US construction spending rebounds strongly in October
US construction spending rose 1.3 percent in October, according to a US Department of Commerce report, with solid investment in private and public sector projects boosting figures.
Construction spending beat forecasts while September data was revised down to show construction outlays, declining by 0.5 percent instead of rising 0.3 percent as previously reported.
- Construction spending during October was estimated at a seasonally adjusted annual rate of £1072.4 billion, 1.3 percent (±1 percent) above the revised September estimate of £1,058.9 billion.
- The October figure is 3.7 percent (±1.3 percent) above the October 2019 estimate of £1,033.8 billion. During the first ten months of this year, construction spending amounted to £886.8 billion, 4.3 percent (±1.0 percent) above the £850.2 billion for the same period in 2019.
- Spending on private construction was at a seasonally adjusted annual rate of £815.13 billion, 1.4 percent (±0.7 percent) above the revised September estimate of £804.10 billion.
- Residential construction was at a seasonally adjusted annual rate of £474.8 billion in October, 2.9 percent (±1.3 percent) above the revised September estimate of £461.5 billion.
- Non-residential construction was at a seasonally adjusted annual rate of £340.3 billion in October, 0.7 percent (±0.7 percent) below the revised September estimate of £342.8 billion.
- Estimated seasonally adjusted annual rate of public construction spending was £257 billion, 1 percent (±1.6 percent) above the revised September estimate of £254.5 billion.
According to economists polled by Reuters, construction spending was forecast to rise by 0.8 percent in October. However, construction spending increased by 3.7 percent on a year-on-year basis in October.
Spending on private construction projects increased by 1.4 percent, fuelled by investment in homebuilding amid record-low mortgage rates and a pandemic-driven migration to suburbs and low-density areas. Spending on residential projects shot up by 2.9 percent.
However, outlays on non-residential construction, such as on gas and oil well drilling, fell by 0.7 percent in October. The pandemic has severely impacted on oil prices, resulting in a contraction in spending on non-residential structures in the third quarter. The fourth straight quarterly decline in spending on non-residential structures bucked a rebound in overall business investment.
Tokyo 'most expensive city' for construction
Tokyo has picked up an unenviable gold medal after being classified the most expensive city for construction.
As the Japanese city prepares a subdued opening to the Olympic Games on Friday, the International Construction Market Survey 2021 by Turner & Townsend found it was the most costly for building, with an average cost of $4,002 per sqm, followed by Hong Kong ($3,894 per sqm) and San Francisco ($3,720 per sqm). New York and Geneva were ranked fourth and fifth respectively.
The survey forecasts that rising prices being seen in the global construction sector will be sustained through 2022 and into 2023.
The widespread disruption to global supply chains witnessed through the pandemic is also being sustained by high demand and competition for key materials between global markets including the US, Europe and Asia.
Globally, demand for steel, softwood and copper piping have seen prices rise sharply over the year, with increases of up to 40 percent seen in some international cities including Tokyo, Sydney, San Francisco, Los Angeles, Chicago, Mexico City, Sao Paulo, Birmingham, Glasgow and Dublin.
As activity accelerates, supply chain constraints are increasing and skills shortages are worsening, resulting in substantial construction cost inflation in many markets.
Neil Bullen, Global Managing Director, Real Estate Turner & Townsend said material shortages have undoubtedly recast the client and supplier dynamic and there is currently a shift in power from client to supplier in many markets around the world.
"Companies need to work closely with their supply chains to guard against these risks – moving from a ‘just in time’ to a ‘just in case’ approach to delivery," he said. “Beyond material and skills shortages, public and private sector clients across the world are juggling multiple, competing goals and priorities. From accommodating hybrid working patterns, to embedding social value into their operations and taking concrete steps towards net zero, success is no longer judged by the old mantra of ‘better faster, cheaper’.”
London ($3,203 per sqm), which ranked third in 2019’s report, fell to eighth place behind Geneva, Zurich, and Boston. The fall in ranking reflects the buoyancy of other construction markets and the combined effects of Brexit and COVID-19, which placed many projects on hold, restricting demand for new work in 2020.
According to the research, the most buoyant construction sector across all 90 markets are data centres, driven by the unabated growth in technology and digitalisation. It is the first year that data centres have topped the ranking moving up from sixth position in 2019.