INDUSTRY REPORT
Global market outlook
With a CAGR of 11.8 percent , analyst Beroe Inc . predicts that the market size of the global construction sector will increase from US $ 15.17 trillion in 2022 to US $ 18.96 trillion in 2024 . It confirmed that , with around 40 % of the market , the APAC ( Asia-Pacific ) region has the largest share , followed by Europe and North America .
“ Countries such as the U . S . and India want to invest heavily in the construction of infrastructure and one trillion U . S . dollars has been set aside by the U . S . government for development ,” it explained . “ With an upsurge in residential , commercial and infrastructure projects worldwide , building activity has returned to normal . Construction materials ' supply-demand dynamics are improving as a result of manufacturers increasing production ,” it added .
APAC , the largest shareholder in the construction industry , is expected to reach up to US $ 6.1 trillion with a CAGR of 4-5 %. While in North America , the market is expected to grow at a CAGR of 4.8 % to reach US $ 2.43 trillion in 2024 .
“ Globally , construction services are being severely impacted by geopolitical unrest and pressures from inflation . Since fewer investment proposals were made due to rising risks throughout the regions , demand for high-value new projects remains sluggish . Governments are concentrating on maintaining infrastructure improvement as an economic engine , which has resulted in constantly rising infrastructure investment . There are inflationary pressures on commodities that affect the construction business ,” explained the analyst .
The cost of construction is based on four major components : cost of materials , cost of labour , cost of construction equipment and administrative expenses . Labour costs contribute a maximum of 35-40 % of the overall cost of construction . Labour costs differ widely , depending upon the availability of skilled labour in a particular region . With rising demand from the construction and other industries in several countries in Europe , the U . S ., and Australia , prices of commodities such as cement and concrete are anticipated to rise steadily .
“ The shortage of truck drivers affects the logistics of raw materials for the construction industry , which is a serious threat to contractors . [ There is less skilled labour available ] for construction work despite the higher labour wages . Moreover , the volatile price nature of oil impacts the production and transportation of construction materials . Many countries in Europe also have a strict policy for migrant workers , and geopolitical uncertainties could further trigger price inflation ,” added the analyst .
“ Labour wages have increased to match the inflation rate , and raw material prices have increased due to the increase in production costs . This results in an increase in overall construction costs . Double-digit construction commodity price inflation is being seen in major regions due to global uncertainties and supply chain networks [ under strain ],” outlined the analyst .
Supply and demand
Major countries are providing economic stimuli and investing in creating and upgrading critical infrastructure to counter economic stagnation amid recession fears . To reduce short-term price shocks in the present market volatility , suppliers are concentrating on creating new contracts with longer project durations and larger average project tickets .
“ Selecting a supplier in the engineering construction market is not an easy task : the top 10 firms hold more than 70 % of the market share . The housing construction sector is predominantly held by regional construction firms with a high market share . Due to the pandemic , the majority of the firms suffered net losses in the quarter and heavy competition will be prevalent among the top suppliers , especially in the infrastructure segment . Top clientele for suppliers could get discounts or lower , as contractors will try to secure more contract awards and keep their market share ,” explained Beroe .
“ Sourcing in the civil construction market is partly different from the Top and above : Images courtesy of Shutterstock . com .
ISMR May 2023 | ismr . net | 31