Program, Cost, Consultancy

World
Construction
2012
Davis Langdon, An AECOM Company World Construction 2012 2

Construction
market overview

2011 was yet another difficult year for
construction globally. Construction
spending growth has stalled and
2011 was the fourth consecutive
year with little or no growth. Overall,
world construction spending grew
by just 0.5% to $4.6 trillion and is
still below the levels achieved in
2007. However, on a positive note,
2011 saw the first increases in world
construction spending since the
start of the recession. Although, the
On a regional basis, all regions apart
from Western Europe and North America
saw positive construction spending
growth, although at reduced levels
to those of the recent past. Asia and
Latin America were the fastest growing
regions in 2011 by a wide margin.
For the second year running China was
the largest construction market in 2011,
and is forecast to be the fastest growing
market in 2012 (Figures 1 and 2). US $bn

outlook for 2012 is looking slightly 0 100 200 300 400 500 600 700 800
more pessimistic as the developing There were some large regional China
USA
economies responsible for much of the differences throughout the year.
Japan
growth in the recent past are starting to Construction spending in Western Germany
slow as their developed country export Europe was the most affected with Italy
markets continue to decline. a contraction of -3%, with the most France
significant falls occurring in Portugal, Brazil
UK
Ireland, Italy, Greece and Spain. The
Korea
continuing sovereign debt problems and India
Eurozone crises suggest that Western Mexico
Europe will continue to struggle in the Spain
near term. Australia
Others

Figure 1: Global Construction Figure 2: Global Construction

Spending 2011 (US $bn) Spending Growth 2011-12 (% change)
US $bn
10
0 100 200 300 400 500 600 700 800 900 1000
China 8
USA 6
Japan
Germany 4
Spain

Italy 2
Italy
USA
% Change

France
0
Brazil
Australia
Germany

Mexico
India
UK

Other countries
France

Korea
Brazil
China

Japan

UK -2
Korea
-4
India
Mexico -6
Spain
-8
Australia
Others -10
 Davis Langdon, An AECOM Company
Regional overview
Our review of world construction in 2011
and outlook for 2012 concentrates on
the six main trading blocks, namely:
Africa, the Americas, Asia Pacific,
Australasia, Europe and the Middle East.
900 1000
China
World Construction 2012
Asia Pacific
Asian markets are expected to continue
to exhibit robust construction spending
growth in 2012. China (+9%) is the
standout followed by India (+8%),
Indonesia (+8%) and Vietnam (+7%). All
sectors are likely to exhibit significant
growth, largely led by non-residential
construction.
China not only exhibits significant
levels of growth but is also the largest
market in the world. China accounted
for 41% of the Asia Pacific total in
2011 (almost twice the size of the
Japanese construction market).
Construction spending in China is
shifting from the coastal cities to the
interior and western provinces. Through
to 2015, infrastructure spending
is expected to dominate China’s
construction spending.
3
India, on the other hand, only accounted
for just over 10% of the total Asia
Pacific market. Given the current
constraints on public finances, India
is seeking increases in private funding
solutions in the provision of much of the
new infrastructure needed.
Japan is expected to see sizable
increases in construction spending
through to 2015 as the earthquake/
tsunami reconstruction effort gathers
pace. However, the reconstruction is
only expected to provide a short-term
spike in construction activity which is
likely to return to trend later in
the decade.
In Southeast Asia relatively strong
construction spending growth is
also expected in Indonesia (+8%) and
Vietnam (+7%) as both countries
upgrade infrastructure to support their
growing populations.
Davis Langdon, An AECOM Company
Russia
World Construction 2012
Europe
Sovereign debt crises and the
uncertainty in the Eurozone are
continuing to constrain construction
spending growth in many Western
European markets. Only the
Scandinavian counties are likely to
be largely immune from the impacts.
Infrastructure construction is expected
to see declines through to 2015
with only limited growth forecast in
both non-residential and residential
construction spending. Austerity
measures in many Western European
countries have focused on the
postponement/cancellation of many
planned infrastructure projects.
Broadly speaking, construction
spending in Western Europe is likely to
remain stagnant for most of the decade
with little or no growth expected.
Indeed, construction spending growth
will be significantly lower in Western
Europe than trend growth for the rest
of the world. It is likely that it will be
2020 before the market in Western
Europe returns to output levels last
seen in 2007.
The fastest growing countries in
Western Europe in 2012 are expected
to be Germany (+1.8%) and the U.K.
(+1.6%). Ireland, Spain, Portugal, Italy
and Greece are likely to experience
continuing declines in construction
spending through to 2015, with little
optimism about growth later in the
decade. Indeed through to 2015, their
share of the Western European market
is expected to decline significantly (by
as much as 10%) while growth in the
remaining countries remains largely
stagnant.
In Eastern Europe there is a more
positive picture of construction
spending growth through to 2015.
However, it should be noted that these
markets are significantly smaller
in terms of volume than those in
4
Western Europe. The fastest growing
sector is forecast to be the non-
residential sector closely followed by
infrastructure.
The fastest growing countries in
Eastern Europe in 2012 are expected to
be Poland (+9.1%) followed by Russia
(+6.5%) and Turkey (+5.5%), all with
growth levels significantly above the
average for the region as
a whole.
In Russia, construction spending
on preparations for the 2014 Winter
Olympics and the 2018 FIFA World Cup
are boosting already booming energy
and transport infrastructure spending.
Middle East
In the Middle East, moderate
construction spending growth (+4.2%)
is expected in 2012. Much of the growth
will be led by increases in infrastructure
construction spending, in particular
energy infrastructure.
Saudi Arabia, the largest market in the
region, is also expected to lead much
of the growth in the region (+5% pa),
through to 2015. Followed by a return to
growth in the U.A.E. (+4% pa), much of
which will be led by Abu Dhabi, rather
than Dubai which remains subdued and
is largely expected to remain that way
through the forecast period.
In addition, prospects in Qatar continue
to remain positive. Indeed, preparation
for the FIFA World Cup 2022 and
upgrading of associated infrastructure
is expected to make construction
spending growth in Qatar amongst the
fastest in the world throughout the
next decade.
Davis Langdon, An AECOM Company World Construction 2012 5

Africa
Following the recent turmoil in much
of North Africa, construction spending
remains constrained, although
there are expected to be significant
opportunities going forward. In
particular, reconstruction in Libya and
infrastructure upgrades in Egypt are
likely to act as a stimulus for the region
through to 2015. However, much of this
has yet to materialise given the ongoing
uncertainty in the region.
In the rest of the region there is a
mixed picture emerging, with some
areas of strong growth, particularly
Nigeria (+8%), with continuing declines
in others particularly South Africa.
Infrastructure construction is forecast
to be the fastest growing sector of
construction output through to 2015.
In Brazil, preparations for the 2014 FIFA
World Cup and the 2016 Rio Olympics
are well advanced and increases in
construction spending are largely being
led by infrastructure upgrades.
Australasia
Construction spending in Australia
is expected to grow by close to 5% in
2012, boosted by the global demand for
natural resources. Similarly, construction
spending in New Zealand is forecast to
rise as earthquake reconstruction moves
forward through to 2015.
Panama

The Americas
Construction spending continues to
be constrained in the U.S.A., largely as
a result of the housing crisis and the
impending election. The construction
market in the U.S.A. is expected to
remain stagnant in 2012, with little
or no growth forecast, much like
construction spending in Western
Europe. Some growth is expected
in Canada and Mexico, although the
problems in the U.S.A. are expected
to constrain growth in both markets
through to 2015.

In contrast, much of South America is

expected to see significant growth in
construction spending through 2012. In
particular, the larger markets of Brazil,
Argentina and Chile are forecast to
see construction growth of over 5% in
2012. Indeed, Brazil and Panama are
likely to have construction spending
growth of over 10% pa through to
2015, significantly above the average
for the region as a whole. Much of
the growth in South America will be
led by increases in infrastructure
spending (particularly energy and
transportation), closely followed by
spending on non-residential structures.
Davis Langdon, An AECOM Company World Construction 2012 6
4% 2%

31%

35%
2005 2015

General outlook 1%

3%
25%

In the short term there is expected Figure 3: Share of construction

spending by region 2015-20
to be a degree of stagnation in global Source: IHS Global Insight (2011)
construction spending in 2012, with
more sustained growth not expected
4% 2%
until 2015 onwards. Developing
Asia
countries are expected to lead growth
Africa
in 2012. The strongest construction 31%
North America
spending growth will again be in China, Latin America 24%
followed by India and Indonesia. In Western Europe
addition, reconstruction spending 35% 2015 Eastern Europe
in both Japan and New Zealand Middle East
will provide a temporary stimulus 1%
4%
to construction spending in both
countries. In Latin America, the only
other major growth area, Brazil and 3%
25%
Panama are also expected to exhibit
robust construction spending growth
4% 2% 5% 2%
throughout the forecast period.
31%
Going forward, the outlook for global
construction is likely to be dictated 24%

by development status. Generally, the 46%

35% 2015 2020
share of global construction spending
continues to shift from developed Asia
1%
country markets to developing country 4%
Africa
markets (Figure 3). In particular, the North America
Latin America
Asian market has increased from a
3% 17%Western Europe
share of 31% in 2005 to a forecast share
25%
2%
Eastern Europe
of 46% by 2020. This shift is largely at Middle East
the expense of decline in the Western
Europe market which has shrunk from a
share of 35% in 2005 to a forecast share
of 24% in 2020.

These are significant changes in the

structure of the global construction
Asiatime-
market over a relatively short
Africa
frame (i.e. 15 years) and when
North America
combined with relative growthLatin America
levels (i.e. rapid spending growth
Western in
Europe
developing countries and stagnation
Eastern Europe
in developed countries) suggest
Middle a new
East
focus for global construction spending
in the future.
Davis Langdon, An AECOM Company World Construction 2012 7
 David Crosthwaite
Davis Langdon, an AECOM company
March 2012
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