This week, Turner & Townsend, the global consultancy that serves clients in the real estate, infrastructure and natural resource sectors, released the results of its 2021 International Construction Market Survey. Among the report’s conclusions are a prediction that prices of basic building materials like steel, copper and lumber will remain elevated through 2023, driven not by covid-related global supply chain bottlenecks, but the pipeline effects of the Biden Administration‘s proposed plan to commit 1 percent of U.S. GDP to infrastructure initiatives that will include major upgrades to road, water and power distribution assets as well as renewable energy project expansion.
Turner & Townsend‘s report is based on input from its own analysts based in 90 global markets, and measures input costs for materials and labor to calculate the average cost per m2 (ft2) across 27 different construction types. Its U.S. analysis evaluated the dynamics between the Biden Administration‘s proposed infrastructure plan against existing capacity challenges within the labor and materials markets, where it says the average cost per hour of labor for a cross-section of construction job roles currently stands at $109 in New York and $104 in San Francisco. By comparison, costs in major Canadian cities are running at half that amount: $52.90 in Toronto and $53.10 in Vancouver.
Higher labor costs are also being accompanied by sustained highs in basic materials costs.
“Widespread disruption to global supply chains seen through the pandemic are being sustained by high demand and competition for key materials between global markets including the U.S., Europe and China,” Turner & Townsend’s analysts wrote. “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.”
The report cites data from Steel Benchmarker showing that in June 2021, the price of U.S. hot rolled band (steel) was $1,824 per ton, up from $572 in June 2021. In May 2021, the spot price of copper traded on the London Metal Exchange was $10,000 per ton, compared to $5,500 in May 2020. Similar trends have been observed in nickel, zinc, aluminum and lumber, as robust demand in the variable economic recovery from covid lockdowns has come up against supply and logistical constraints.
“Multi-speed recovery”
Some covid-related dislocation is expected to self-correct: Turner & Townsend found that 58.9 percent of its surveyed construction markets anticipate being back at pre-pandemic output levels within the next 12 months, albeit with some regional disparities (what Turner & Townsend characterize as a “multi-speed recovery”). Sixteen out of 90 markets surveyed reported already being back “on par” with pre-covid construction output levels, while five–Berlin, Frankfurt, Hamburg, Milan and Perth–said they were in fact exceeding pre-covid construction.
Of the remaining global city markets surveyed, 13 expect to regain pre-covid building levels within the next six months, 19 within the next 12 months, 28 within the next 1-2 years, and nine markets expect two or more years to recover.
Turner & Townsend’s regional network also identified the top three performing building sectors in 2021, and Number One may or may not come as a surprise: data centers, up from sixth place in 2020, and followed by transportation (roads, rail and ports), and followed by industrial, manufacturing and distribution projects. Also not surprisingly, sectors that dropped down the list were those hit hardest by covid: commercial office development, sports, leisure/hospitality, and airports.
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