The construction market is facing severe headwinds globally after making good progress in recovering from the severe downturn recorded in 2020 amid the widespread disruption caused by restrictions imposed to contain the spread of COVID-19. There is a high degree of uncertainty over the short-term outlook in the industry following Russia’s invasion of Ukraine. The war will exacerbate existing supply chain disruptions and put even greater upward pressure on energy prices, which will further drive up prices for key construction materials.

Investment in the residential sector continues to be buoyed by government support measures and housebuilding programs. Moreover, investment in the infrastructure and energy and utilities sectors has been a major driver of the recovery in overall construction output. Industrial construction has also been recovering from the COVID-19 induced downturn in 2020. This construction market report provides a detailed analysis of the prospects for the global construction industry up to 2026.

What is the regional outlook of the construction market?

The key regions in the construction market are the US and Canada, Latin America, Western Europe, Eastern Europe and Central Asia, South-East Asia, South Asia, Australasia, North-East Asia, Middle East and North Africa, and Sub-Saharan Africa.

The US and Canada

The construction output in North America stayed flat in 2021. However, the general outlook for the industry is positive as infrastructure spending gathers pace. In the US construction industry, the residential housing sector has been the key driver of overall construction activity, but price pressure and tightening in monetary policy is starting to weigh on output. The Canadian construction industry’s output in 2021 was supported by investments in residential buildings, repair works, and civil construction activities. In contrast, non-residential construction activities registered a marginal decline in 2021.

Latin America

The global surge in commodity prices and supply-chain fragilities have led to rampant inflation in major economies of Latin America, such as Brazil and Argentina. Construction material costs such as steel, lumber, and concrete have weighed on the value chain causing delays and cost hikes. Price pressure is unlikely to be alleviated in the short run with the ongoing war in Ukraine and the sanctions in Russia pushing primary product prices upwards. The residential sector looks to suffer most from the increase in interest rates. However, higher prices in commodities have benefitted much of Latin America as soaring copper, lithium, and other base metal prices have resulted in increased export earnings and tax revenue. Continued focus on renewable energy investment is further shifting the energy generation sector in Latin America.

 Western Europe

Significant government spending has supported the recovery in the construction sector across Western Europe. However, high materials prices and product shortages hampered works on projects, and the situation is set to worsen in 2022 given the fallout from Russia’s invasion of Ukraine. Russia and Ukraine are key suppliers of steel to the region, and disruptions to oil and gas supplies are having a major impact on energy costs across the region. Commercial construction is also expected to start to recover from the slump recorded in the past two years. An increase in tourism and commercial activities, as well as an increase in the total value of new orders from private office and entertainment construction, bodes well for the implementation of new investment plans. The residential sector is also expected to continue to expand.

Eastern Europe and Central Asia

Construction markets in Eastern Europe faced risks owing to the impact of the Russia-Ukraine war, which is expected to stoke inflation and weaken investor confidence in the region. Construction in Ukraine will be completely halted while the Russian invasion continues. The Russian economy will suffer heavily from punitive sanctions placed on the country by Western governments while economies that are heavily interlinked with Russia will suffer as it will disrupt trade, supply chains, remittances, and tourism activity. In addition, a historic surge in refugees flowing out of Ukraine into neighboring countries such as Poland, Hungary, and Romania is likely to strain public finances in the short term. Infrastructure spending is likely to continue with the support of EU recovery funds.

South-East Asia

Construction industry growth in South-East Asia moderated further in the final quarter of 2021. Contributing to this revision was a weaker than expected rebound in Q4 2021 in the Vietnamese construction industry, following a significant contraction in Q3, and the continued downturn of Malaysian construction activity. Construction output in South-East Asia is likely to have moderated further in the first quarter of 2022. Risks to the outlook in the region include rising oil and energy prices due to the conflict in Ukraine and its impact on both the cost of construction materials and inflation. Rising inflation may lead to an increase in wage costs, particularly in those economies where labor supply is currently tight, and press central banks to tighten policy, increasing the cost of debt financing.

 South Asia

The Ukrainian war and the resultant surge in oil and gas prices will affect the construction industry in South Asia. However, the industry is expected to continue growing albeit at a moderate pace over the short term, led by growth in India. This will be followed by robust expansion over the remainder of the forecast period. Underlying support will come from the rising middle-class population, driving consumption growth, and leading to investments in housing and infrastructure. Industrial construction is likely to benefit from the COVID-19 crisis for a medium to long period. This is because the industrialized countries are looking to diversify their supply chain away from China, and the region offers attractive alternatives with low labor costs as well as a large captive market in the form of an expanding middle-class population. However, the emergence of newer and more fatal variants of COVID-19 may lead to tighter containment measures hampering growth.

 Australasia

Construction activity in Australasia was buoyant in 2021, overcoming the disruption in Q3 that occurred due to an outbreak of the Delta variant of the coronavirus. The growth of the region’s construction output was bolstered by a stronger than expected rebound in Q4 in New Zealand. A tightening of restrictions in both New Zealand and Australia in the first quarter of this year in response to outbreaks of the Omicron variant may temper construction industry growth during the quarter. Downside risks to the region’s construction outlook this year include the impact of rising energy and oil prices due to the conflict in Ukraine and its resulting impact on construction material costs and inflation. With labor supply in the region already tight, wage costs are likely to rise, which may deter new construction investment in the region.

North-East Asia

The growth of construction output in North-East Asia slowed in the final quarter of 2021, primarily due to another weak period of construction activity in the Chinese residential sector. Government restrictions on debt growth at Chinese real estate developers are expected to soften new residential development in the short term, and this is expected to be further exacerbated by falling home prices and sales volumes. Elevated debt levels at Chinese local governments may further temper construction growth in China this year. Further risks to construction output in the region include the impact of the conflict in Ukraine on oil, energy prices, building material costs, and inflation, as well as the prospect of additional restrictions on activity to curb COVID-19 infections. After declining in 2021, the residential construction sector will see positive growth this year with the government’s focus on the development of subsidized housing units.

Middle East and North Africa

The surging oil prices and the sanctions on Russia are expected to benefit the oil and gas rich Middle East and North Africa (MENA) region. However, there are downside risks stemming from Russia’s invasion of Ukraine. Notably, investor confidence will be undermined by the intense geopolitical uncertainty, and the supply disruptions will compound existing upward pressure on key construction materials. Food grain inflation will also accelerate, putting greater pressure on household spending and consumer confidence, which had been recovering in the wake of relaxation of COVID-19 restrictions. Saudi Arabia’s construction industry is expected to register growth this year, supported by developments in infrastructure, energy and utilities, and residential construction projects.

 Sub-Saharan Africa

Construction output growth was sluggish in 2021 in Sub-Saharan Africa due to COVID-19 restrictions and weak investment. This limited the recovery from the sharp 2020 downturn. There was subdued growth or even high contractions in some quarters of 2021, and as a result of the low base effects, there will be positive growth in Nigeria, South Africa, and Angola where output levels are still significantly below the pre-COVID level. To free up funds to support sectors heavily affected by the crisis, there will be a focus on negotiating debt relief and restructuring with external creditors. The key risks associated with the industry’s development in the short and medium-term could be electricity supply disruptions, increased labor shortages, rising oil prices, and supply chain constraints.

Construction market, by regions

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Market report scope

This report provides

• An overview of the outlook for the global construction industry to 2026.
• Analysis of the outlook for the construction industry in major global regions: North America, Latin America, Western Europe, Eastern Europe, South Asia, South-East Asia, North-East Asia, Australasia, the Middle East and North Africa, and Sub-Saharan Africa.
• A comprehensive benchmarking of 91 leading construction markets according to construction market value and growth
• Analysis of the latest data on construction output trends in key markets.

Reasons to Buy

• Evaluate regional construction trends from insight on output values and forecast data to 2026.
• Identify the fastest growers to enable assessment and targeting of commercial opportunities in the markets best suited to strategic focus.
• Identify the drivers in the global construction market and consider growth in emerging and developed economies. Formulate plans on where and how to engage with the market while minimizing any negative impact on revenues.