GLOBAL TRENDS
Global construction cost performance
Market landscape ↓
Cost rankings ↓
Preliminaries and margins ↓
Cost inflation ↓
Labour ↓
Materials ↓
Supply chain ↓
Plant ↓
Global construction market landscape
The global economy has been thrown into another period of uncertainty, just as construction markets start to regain momentum. Bolstered by declining inflation and easing interest rates in major economies around the world, construction activity has revved up in many markets worldwide over the past year. Overall global disinflation has persisted, enabling many major central banks to start to ease their monetary policy stance. However, economic headwinds have intensified since the start of 2025, dampening confidence and posing significant risks.
A trade tightrope
In early 2025, sweeping tariffs announced by US President Donald Trump sent shockwaves through global markets, heightening tensions between major trading partners and exacerbating volatility. While the full scope of these tariffs remains unclear, sudden policy shifts have increased trade risks and disrupted global supply chains. The ongoing uncertainty surrounding these policies is expected to weigh on economic activity, as businesses delay investment decisions until greater clarity emerges. While the global economy demonstrated resilience in 2024, new challenges in 2025 present considerable hurdles.
Early indicators suggest a moderation in global growth, with the potential for renewed inflationary pressures. Cautious consumer and business sentiment across multiple regions reflects hesitation in investment and expenditure, which could further impact economic performance.
Diversification drives resilience
This unpredictable policy environment has heightened risks for major trading economies, reinforcing the need to diversify supply chains – a lesson also learned from the COVID-19 pandemic. In some cases, reduced demand has had a disinflationary effect, as manufacturers outside the US seek alternative markets.
Conversely, heightened risks and sudden policy shifts have contributed to inflationary pressures in certain sectors, such as advanced manufacturing and automotive, creating a highly volatile environment. Ongoing disruptions could strain supply chains, increase costs for key imports and prolong uncertainty in procurement and logistics, with significant implications for construction markets.
INSIGHT "Trade tensions and supply chain disruptions are reshaping global construction, demanding sharper cost management and strategic resilience."
A mixed picture
Against this backdrop, the outlook for the global construction market remains mixed. Inflation in construction costs has stabilised in many countries, and the start of interest rate cuts has renewed optimism for financing and development. However, trade tensions and supply chain disruptions continue to pose risks, necessitating careful capital planning, robust cost management and strategic pivots to navigate an evolving landscape.
International construction cost rankings
New York
San Francisco
Zurich
Geneva
London
Los Angeles
Chicago
Tokyo
Philadelphia
Sapporo
Our annual ranking of the most expensive construction markets remains consistent at the top of the table. New York City retains its position as the most expensive market for the third consecutive year, followed closely by San Francisco in second place, with Zurich rounding out the familiar top three.
In New York City, construction costs remain elevated due to strong market activity, dense urban environments, record-high employment and expanding high-growth industries such as life sciences, the green economy and tech. Major infrastructure projects further support construction demand.
Meanwhile, San Francisco’s construction sector faces persistent labour shortages, rising material costs and regulatory hurdles. The ongoing demand for office space in the technology sector, intensified by new demand sources from AI and high-end residential construction keep the market under pressure.
Geneva has moved up one place to fourth position, while London has risen from ninth place last year to fifth, reflecting a notable shift. This is partially driven by the appreciation of UK pound sterling against the US dollar, but also reflects London’s continued strength as a global financial hub, amplified by recent turbulence in the US.
US cities continue to dominate the top ten rankings, with Los Angeles securing sixth place, followed by Chicago in seventh, which has moved up one position. The LA market has seen a greater level of price escalation in the past 12 months driven by the supply chain disruption and construction demand following the wildfire disasters. Philadelphia, included for the first time in this year's report, debuts at ninth place.
INSIGHT "Construction costs remain under pressure in the world’s most active cities, driven by labour shortages, supply challenges and surging demand from high-growth sectors."
A less dominant USD this year has allowed non-US markets to regain positions that were previously impacted by last year's strong dollar, contributing to shifts in global construction rankings.
Tokyo has re-entered the top ten after being absent last year, now ranking eighth, while Sapporo has entered the top ten for the first time and remains Japan’s second most expensive construction market. The Japanese construction market as a whole has seen an upward shift in rankings, reflecting strong demand fuelled by both foreign and domestic investment. General contractors report strong order books, with data centre development gaining momentum alongside major projects such as those planned to deliver legacy benefits from this year’s Osaka Expo, semiconductor plants in Kyushu and Hokkaido and major life sciences investments from Takeda and others.
Turner & Townsend, Global construction market intelligence 2025
MARGINS
Preliminaries and margins in global construction
Our survey identified the typical percentages for preliminary costs and profit margin for small and large commercial projects, specifically those with a gross floor area (GFA) of 2,500m² and 50,000m², respectively. These percentages vary by region and country, influenced by factors such as construction type, local building standards, site complexity and overall building costs.
At a global scale, average preliminary, overhead and profit (OH&P) figures for commercial projects vary depending on the project size with smaller projects typically seeing higher percentages compared to large projects. The global average for preliminary costs on small projects sits at 11.1 percent, while large projects come in at 10.0 percent. Similarly, the global average for profit margins on smaller commercial projects sits at 10.6 percent, while larger projects average at 8.4 percent.
In general, larger projects have lower preliminary costs and profit margins due to economies of scale, streamlined project management and reduced proportional overhead costs. Larger projects often benefit from bulk procurement, optimised labour allocation and more efficient site operations, which help drive down relative costs compared to smaller builds. Additionally, contractors tend to accept lower profit margins on large builds because of higher total contract values and long-term strategic gains, making these projects attractive despite the reduced percentage margins.
Following a year of normalising inflation for costs of raw materials, logistics and energy, prices had mostly stabilised, except for some volatile inputs such as copper. However, global trade policy uncertainty and potential disruptions to trade flows remain key concerns. Shifts in material sourcing, pricing instability and evolving trade regulations have triggered price fluctuations of some goods and services, requiring adjustments in contractor pricing strategies.
INSIGHT "Smaller commercial projects sit at 10.6 percent, while larger projects average at 8.4 percent."
Australia, New Zealand and Europe report higher preliminary costs, partially due to strict building regulations and skills shortages driving stronger wage growth. Large projects in these regions require extensive approvals, site preparation and compliance measures, increasing the overall cost burden. Additionally, the Middle East is experiencing higher-than-average preliminary costs due to a booming construction market, which is driving labour shortages and high demand for contractors and services.
Contractor profit margins tend to be higher in South America, Africa and Asia, driven by inflationary pressures, currency fluctuations and financial risks. Economic volatility often forces contractors in these markets to adjust pricing strategies to mitigate against uncertainties in material costs and market instability.
Since overall contract values tend to be smaller in lower-cost regions such as South America and Africa, higher percentage margins are necessary to ensure contractors remain incentivised to take on projects. In contrast, higher-cost regions, where project values are larger, allow contractors to operate with lower percentage margins while still achieving substantial profits.
Preliminaries and OH&P
PROFIT
Preliminaries and margins by project type
Our survey finds that data centres rank as the project type with the highest profit margins globally, with 26 out of 99 markets reporting this trend.
The surge in AI-driven demand has made data centres one of the hottest sectors globally, fuelling higher profit margins and increasing upfront costs due to the limited pool of specialised contractors and trades required for these projects. The specific land requirements for data centres add another layer of complexity and cost to preliminary expenses.
The data centre sector is followed by corporate occupier (office fit-out) projects, noted in 13 markets, as well as industrial, manufacturing and distribution projects, highlighted in 11 markets. Despite evolving hybrid work models, the office fit-out market has shown resilience, with appetite remaining strong particularly for high-spec/grade A space in hub markets.
On the cost side, data centres also lead with the highest preliminary costs, reported in 20 markets. Transport projects follow with 10 markets, while industrial, manufacturing and distribution, along with major mixed-use developments, are each reported in nine markets. Greater certainty around energy supplies and the impact of tight monetary policy on global demand have also been pushing costs downwards. The average price of oil has fallen by 28.5 percent since its peak in June 2022 as production in the US and Iran has swelled.
Figure 3:
Turner & Townsend, Global construction market intelligence 2025
INFLATION
Global construction cost inflation across 2024, 2025 and 2026
Global construction cost inflation rose by 4.15 percent in 2024, with significant variations between regions. While inflationary pressures moderated in developed economies, several developing markets experienced much stronger escalation due to economic instability, currency fluctuations and material cost volatility.
In developed regions, construction inflation rates continued normalising in 2024, as the effects of restrictive interest rates and softening demand filtered through the economy. The UK recorded an average increase of 3.0 percent, while Europe experienced average inflation of 2.9 percent. North America reported 3.6 percent, whereas Australia and New Zealand experienced a higher rate of 4.7 percent for the year, largely driven by a newly negotiated enterprise agreement introducing a payrise for construction labour, though this still marks an improvement compared to previous years. These figures indicate a return to escalation rates more aligned with those seen prior to the pandemic, suggesting greater stability in material pricing and project-related costs.
Asia presents mixed inflation trends in 2024, with an overall average of 3.4 percent. Countries such as China, Vietnam, Singapore and South Korea recorded lower construction cost inflation rates, largely due to cooler market conditions and softer demand. In contrast, Japan and India experienced higher increases, driven by a shortage of skilled labour and stronger construction demand, contributing to higher cost pressures.
While some regions have recorded higher construction inflation, this trend is largely driven by specific outliers, rather than a uniform pattern across several markets. For example, Buenos Aires and Lagos have experienced exceptionally high construction cost inflation, influenced by currency volatility, inflationary pressures and unique market conditions. However, when outliers are excluded, average inflation across South America and Africa is more aligned to global trends, with South America at 2.9 percent and Africa at 4.0 percent. This suggests that while inflation remains a concern in some markets, not all developing economies are experiencing extreme escalation rates.
As global trade policies evolve, construction inflation rates are likely to be influenced by shifts in the supply chain. Markets such as Singapore, which is heavily reliant on imported materials and equipment, remain highly sensitive to trade disruptions, with any global impact expected to affect both project costs and timelines.
To ensure optimal viewing of Figure 4, it is highly recommended to view this page on a desktop or laptop screen rather than a mobile or tablet device. The larger screen size provides superior clarity and detail, facilitating a better understanding of the presented information.
Figure 4: Construction cost inflation across 2024, 2025 and 2026
Turner & Townsend global construction market intelligence survey 2025
Construction cost growth continues to show signs of easing at the global level. On average, construction cost inflation is projected to settle at 3.9 percent globally in 2025, before rising marginally to 4 percent in 2026, though regional disparities persist.
Demand remains a key driver of construction cost inflation in regions. Strong growth sectors have increased construction expenditure and are expending project pipelines resulting in market capacity pressures. Additionally, labour shortages in high-demand markets and for sector-specific skills remain a major factor influencing cost inflation. The Middle East and Australia are experiencing these price pressures due to sustained activity levels and shortages of skilled labour, driving up construction costs and contributing to overall inflation.
Markets across Asia present mixed trends. China’s construction sector continues to be impacted by a sluggish property market, while India, Malaysia and the Philippines should experience a booming market, driving stronger construction cost inflation. Vietnam may also see a stronger market compared to last year, although the recent trade tariff turmoil presents a downside risk to this.
Africa once again expects to record the highest levels of inflation, primarily due to hyperinflation, currency depreciation and political instability in certain markets. Meanwhile, Europe anticipates the lowest inflation levels at 2.4 percent in 2025 and 2.8 percent in 2026, with many major economies yet to recover from inflationary pressures in recent years.
In the UK and North America, construction cost inflation is anticipated to remain steady at 3.5 percent and 3.8 percent, respectively. However, at the time of the survey, uncertainties persist, particularly in the US, where policy changes could have significant implications for construction. Factors such as fluctuations in plant and material costs and deportation policies affecting labour availability are expected to be key considerations influencing future trends.
Given the potential for rapid market shifts, ongoing monitoring of developments is advised to ensure timely adaptation to changing conditions.
GLOBAL
Construction input costs and global supply trends
Labour
The global increase in labour costs, driven by persistent skilled labour shortages, continues to exert upward pressure on construction expenses. While some markets have seen improvements in skilled labour availability, shortages remain a major concern in most developed nations, exacerbated by an ageing workforce, high retirement rates and insufficient recruitment of new talent in the construction sector.
Australia and New Zealand continue to experience critical skilled labour shortages, while Europe has seen conditions deteriorate further, with a higher proportion of respondents reporting skill shortages. Labour constraints persist across Asian markets, although improvements have been observed in the UK and North America.
At a global level, labour availability has shown modest improvement, with fewer markets reporting skill shortages, decreasing from 79.1 percent to 71.7 percent, while the proportion of markets reporting a balanced labour situation has increased from 11.0 percent to 22.2 percent. A normalisation in activity levels has contributed to this improvement. However, in many developed markets, housing shortages have further complicated the issue, making it challenging to accommodate additional workers, even where demand for labour remains high.
Turner & Townsend, Global construction market intelligence 2025
There’s limited optimism regarding future labour availability. Our survey indicates that only 17.2 percent of markets expect an improvement, while 26.3 percent anticipate a decline and 56.6 percent believe labour availability will remain unchanged.
Although over half of the markets expect labour availability to remain unchanged, it is important to consider that the global construction industry is already facing a skilled labour shortage, with over 70.0 percent of markets reporting shortages. As a result, labour conditions remaining the same does not necessarily indicate stability, but rather the continuation of existing constraints.
Some markets, including China and Brazil, anticipate an increase in labour availability. In Saudi Arabia, despite rising construction activity, Riyadh is expected to see improved labour availability as it attracts workers from neighbouring countries. However, this shift will likely reduce labour availability in other Middle Eastern markets as workers migrate toward Saudi Arabia.
Meanwhile, Japan is expected to face worsening construction labour shortages, while in North America, half of the surveyed markets expect labour availability to decline. Additionally, rising activity levels in certain markets, such as Brisbane’s preparations for the 2032 Olympics, should further strain labour supply and exacerbate shortages.
Turner & Townsend, Global construction market intelligence 2025
INSIGHT "Switzerland leads the world in construction labour costs, with North America and Europe close behind."
Switzerland continues to have the highest construction labour costs, driven by strong wage structures, strict labour protections and a well-developed construction market. Denmark, a new entrant in the survey, has secured second place, while the US has moved to third. Despite this shift, the US remains one of the most expensive construction markets, influenced by high-cost cities such as New York, San Francisco and Boston.
In Saudi Arabia, rising construction activity combined with higher wages is attracting workers from neighbouring countries, reinforcing the trends observed in our analysis.
On a regional level, the ranking remains largely consistent with last year’s report. North America is still the region with the highest construction labour costs, while Europe ranks as the second most expensive region despite significant market variations. In Europe, cities like Zurich and Geneva continue to be among the costliest, whereas others such as Madrid and Warsaw offer more competitive labour rates.
Elsewhere, New Zealand is experiencing a net migration loss to Australia, driven by higher wages and a broader range of job opportunities in Australia. Meanwhile, Asian markets exhibit considerable wage variability across different countries, reflecting diverse economic conditions and labour market dynamics.
Materials
Supply chain
While global supply chains have improved, our survey indicates that instability and moderate delays continue to affect most markets. 68.7 percent of respondents report ongoing disruptions, while 28.3 percent describe conditions as stable. Only 3.0 percent have experienced severe disruptions, with lengthy delays occurring.
Looking ahead, 63.6 percent of respondents expect supply chain conditions to remain unchanged, while 21.2 percent anticipate deterioration and 15.2 percent foresee improvements. We anticipate some instability and moderate delays throughout the year, while recent shifts in global trade raises concerns about potential impacts on shipping and supply chains.
Our survey findings indicate that electrical materials, such as generators, switch gear and condenser units, along with HVAC components, have significantly longer lead-in times compared to other construction materials. This trend is largely driven by the surging demand for data centres, identified elsewhere in the report as one of the hottest sectors. These facilities require extensive electrical infrastructure and cooling systems, placing strain on global supply chains.
Additionally, the adoption of renewable energy solutions has intensified demand for electrical components, as industries transition towards low-emission technologies that rely heavily on copper-intensive systems. Copper, a critical material in electrical infrastructure, has exhibited price volatility, driven by supply constraints, geopolitical factors and growing consumption in AI-driven data centres.
Plant
We measure plant costs as day hire rates, considering labour, consumables (eg fuel) and sales tax for a 50-tonne mobile crane with an operator per day. Our data indicates that plant costs have remained largely unchanged compared to last year, as have overall operational costs for plant, machinery and equipment. A decline in oil prices over the past year has contributed to the stabilisation of plant prices. However, this has been partially offset by rising labour costs in most countries.
Recent tariff actions from the Trump Administration could potentially impact the cost of machinery and equipment. Since a portion of large construction machinery is sourced from the US, added duties on specific components and raw materials required for manufacturing may contribute to higher prices for US-produced machinery and equipment.
TENDERING COMPETITION
Global tendering competition and construction market outlook
Assessing current tendering conditions and anticipating future shifts provides critical insight into the construction market cycle and serves as a key indicator of potential cost inflation.
Tendering conditions have been assessed on a scale from 1 to 5, reflecting the level of competition within the market. By evaluating tendering competitiveness, we can gain insights into the overall market activity and potential impacts on construction costs.
- Markets rated 1 or 2 typically indicate high levels of activity, where numerous projects are available for bidding. In such conditions, contractors are often operating at or near fill capacity, allowing them to be more selective and command higher profit margins due to reduced pricing pressures.
- A rating of 3 signals a balanced market and tendering competition is healthy, and pricing remains generally stable.
- Markets rated 4 or 5 points to softer conditions, characterised by fewer available projects and intensified competition among contractors. In these scenarios, profit margins are often squeezed, and pricing becomes more aggressive to secure work.
Tendering conditions across global construction markets have generally shifted toward a more balanced environment in 2025, reflecting a normalisation of construction activity following stronger growth in recent years. Our survey finds that 58 out of 99 markets consider tendering competition to be balanced and within a healthy range.
Despite a broader trend toward equilibrium and balanced markets, global tendering conditions remain tilted toward heightened competitiveness. In 2025, tendering competition was rated at level 4 or 5 in 31 cases, while only 10 markets reported conditions at level 1 or 2. This distribution suggests a general slowdown in construction activity, accompanied by intensified competition.
In major economies, central banks have initiated rate-cutting cycles, creating less restrictive financial conditions for developers. This shift has likely contributed to a movement from highly competitive tendering conditions toward a more balanced environment in Australia, New Zealand, Europe and the United Kingdom. However, uncertainties in the global economy at the time of the survey are also likely impacting investment decisions – particularly in North America, where tendering conditions have shifted toward stronger competition or a cooler market.
Other notable shifts include an increasingly competitive environment in Asia, particularly in the Chinese market, driven by the ongoing property slowdown. South America, notably Brazil, has seen increased competition, reflecting broader market pressures across the region. In contrast, the Middle East has experienced reduced competition due to a surge in project numbers, contributing to a stronger market outlook.
To ensure optimal viewing of Figure 11, it is highly recommended to view this page on a desktop or laptop screen rather than a mobile or tablet device. The larger screen size provides superior clarity and detail, facilitating a better understanding of the presented information.
Figure 11: Regional construction tendering competition
Looking ahead, 54.5 percent of markets anticipate balanced tending conditions, up from 42.9 percent the previous year. In contrast, 15.2 percent expect declining tendering competition, a notable drop from 35.2 percent. Typically, declining competition reflects a heating market with ample opportunities and reduced competition for contracts.
Meanwhile, 30.3 percent of markets anticipate increasing tendering competition, up from 22 percent last year. This shift highlights ongoing uncertainty. Rising competition generally signals a cooling market, where fewer available projects intensify the contest for work. At the time of the survey, global trade policies remained unpredictable, with ongoing discussions regarding new trade agreements or the absence of deals expected to influence market outlooks.
Analysis of current tendering scores against their outlooks reveals a clear trend. Balanced markets overwhelmingly expect conditions to hold steady. Low-competition markets anticipate further softening in tendering competition or continued market heating. High-competition markets are more likely to forecast even greater levels of competition. This points to growing divergence in global tendering conditions, with stable regions holding firm and others drifting further from equilibrium rather than moving toward it.
The outlook across Europe and the United Kingdom remains stable, with most markets expecting tendering conditions to hold steady. As these regions are already experiencing balanced conditions, further stability is anticipated. In Asia, expectations are more varied due to the region’s economic diversity.
In Australia and New Zealand, tendering conditions are expected to soften in markets such as Brisbane and Perth, driven by strong project pipelines. Across the Americas, South America is projected to face increasing tendering competition and cooler market conditions. A similar trend is evident in North America, although to a lesser extent, primarily reflecting the impact of uncertain US trade policy, which continues to influence regional market sentiment.
To ensure optimal viewing of Figure 12, it is highly recommended to view this page on a desktop or laptop screen rather than a mobile or tablet device. The larger screen size provides superior clarity and detail, facilitating a better understanding of the presented information.
Figure 12: Regional construction market outlook
Top-performing sectors
Data centres have topped our table when ranking the leading sector in each market, with 21.2 percent of respondents identifying them as the top-performing sector. This trend is particularly strong in major financial and tech hubs such as London, Tokyo, Melbourne, Paris, Frankfurt, Beijing, Mumbai and Jakarta, where demand for cloud computing, AI infrastructure and digital services continues to drive investment. Despite some providers reassessing projects due to uncertainty in trade policies and evolving AI infrastructure needs, long-term growth remains strong due to persistent digitalisation trends.
Transport and mobility, highlighted by 15.2 percent of respondents, ranks second, with Chinese cities, Singapore and major US markets investing in ports, rail, roads and airport expansion to support urban growth and infrastructure modernisation.
Industrial, manufacturing and distribution, at 13.1 percent, has seen growth in markets like Hanoi and Ho Chi Minh City benefitting from supply chain diversification away from China. Japanese cities and US markets like Atlanta, Austin, Charlotte, Detroit and San Antonio are also experiencing expansion as they strengthen their manufacturing and logistics infrastructure.
Residential and social housing, identified by 12.1 percent of respondents, remains a priority in rapidly urbanising cities such as Nairobi, Lagos, New Delhi and Manila, where population growth is driving investment in housing development.
UNCERTAINTY
Looking ahead: emerging trends in the global construction market
As the global construction market moves forward, trade policy uncertainty remains a significant challenge, shaping investment trends, material costs and supply chain dynamics. While financial conditions have improved with the easing of inflation and interest rates, persistent uncertainty regarding tariffs, regulations and geopolitical shifts continues to influence business decisions.
Recent developments in global trade negotiations suggest cautious optimism, yet unpredictability in tariff enforcement and international policy responses presents risks to procurement strategies and pricing structures. Countries dependent on material imports are particularly vulnerable to policy shifts, which could lead to price volatility, project delays and supply chain disruptions.
Investor sentiment remains mixed, as developers weigh the impact of potential trade barriers on project feasibility. While some markets benefit from stable trade frameworks, others may experience slowed investment due to concerns over cost escalations and unpredictable regulatory environments.
At the same time, skilled labour shortages remain one of the most significant challenges affecting project timelines and costs. Many markets continue to struggle with workforce constraints, particularly in regions experiencing high construction demand. Ageing workforces, reduced recruitment and housing shortages for labourers further compound the issue, creating pressure on wages and project planning.
AUTHOR
Tiffany Emmett, Project Director, Head of Construction Economics, Australia and New Zealand
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