The world’s construction sector is under massive pressure as supply disruptions and overheating markets are leading to pressures on construction costs, the latest report has found.

In the 2022 edition of its International Construction Market Survey, professional services consultancy Turner & Townsend has analysed cost and construction market conditions across 88 markets and 17 types of commercial, multi-residential and public sector buildings.

Of the 88 markets analysed, more than one-third (34) were classified as either ‘hot’ or overheating.

This compares with just nine in the same report last year.

As this has happened, as many as 38 of the 88 markets experienced cost inflation of 10 percent or greater during calendar 2021.

This compares with only 11 markets which were expected to experience cost inflation of such magnitude when the survey was performed last year.

Furthermore, cost escalation of ten percent or greater is expected in 27 markets in 2022.

The report also found that:

• Among those who responded to a survey as part of the report, almost six in ten (56.8 percent) indicated that they had experienced either a significant impact (17.0 percent) or a high impact (39.8 percent) from supply chain destabilisation.
• Lead times are blowing out. Across survey respondents, more than nine in ten (94.3 percent) indicated that lead times had increased over the past year. More than six in ten say that lead times have increased by four or more weeks, whilst more than one third (36 percent) say lead times have blown out by more than five weeks.
• Shortages of skills and labour are evident in almost eight in ten markets (79.6 percent) worldwide.

Not surprisingly, the report found that challenges are being generated by ongoing supply chain disruptions as well as worker shortages at a time of heightened demand for construction around the world.

These challenges have been exacerbated in 2022 by the Ukraine war, commodity price shocks, surging inflation and COVID-19 lockdowns.

According to the report, firms are adopting several measures to mitigate supply chain risk.

Some have taken to broadening their geographic reach when procuring materials and equipment.

Others are locking in multi-year volumes with preferred suppliers at fixed rates.

Yet others are using digital tools to make better informed procurement decisions, moving from ‘just in time’ to ‘just-in-case’ delivery models, and promoting closer and earlier contractor engagement across all tiers of the supply chain.

Neil Bullen, Global Managing Director, Real Estate, said the report highlighted intense industry challenges.

“We face headwinds on multiple fronts across the global construction sector and the broader international economy,” Bullen said.

“The continued interconnectivity of markets is more apparent now than ever.

“We see near-universal inflationary trends founded on construction labour shortages, demand exceeding supply, and disruption in supply chains hitting costs and programs.

“Companies must adopt a wider, global view of their construction supply chains to manage the uncertainty as we brace for further challenging months.”