This article appears in the current issue of Construction Connection.
The recently released Global Construction 2025 report, the third in a series of major global studies of the construction and engineering industry published by Global Construction Perspectives and Oxford Economics, provides accurate and reliable forecasts to 2025 for the global construction and engineering industry as well as for key regional and country markets.
Sponsored in part by Oracle, the report estimates the global value of the construction output will increase by 75% between 2012 and 2025, with the U.S. among the top three largest construction markets, despite depressed numbers in the last seven years.
Garrett E. Harley, direction of Engineering & Construction Strategy for Oracle Primavera, says “From a global perspective, the long-term investment volume and potential release of capital should make any construction company smile. However, the challenges and lessons exposed in the recent downturn still weigh heavily on the minds of public and private leaders and will continue to shape business strategies for both owners and contractors. It’s imperative that owners, their consultants and their contractors transform their business operations and delivery capabilities to maximize value and reduce risk.”
While the long-term forecast is optimistic, the short term U.S. economy is expected to expand at a slow, but steady pace of 2.7% over the forecast period, which should reduce the unemployment rate to around 5%, but probably increase the rate of consumer price inflation to around 2.2%.
Looking at specific markets, the report estimates that housing and non-housing sectors will grow at about 5%, while infrastructure – which includes transportation, highways, water and waste – will grow at half that rate over the next 12 years. Demand for public sector construction (schools, hospitals, etc.) is likely to increase, due to both the expected increase in the U.S.’s population and the higher proportion of elderly people. The high level of U.S. debt will likely make financing needed public construction work difficult.
The answer to meeting infrastructure and other public sector construction needs despite funding challenges could come from alternative project delivery solutions, such as public private partnerships (P3), according to the report. Global Construction 2025 analysts noted that the U.S. infrastructure sector needs to embrace new skills and thinking in overcoming funding obstacles to new infrastructure and needs to look at successful models in other countries. Success will also depend on the insurance and re-insurance sector improving their understanding of risk profiles, and ensuring that best practices in P3 project delivery are transparent and understood.
Harley says, “If you’re not well versed in how to secure funding creatively – such as through a P3 or other alternative project delivery method – start looking for business development and strategy people to add to your teams. Partnerships will last a long time in these agreements and like any good relationship it’s the commitment to communicate that builds and maintains trust.”
