Research Briefing | Aug 10, 2023

Key Construction Themes 2023 Revisited

We continue to forecast growth in global construction activity over 2023, albeit at a slower rate than we anticipated at the end of 2022. In this context, we are revisiting the 6 themes we thought would dominate the narrative of the construction sector over 2023.

What you will learn:

  1. Infrastructure investment will drive growth in construction activity. Civil engineering is on track to be the fastest growing segment of the construction market over 2023, as governments around the world continue to champion major infrastructure investment.
  2. Tighter monetary policy and recessions will weigh on demand for new buildings. Aggressive policy tightening by central banks has lifted financing costs and reduced private demand for new buildings. Building construction activity has fallen more than we expected, as the sizeable backlog of work has been less supportive of activity levels than we previously envisioned.
  3. Supply side constraints will ease, but not dissipate. Global supply chain pressures are continuing to ease as expected. Labour shortages are also easing, although the risk remains that shortages in some locations, such as Northern Europe, will become more structural.
  4. Construction costs will rebase at higher levels. Structural hikes in the costs of producing and shipping materials are expected to see construction costs rebase at a higher level.
  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 real estate commencements will fall, we now forecast a rebound in total residential commencements following the earlier than expected reopening from Covid restrictions.
  6. Work towards a more sustainable future will remain steady. The global push towards a less carbon intensive future is continuing to support construction activity around the world. We continue to believe the net-zero transition will drive a more significant upswing in activity later in the decade.
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