International construction cost survey 2012

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In Europe the problems that started in Ireland and Greece have spread to Portugal, Italy and Spain. Falling asset values, high unemployment and crippling government debt in several of the Euro member countries are likely to result in economic weakness in 2012. In the US and Europe, governments are running out of policy levers, be they monetary stimulus or austerity measures such as higher taxes and pay cuts. Politically difficult as austerity measures are, they also prolong and exacerbate the downturn, as demand and consumption falls. This sets the retail, property and construction sectors on a downwards spiral. Those countries which introduced stimulus measures to boost their economies and construction sectors have mostly spent their stimulus budgets and there are few remaining policy levers or alternative stimuli to help their economies achieve self-sustaining growth. But with time businesses restructure, reduce their cost base, recapitalise and prepare for the future. The US seems to be at this stage of recovery in many sectors including the construction sector. The US went into the GFC first and so logically it will emerge first. In 2012 the US construction data should start to improve. The effects of the continuing difficulties in the developed economies are being felt everywhere, even in the growth economies of Asia, South America and Africa, through reduced international trade, tightening credit markets, falling share markets, lower retirement fund balances and lower house prices. Public infrastructure budgets have been cut, public works projects delayed and consumers are saving more, paying off debt, consuming less, and exercising caution. These are all good virtues after years of credit-fuelled growth, but demand is lower, and the construction sector struggles to find projects. However, worldwide there are many reasons to be optimistic. The Chinese, Indian, Vietnamese and African economies are on long-term growth paths that will improve living standards, creating jobs and opportunities for their people and the economies which supply them. There is still a long way to go so the demand for resources and skills will grow. The demand for energy and resources is driving the growth of many new projects in natural resources, gas, coal shale and renewable energies in countries as diverse as Australia, Kazakhstan, Mauritania, Brazil and the US, creating jobs, driving construction and wealth. South Africa is transforming its power sector with major investments in power stations. Australia has introduced a carbon tax that will eventually force the replacement of coal power stations with cleaner alternatives. Communications networks are being built, or upgraded as high-speed internet becomes global. Siemens City, Vienna World-class, energy-efficient construction, delivered to meticulously engineered costs, certified to US Green Building Gold standard. making the difference 3 This document is in the public domain and is shared here by RSS Construction Projects Ltd - www.rssprojects.com
International construction cost survey 2012 King Edward VII Memorial Hospital, Bermuda The first P3 (PPP) project in Bermuda is being delivered using local contractors for stakeholders in the US, Europe and Bermuda. Worldwide, these projects add up to a substantial portfolio of long-term construction work. It is a good time to build. Construction costs are generally benign as shown by our surveys. In most regions the markets are not overheated like they were in the last decade. That means projects are more likely to be built on time and budget. Contractors have retained their most skilled labour and many of the casuals employed when work is plentiful have left to pursue other opportunities. In many countries the construction sector is now very competitive and tendered prices often come in below budget. The surveys show that construction costs in half of the countries surveyed are still below 2008 levels. Most of our respondents indicated that labour rates were well under control. 4 Turner & Townsend Materials prices are also competitive. Commodity prices increased alarmingly in early 2011 but have now fallen. Steel prices fell in late 2011. Lower coking coal and iron ore prices indicate that steel could be cheaper in 2012. Copper prices have also fallen by 20 percent since March 2011 which should mean cheaper costs for some electrical and plumbing materials in 2012. All of this bodes well for construction costs in 2012 with forecast cost increases in line with 2011. In other words, construction costs in most regions are expected to stay moderate during 2012. Barring natural disasters and other surprises, 2012 offers a window of opportunity to build your project on time and perhaps under budget. Part of the reason why construction markets are so competitive is that housing and non-residential building construction is hardly increasing in most developed economies, because there is little, if any, price growth. Eventually, this cyclical downturn will end as the fundamentals of supply and demand reassert. Housing markets will recover, consumers will start to borrow and spend again. The cycle will turn, and when it does costs will increase again as building, resources and infrastructure projects compete for resources and skills. Alstom Hydro, China Multiform energy-saving technologies are helping to make this 146,000 m2 hydropower manufacturing facility fully carbon neutral. This document is in the public domain and is shared here by RSS Construction Projects Ltd - www.rssprojects.com
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International construction cost survey 2012

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