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_ ) _ , D , D

World
Construction
2011
D ) , ) ( A 2 4 _ D _ 201 1
2010 was another diffcult year for
construction globally. Overall, world
construction spending declined for
the third consecutive year, falling by
1% to $4.4 trillion. World construction
spending growth is not set to return
until 2011, although it is forecast to
be below 1% overall. 2012 is expected
to be more positive, with growth
approaching levels (5%) not seen since
the beginning of the recession.
On a regional basis, only Asia saw
positive construction spending growth
through 2010, although the levels of
growth have slowed as a result of the
wider recession. Nevertheless Asia has
not witnessed the declines evident in
the other global regions.
China for the frst time has overtaken
the USA and was the largest national
construction market in 2010. China is also
expected to be one of the fastest growing
markets through 2011 (Figures 1 & 2).
There were some large regional
differences throughout the year.
Construction spending in Western
Europe was the most affected with
a contraction of -2%, with the most
signifcant falls occurring in Spain,
Portugal, Greece and Ireland. Indeed,
recent forecasts suggest that there may
be a more fundamental shift occurring
in the balance between construction
spending in Western Europe and
Asia (Figure 3).
Our review of world construction in 2010
and outlook for 2011 concentrates on the
fve main trading blocks, namely: Africa,
the Americas, Asia Pacifc, Australasia,
and Europe and the Middle East.
Construction
market overview
China
USA
Japan
Germany
Italy
France
Brazil
UK
Korea
India
Mexico
Spain
Australia
Others
0 100 200 300 400 500 600 700 800
US $bn
10
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China
USA
Japan
Germany
Italy
France
Brazil
UK
Korea
India
Mexico
Spain
Australia
Others
0 100 200 300 400 500 600 700 800
US $bn
10
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%

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19%
Latin America
Western Europe
Middle East
Eastern Europe
Asia
Africa
North America
2%
37%
4%
2%
32%
4%
2010
19%
2%
43%
5%
2%
25%
4%
2020
19%
Latin America
Western Europe
Middle East
Eastern Europe
Asia
Africa
North America
2%
37%
4%
2%
32%
4%
2010
19%
2%
43%
5%
2%
25%
4%
2020
19%
Latin America
Western Europe
Middle East
Eastern Europe
Asia
Africa
North America
2%
37%
4%
2%
32%
4%
2010
19%
2%
43%
5%
2%
25%
4%
2020
) _ 3 _ D _
DA ) _ ) 201 0-20
Source: IHS Global Insight (2010)
) _ 1 D _
A ) 201 0 ( $ )
) _ 2 D _
A ) _ M 201 0-1 1 (% ) )
D ) , ) ( A 3 4 _ D _ 201 1
_ A
In Europe, construction spending
declined by 3% in 2010, following the
9% decline in 2009. In Western Europe
construction spending in Spain (-15%),
Portugal (-12%) and Ireland (-15%)
will continue to be among the worst
affected, with little prospect of any
improvement over the next few years.
However, conditions elsewhere are
looking slightly more optimistic with
some growth expected in Poland,
Germany and the UK, although the
recovery is likely to be a slow one.
On a more positive note construction
spending in Turkey looks relatively
robust, with growth approaching
5% through 2011 with similar levels
expected in 2012.
Overall, construction spending
growth is expected to remain largely
static in Western Europe through 2011.
Any recovery is likely to be led by
countries in Central and Eastern
Europe, in particular Poland (9%), the
Czech Republic (9%) and Hungary (8%).
( D
Construction spending in the Middle
East declined in 2010 (-2%) although the
outlook for 2011 is beginning to look more
promising, with construction spending
growth likely to reach 3%. Any growth
is likely to be led by work resuming
on projects that had been suspended
rather than any major new schemes.
The UAE (principally Dubai) was the
hardest hit by the slowdown and faces
the most prolonged and subdued
recovery. Dubais recovery is largely
conditioned by how quickly the excess
supply of property (generated by the
rampant speculation during the mid
2000s) can be absorbed. However, one
major infrastructure project of note in
the region is the construction of the Gulf
Cooperation Council (GCC) railway, with
the frst phases in the UAE expected to
begin imminently.
Conversely, construction spending in
Saudi Arabia (the largest construction
market in the region) remains relatively
robust despite the problems elsewhere
in the region. Indeed, given recent events
in North Africa (Egypt, Tunisia and Libya)
Saudi Arabia is likely to beneft from
the expected increase in oil prices,
which often translates into increased
construction activity.
D
In Asia, construction spending growth
(7%) continues to outstrip all other global
regions. Indeed, most country markets
in Asia didnt experience a recession
only a slowdown in rates of growth.
Growth in infrastructure spending
continues to drive the market in Asia,
this is largely a factor of continuing
economic development but also the
effect of various Government stimulus
packages, introduced during the
recession, which translated into some
very large civil engineering projects
throughout the region.
The strongest construction spending
growth in 2011 is expected in China
(10%) and India (10%). Indonesia (5%)
and Vietnam (5%) also offer some
potential. However, construction
spending in Japan remains in negative
territory, with any recovery unlikely
before 2012. Although the recent
earthquake and subsequent tsunami
are likely to boost construction
spending in Japan in the short-term
as the re-construction effort gets
underway through 2011.
The latest fve year plan takes effect
in China this year, with a focus on
economic, social and environmental
sustainability through to 2015. As a
result future construction spending
growth is expected to moderate from
the heights of the recent past, although
it is still likely to average between 8% -
9% per annum. Infrastructure spending
continues to be the primary driver of
construction spending growth in China.
19%
Latin America
Western Europe
Middle East
Eastern Europe
Asia
Africa
North America
2%
37%
4%
2%
32%
4%
2010
19%
2%
43%
5%
2%
25%
4%
2020
Regional overview
Singapore
D ) , ) ( A 4 4 _ D _ 201 1
D _ D
Construction spending in Australia is
expected to grow by 3% in 2011 after
two years of decline. Prospects for
2012 are even brighter with further
construction growth (7%) forecast.
Infrastructure spending is leading
the re-bound and is likely to be the
fastest growing sector going forward,
in particular the mining and transport
infrastructure sectors.
In addition, the recent foods in
Queensland are expected to generate
signifcant levels of construction
spending in the immediate future as
the state attempts to re-build.
_ D
In the USA construction spending
growth is expected to return during
2011 (albeit very limited), with a robust
recovery expected through 2012.
This follows four consecutive years
of decline which resulted in the USA
experiencing the longest and deepest
construction recession of any major
market in the world.
All sectors are expected to remain
relatively subdued throughout 2011,
although a relatively strong upturn
is expected in 2012 led largely by the
residential sector. However, residential
spending remains at historically low
levels so any growth is coming from a
very low base.
The USA Governments stimulus packages
have helped cushion the blow to some
extent, although many of these projects
are long-term schemes designed to
help the industry over a number of
years, so there impact is not immediate.
However, there are some bright spots, in
particular publicly funded transportation
projects. Plans for future High speed rail
projects between some major US cities
are well developed and construction
could start as early as 2012.
Further South, after a relatively fat
2010 construction spending growth
(5%) is expected to return to Latin
America during 2011. Most of the
growth will be lead by infrastructure
spending, specifcally, transport and
energy projects throughout the region.
Brazil (5%), Chile (9%) and Peru (5%)
are where growth is likely to be the
highest through 2011. Brazil, the largest
construction market in the region, is
expected to exhibit signifcant growth
in construction spending in the near
term as World Cup and Olympic Games
development continues. In addition,
growth is expected in the residential
sector in Brazil as the government
attempts to address the chronic
housing shortage in the country.
_
The recent unrest in parts of North Africa,
and the threat of contagion, is expected
to have dramatic consequences for
construction spending in the immediate
future. Construction spending in Egypt,
Tunisia and Libya is expected to decline
signifcantly through 2011 and there are
likely to be knock-on effects in other
neighbouring countries in the region.
However, away from the Mediterranean
coast prospects in Nigeria look promising
with construction spending growth of
9% expected during 2011. Furthermore,
some sub-Saharan countries (Angola in
particular) are benefting from an infux
of Chinese investment.
However, construction spending in
South Africa has slowed post World Cup
2010 although some growth is likely
in infrastructure spending over the
medium term, particularly in the water,
energy and transport sectors.
Bridge Manaus, Brazil
D ) , ) ( A 5 4 _ D _ 201 1
In terms of broad trends and dominant
patterns of change, we are seeing a
structural shift in construction demand,
from developed to developing regions
(Figure 4). Specifcally, there appears to
be a shift in balance between Western
Europe and Asia.
In the short term there is likely to be a
slight recovery in global construction
spending through 2011, with more
sustained growth expected from 2012
onwards. Developing countries are
leading the recovery. The strongest
construction spending growth will
again be in China and India, with some
countries in Latin America and East and
Central Europe also growing robustly.
In the long run there is expected to be
a fundamental shift in future demand
patterns as construction spending in
developing regions grows signifcantly,
largely at the expense of construction in
developed regions.
General outlook
) _ 4 _ D _ DA )
A D D 200 -20
Source: Global Construction Perspectives (2010)
2005
Developing
countries
35%
Developed
countries
65%
Developing
countries
55%
Developed
countries
45%
2020
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_ ) _ , D , D
www.davislangdon.com
www.aecom.com
David Crosthwaite
Davis Langdon, an AECOM company
March 2011