Survey finds longer lead times and higher costs challenging global construction

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California Construction News staff writer

While construction activity continues to increase in many global markets, increasing volatility and rising costs continue to challenge the industry as construction labour shortages, increasing demand, and disruption in supply chains are causing prices to spike.

Those are the conclusions of the 2022 Construction Market Survey released last week by Turner & Townsend.

“2022 has so far been a year of continued recovery and increasing activity levels for construction markets around the world, however, ongoing supply chain disruptions, worsening skills shortages and surging construction costs are generating some of the most challenging market conditions since the onset of the COVID-19 pandemic,” the survey found.

San Francisco is now the most expensive cities for construction.

“In a year in which San Francisco has shot back to the top of our rankings for most expensive city in the world in which to build, we are seeing acute cost pressures being felt not only in San Francisco, but throughout both primary and secondary cities across the U.S,” the survey found.

The post-COVID world has changes what many people want from their career and life beyond. Labor trends of the ‘great resignation’ and the ‘great retirement’ have affected all sectors of the US economy and this has turned many away from the construction sector.

In San Francisco, construction demand is continuing to be led by increasing requirements for new mixed-use real estate from Google, Apple, Facebook and other tech companies throughout the Bay Area.

Housing demand also remains at an all-time high, partly because projects were delayed during the pandemic, but also by the acute shortage in housing stock. The rate of development is especially high on the Peninsula and in San Jose, with Google, for example, delivering residential buildings as part of a corporate drive towards meeting high affordable housing demand.

New challenges are adding to existing pressures including the war in Ukraine, commodity price shocks, surging inflation, and COVID-19 lockdowns impacting Shanghai and Ningbo ports.

“Whilst construction activity levels are currently showing resilience, we are seeing this impact construction projects across the world and may see this weigh on new investment in 2022.”

Supply chain diversification, alternative contracting methods, and changed procurement strategies are some of the strategies that being adopted to try and mitigate risks.

This year the International Construction Market Survey by Turner & Townsed found longer lead times to be the most significant challenge, with most ballooning by more than 5 weeks in the last 12 months.

Also, 90 percent of respondents indicated rising costs of construction had a significant or high impact on the delivery of construction projects. These factors are leading to a significant increase in hot or overheating markets around the world.

Turner & Townsend found 38.6 percent of global markets surveyed were classified as ‘hot’ or ‘overheating’ – where conditions are deemed at risk of acting as a brake on development.

Now in its 13th year, Turner & Townsend’s latest International Construction Market Survey (ICMS) brings together information and research from 88 global markets.

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