Significant increases in tender prices on construction projects are expected throughout 2025 across the US, Canada and Australia, a new report suggests.

(above image of Seattle via Wikipedia)

But subdued market conditions are expected to remain throughout Europe.

In its Annual Report 2025, multi-national quantity surveying and cost consulting firm Rider Levett Bucknall has provided an overview of the outlook for world construction markets and tender prices across the next three years.

All up, the report says that the world economy has shown resilience over recent years in the face of geopolitical shocks, the pandemic and the energy crisis.

Pointing to forecasts by both the OECD and the International Monetary Fund that global growth would come in at 3.3 percent across both 2025 and 2026, RLB says that this remains positive despite being muted in historic terms. This is especially the case when considered alongside easing inflation levels.

In terms of construction tender pricing, RLB says that there has been a shift in focus as input prices pressures have eased but commercial and geopolitical risks have intensified.

Turing to specific markets, RLB says that significant cost and pricing pressures are expected to remain across both North America and Australia.

In North America, significant price escalation is expected to occur in both the United States and Canada. This is the case notwithstanding that the rate of escalation is expected to moderate slightly compared with 2024 levels across nine out of the thirteen North American cities which are covered in the report.

In the US, tender price escalation of five percent or greater is expected in 2025 across markets such as Honolulu (6.0 percent), Seattle (5.8 percent), Portland (5.3 percent) and Las Vagas (5.0 percent).

Strong price escalation is also expected in Boston, Washington DC, Los Angeles and New York.

Turing to Canada, tender price escalation of 6.0 percent and 5.5 percent is expected in Toronto and Calgary respectively.

In the US, RLB expects the overall dollar value of construction activity to increase by 8.5 percent in 2025 as market conditions remain stable but cautious. This follows a 6.4 percent increase which occurred in 2024.

This will occur as a generally positive economic outlook, high levels of government spending and falling interest rates support growth in both residential and non-residential building activity.

However, significant cost pressures remain amid a persistent shortage of workers. In one survey conducted by the Associated General Contractors of America, more than 90 percent of US construction firms indicated that there were having difficulty in finding both salaries and non-salaried workers.

That said, salaries have stabilised as workers have flocked to large projects such as data centres. Workers who are employed on these projects are generally more willing to accept moderate wage increases on account of the long-term job security which these projects offer, RLB says.

Whilst the price of many commodities have stabilised, moreover, contractors are preparing for possible cost increases in relation to steel, lumber (timber) and mechanical, electrical and plumbing components amid the prospect of broad tariffs under the Trump administration.

(in Honolulu, tender price escalation of 6 percent is expected in 2025. Image source: Wikipedia)

Another country in which strong pricing pressures are evident is Australia.

Across major cities and towns, tender price escalation of five percent or greater is expected in Gold Coast (6.0 percent), Townsville (6.0 percent), Brisbane (5.6 percent), Adelaide (5.0 percent) and Darwin (5.0 percent).

In terms of building construction, conditions across much of Australia remain challenging as higher interest rates and rising borrowing costs have made it more difficult for developers and property owners to finance new projects – albeit with approval numbers ticking up in recent months.

Nevertheless, overall levels of construction activity remain high on account of a backlog of public sector road and rail projects. This will be supported in coming years by energy projects and work associated with the 2032 Brisbane Olympics.

In its report, RLB says that cost escalation pressures persist notwithstanding that the rate of escalation has stabilised compared with 2022 peaks.

Factors behind this include ongoing pressure on labour and materials, low productivity, restricted competition among contractors, high construction insolvency rates and greater risk allowances in tender submissions on account of higher levels of risks associated with cost and delays on projects.

Across other major markets, according to RLB:

• In Europe,economic stagnation and geopolitical risks are significantly hindering investment in the construction sector. This is particularly the case in northern Europe. In the south, southern regions are experiencing some growth in tourism and renewables but face similar labour challenges.
• In North Asia,construction activity showed stability or slight decline in 2024. Data centres, industrial sectors, and infrastructure were sources of positive growth. The ageing workforce presents a significant future challenge.
• In Southeast Asia, steady growth is projected for 2025. This will be driven by robust investment in infrastructure, data centres, and renewable energy. However, each market faces distinct local challenges.
• In the Middle East,large-scale projects and strong economic activity sustain dynamic growth. This is despite rising construction costs and inflation. The UAE and KSA will lead the way.
• In Africa, investment continues to be heavily linked to inflation and political stability. While some regions show robust growth in specific sectors (e.g., residential in Johannesburg, mixed-use in Cape Town), political risk and instability remain significant concerns.