Executive Summary:

The outlook for the Global Construction sector continues to be encouraging over the next five years, assuming the worst of the COVID pandemic is behind us.

Close to a year and half of dealing with COVID-19 has been a major challenge to all construction related organizations around the world.

COVID-19 has seen close to 230 million confirmed cases & close to 5 million deaths around the world. (Could be 10 million with the way some countries are under-reporting) and over 700,000 deaths in the USA.

The virus has created significant problems to the Global Construction sector, compelling many organizations to substantially modify, shut down, or severely slow down ongoing construction activities. The world economy & construction sector is in its most unpredictable position since the Great Depression of the 1930’s. International economic growth has slowed down significantly. 

The pandemic has negatively impacted the economies and construction sectors of more than 180 of the world’s 200 countries. Some counties have successfully navigated around the pandemic, while many countries have significantly struggled with the virus.

COVID-19 will be with us for the next year or two, so don’t throw away your masks. Some of the main challenges for the construction industries include:

• More than 80% of Contractors have suffered delays in obtaining domestic & international construction components. 
• Over 75% of construction related companies have suffered project cancellations, suspensions or major delays.
• A global recession is a distinct possibility in 2022, look for inflation to move higher. Gasoline prices have increased in the US by 15% to 20% in the last 40 days. 
• India has experienced more than 450,000 deaths (could be x 5 times more).
• Brazil has suffered more than 590,000 COVID related deaths.
• Key construction materials (steel, copper, timber) are experiencing spiraling price increases, shortages & delivery to site delays brought on for the most part by COVID, the US housing boom and these issues are causing increased construction cost & a rise in inflation across the world.
• Pent up demand has caused huge price spikes to steel & OSB plywood & lumber products.
• Generally Commercial construction will struggle with oversupply of offices & shopping malls (USA big problem – shopping online)
• There are some shortages of qualified workers in some countries (Welders / Instrument fitters etc.).
• Looks like there will be more Infrastructure projects. 
• The drawn-out & disorganized rollout of vaccinations is a serious problem in many countries. Europe has really struggled, seems to be improving 
• A new strain of COVID-19 first reported in Japan surfaced in the USA, could this be a big problem?
• We have seen the 2nd, 3rd and 4th waves of COVID-19, look for this to continue. For how long? We just don’t know. 
• Over 70% of Contractors have experienced project delays & disruptions in the last 12 months.

However, we are starting to see signs that the COVID-19 pandemic is starting to weaken, substantial headway has been made with the vaccine rollout and it appears that in North America economic recovery could be achieved in the next 3 to 6 months. However, we are not out of the woods yet, another COVID-19 wave could bring on an economic recession in the 4th Q of 2021. The construction sector continues to face headwinds as we transition into 2022.

• New single family homes & apartment construction continues to remain extremely strong, we could see close to 1 million new homes constructed in 2021, look for this blistering trend to cool down by the 4th Q of 2021.
• Commercial construction offices, hotels, shopping malls will continue to be sluggish, as this sector deals with working from home issues & shopping online. 
• Infrastructure, renewable energy work looks to be well set for future Government investment. 
• Manufacturing, Food, Pharmaceutical related construction is expected to see reasonable growth in the 4th Q 2021. 
• The recent jump in oil & gas price is good news for Engineering firms & Contractors. Oil, Gas & Petrochemical construction is forecast to have a positive growth period for the next couple of years, even with the recent cancellation of the Keystone Pipeline by the Biden Administration. The number of US drilling rigs have increased by more than 25% across all US Oil & Gas basins in the last 10 weeks. 

Industrial Construction projects have seen a significant loss of worker productivity due to COVID mitigation programs.  

Industrial Construction projects will on average take longer to accomplish, for example a 12 month typical construction schedule will take anywhere from 14 to 15 months to complete post COVID-19.

As we continue to transition into 2022 we are possibly moving into a new “normal” that still needs to be fully understood. We believe COVID-19 will have a major impact on how Construction Projects are bid, procured and executed in the foreseeable future. 

We have been talking with a number of Construction Managers, Site Superintendents, Planners & Estimators in the last couple of months regarding the loss of productivity on specific trades due to COVID-19 on Industrial Construction projects currently being constructed in the USA & Canada: 

This is the feedback we are getting: The majority of Refinery, Power, Manufacturing Pharmaceutical, Food Production & Owner companies are including clauses / contractual language in their construction contracts / Requests for Proposal (RFP’s) to minimize the spread of COVID-19 within their production sites, most of these contractual requirements will impact construction productivity. These include:

We have carried out an Order of magnitude increase on a $20 to $30 million Industrial project that could be in the $1.5 to $2 million range.

Current world political & economic risks & some positive issues facing the Global Construction Industry include:

• A 3rd wave of COVID-19 pandemic in Europe & other regions of the world appears to be a distinct possibility. 
• The ongoing confrontational stance of China with India, Taiwan, Hong Kong, Australia, the USA & the countries bordering the South China Sea.
• The possibility of an all-out trade war between China and the US is still a possibility, as the US pins the blame of COVID-19 on China. It would appear we’ve entered a new Cold War between the US and China. 
• China’s real estate house of cards could be brought down by real estate company Evergrande, the world’s most indebted company, this could send ripples throughout the global financial market.
• Higher oil prices, US gasoline pump prices have increased by 33% in the last 3 months, is this a sign that inflation is about to kick in?
• The recently announced (Australia / UK / USA) – AUKUSA nuclear submarine deal has angered China.
• North Korea continues to be a wild card, how will the new US administration deal with this problem?
• There remains a possibility of a prolonged Global Recession in the next 6 to 12 months.
• The loss of construction worker productivity on Industrial Construction projects related to social distancing, new safety rules & the need for personal protection, remain an issue.

If the majority of these concerns can be resolved or put to rest, then the Global Construction Industry has an excellent chance to grow & prosper in the next 3 to 5 years particularly in some of the 2nd & 3rd world developing economies of SouthEast Asia, Africa & South America.  However, the current global war on COVID-19 needs to be won before this can be realized & this might take another year or two before this happens. 

4th Q of 2021 Construction Outlook for Major Countries:

4th Q 2021 Prices at a Glance:

• Forecast Cost of a barrel of Crude Oil $75 – $80
• Forecast of Euro / US $ Exchange Rate 1.16 – 1.25
• Forecast of UK Pound / US $ Exchange Rate $1.36 – $1.43
• Forecast of Copper per pound $4.10 – $4.20
• Forecast of Aluminum per pound $1.00 – $1.15 
• Forecast of Gold per Ounce $1,750 – $2,000
• US Construction Material Inflation (Basket of 10 construction materials) 3.5% – 5.5%

Compass International is considered by many to be the global leader in providing construction cost data. We partner with many of our clients to train their staff on Conceptual & Detailed Estimating methods, Validate Estimates, and to Turnaround problem CAPEX projects.

Eliminate the risk of cost overruns with Compass International’s researched and current US & International construction cost data.

Compass International’s staff of Estimators, Cost Engineers and Planners spend thousands of hours of construction costs research to develop our (8) construction cost data bases. In addition we have a network of Construction Professionals / Consultants / Estimator located in more than 20 countries providing us with real time cost data, all of our data is supplemented with feedback from Project Control Professionals, Estimators, Q.S.’s, Architects, Engineers and Construction Managers around the world. 

This comprehensive research supports us in validating our construction cost data library. Our updated construction cost data will assist you in your estimating / budgeting efforts, removing any concern of future construction cost overruns.

Our (8) 2021 Construction Cost Books & PDF’s are now available.

• To view our latest 2021 books, click here.  

At Compass International Consulting Services, we provide: 

1. Estimate Validation Services / Reviews of FEED Studies, AFE Budgets & Detailed Estimates for Owners that can save millions of CAPEX dollars. We also provide Independent Estimates / Check Estimates: 
2. Benchmarking Services: 
3. Global Market Surveys / Global Construction Cost Studies.
4. Turnarounds of Problem EPC / CAPEX Projects:
5. Optimizing CAPEX / OPEX Costs: 

To contact the Author of this newsletter or to enquire about our (8) Publications & Cost saving services, contact John G. McConville CCP – in USA call (609) 577 4505 or contact me on [email protected]