International construction market survey 2016

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Overstretched: taking the heat out of procurement in an overheating market This year’s survey has revealed New York City and Seattle are beginning to overheat. What tactical tools can property owners and developers use to mitigate the risk of cost escalation in such markets? As demand outpaces supply and pushes prices to record highs, overheating markets suffer a range of dangerous cost escalation problems, from labour shortages to rocketing costs of commoditised building materials and contractor cost mark-ups. But many market players seeking to build in this hot landscape often remain far too cool about the risks. The threat of cost escalation is very real indeed, but fortunately so are some tried and tested practical procurement tactics to avoid overspending or reduce the risk it poses. Good governance Reduce uncertainty by addressing how best to control and manage project costs well in advance, keeping control of the project schedule and maximising stakeholder engagement. Direct manufacturer engagement Reduce handling charges and simplify the coordination of purchase by going straight to the source manufacturer rather than through an intermediary. Contingency control Establish watertight rules around contingency drawdown that stop contractors ignoring cost overruns. Exclusive relationship-building While long-term associations with contractors can be beneficial, don’t get complacent – make sure good value is achieved from longstanding relationships. Outside perspectives can help with this. Site logistics controls Centralising how site logistics are developed, bought and managed can provide real cost efficiencies compared to buying them in separately through individual trade contractors. Smart timing Well-planned procurement and a keen understanding of the market will help in taking advantage of fluctuations in the prices of essential commodities rather than having them dictate the costs. 14 Turner & Townsend
Analysis Figure 6: Competition across the majority of markets is keeping tenders competitive Cold Lukewarm Warm Hot Overheating Moscow São Paulo Beijing Brisbane Doha Houston Johannesburg Kampala Melbourne Muscat Northern Ireland Perth Santiago Seoul Singapore Toronto UAE Amsterdam Bangalore Hong Kong Istanbul Kigali Munich Nairobi Paris Scotland Sydney UK central UK north UK south Warsaw Zurich Dublin Kuala Lumpur London San Francisco New York City Seattle International construction market survey 2016 15
Page 1 and 2: International construction market s
Page 3 and 4: Foreword The past year has seen wid
Page 5 and 6: 5newcomers 38 global markets £500b
Page 7 and 8: Redefining relationships with the s
Page 9 and 10: The ripple effect of China Followin
Page 11 and 12: The impact of currency Foreign exch
Page 13 and 14: Figure 2: Predicted construction ma
Page 15: Analysis Over the long term, constr
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Page 25 and 26: International building costs, in 20
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International building costs, in 20
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Houston USD San Francisco USD Seatt
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Figure 11: CBD offices - high-rise
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References and further reading Amer
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Turner & Townsend is an independent
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International construction market survey 2016

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