Research Briefing | Dec 16, 2022

Global: Key Construction Themes 2023 – Infrastructure to drive growth

Growth in construction activity is expected to pick up in 2023, despite the spectre of recession in many advanced economies. In this context, we have identified 6 themes that we think will dominate the narrative of the construction sector over 2023.

Download the full research briefing for our extended analysis on the below key themes for the global construction sector in 2023:

  1. Infrastructure investment will drive growth in construction activity. Governments worldwide continue to champion major infrastructure projects to boost their economy’s productive potential and drive the post-Covid economic recovery. This will see civil engineering be the fastest-growing sector in the construction market.

    2. Tighter monetary policy and recessions will weigh on demand for new buildings. Aggressive policy tightening by central banks over 2022 has lifted borrowing rates and thereby reduced the demand for building construction work. However, a large backlog of work will help to mitigate the impact on building construction work done over 2023.

    3. Supply-side constraints will ease, but not dissipate. We expect the easing in global supply chain pressures will continue over 2023. We also expect some labour shortages to ease, although there is a risk that shortages in some locations, such as Northern Europe, will become more structural.

    4. Construction costs will rebase at a higher level. A correction in the mismatch between supply and demand will ease the pressures driving construction cost growth. However, we do not expect construction costs to fall back to pre-Covid levels.

    5. Chinese real estate commencements will fall in 2023. Weak confidence and high debt among developers will ensure Chinese real estate commencements remain weak over 2023. While we forecast a gradual recovery in q/q terms, a relatively strong start to 2022 will ensure an annual fall in commencements over 2023.

    6. Work towards a more sustainable future will remain steady. The global push towards a less carbon-intensive future will continue over 2023 with further investment in renewable energy generation and other green infrastructure. We do not expect this investment to drive a construction boom in 2023. Instead, we believe a significant ramp-up in activity is more likely later in the decade.
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