INSIGHT

Key themes shaping the outlook

Author: Isaac Hou, Construction Economist

Construction is entering a new phase, shaped by AI, geopolitical uncertainty, evolving procurement models and the energy transition. This section explores the trends redefining how projects are delivered.

OPPORTUNITY

Digital and AI

Digital transformation and AI continue to present a clear opportunity to improve productivity in construction, but progress remains slow and uneven.

More organisations are beginning to build businesses cases for digital adoption, but implementation in construction is still relatively slow.

Building Information Modelling (BIM) and smart building investment are two areas where uptake and investment is improving incrementally, but the picture still varies across markets and remains largely project-led rather than portfolio-wide.

Barriers to widespread adoption stem mostly from:

Data quality and accessibility

Skills and capability gaps

Governance and approval processes

There can also be a misunderstanding of where AI implementation might be most impactful. Limiting AI to back-of-house operations and administration reduces its potential for transformation. Market leaders are embedding AI in the foundations of capital delivery - using it to identify risks and improve data and analytics to support decision-making.

AI in capital delivery

Turner & Townsend offers a bespoke assessment model of digital maturity - helping clients understand the most transformative ways to adopt AI to enhance construction processes.

Assess AI capabilities

AI is not an autonomous decision-maker, and different tools have different weaknesses. Agentic AI is quick, but prone to hallucination, while machine learning is slower but more robust.

Prioritise high-value use cases

Do not transform everything at once. Build a roadmap around two or three high-value use cases, such as automated design assurance or PMO reporting.

Build strong data foundations

Inventory existing and historic data assets and ensure consistent structures and governance to offer robust foundations for AI to draw on for long-term predictive capability.

Embed risk management

AI does not and should not remove human responsibility – and oversight is essential. Retain clear audit trails and ensuring total data transparency, with human sign-off of AI outputs.

Scale AI across the portfolio

Having established the firm foundations above, then the processes can be fully automated and AI can be integrated across existing systems. Continue reflecting on the approach and refining the data layer to keep strengthening predictive analytics.

REALITY

Navigating uncertainty and volatility

The global construction market is operating in a more volatile and fragmented environment, shaped by persistent headwinds including trade tariffs, energy supply volatility, geopolitical conflict and shifting supply chains.

These factors represent a structural shift towards sustained uncertainty, which is now treated as inevitable. Cost and delivery outcomes are becoming more sensitive energy price shifts, logistics costs, currency fluctuations and trade dynamics.

While some markets are more exposed - particularly those with longer or more important-dependent supply chains - no region is fully insulated as global energy and transport networks continue to carry risk across regions.

The industry is evolving. Contractors and clients are adapting by:

Embedding higher risk allowances within pricing

Adopting more conservative programme and productivity assumptions

Becoming more selective in project engagement

Prioritising supply chain resilience and diversification

The result is a move to embedding risk into pricing and planning. This puts pressure on margins and preliminaries, undermining the benefits of moderating inflation.

In a fundamental shift in behaviour, the sector is transitioning to operate in a structurally higher-risk environment, where success depends on how effectively volatility is anticipated, allocated and managed across the project lifecycle.

EVOLUTION

Shifting procurement strategies

Procurement strategies are evolving to mitigate increasing project complexity and structural uncertainty. Traditional approaches are still mainstream, but it is positive that more integrated and collaborative delivery models are becoming increasingly prominent.

Openness to new models

Traditional models such as design-bid-build still account for approximately 50 percent of procurement globally, reflecting a preference for cost certainty and clear risk allocation. However, they are less effective and more inaccurate when operating in higher-risk environments.

In more mature markets, adoption of collaborative approaches such as two-stage design and build and construction management is increasing. This is being driven by:

Increasing technical complexity, particularly in data centres and infrastructure
The need for earlier contractor involvement to manage risk
Greater emphasis on flexibility and responsiveness in delivery

Risk-balanced approaches

As risk becomes more complex and less predictable, procurement strategy is increasingly recognised as a critical lever for managing cost, programme and delivery outcomes.

More integrated models support:

Earlier identification and allocation of risk
Improved collaboration across stakeholders
Greater flexibility to respond to changing conditions

TRANSITION

Energy shocks support the growing sustainability trend

Global volatility in the energy market has focused minds on how power is procured and used. This is strengthening the momentum towards more sustainable and energy efficient projects in many regions. The trend is also reflected in the strong global demand for new energy infrastructure, from renewable generation to a raft of transmission projects helping get the power to where it’s needed.

A key limitation both for energy infrastructure for projects wanting better sustainability credentials is the availability of skilled green labour, with over two-thirds of markets reporting shortages.

The adoption of low embodied carbon materials remains limited, but this is not a case of lack of ambition or interest from clients. Around half of our surveyed markets report the constraints are instead due to cost, availability and insufficient market readiness.

SUMMARY

Conclusions

Five key takeaways from this year’s findings.

Plan for local market conditions

Construction costs are increasingly driven by local labour markets, sector demand and risk pricing rather than global trends. Tailor budgets and delivery strategies to local market conditions and prioritise investment where capacity and value align.

Engage early and share risk

Contractors are becoming more selective, particularly on complex and fast-track projects. Early engagement and collaborative procurement will help secure capacity, improve pricing certainty and strengthen delivery outcomes.

Put labour at the centre of planning

Labour shortages remain the biggest driver of cost escalation and programme risk. Build realistic schedules, explore alternative delivery models and strengthen long-term workforce planning to reduce project risk.

Build resilient supply chains

Energy volatility and geopolitical uncertainty continue to affect material costs and logistics. Improve supply chain visibility, review cost assumptions and build appropriate contingencies into project planning.

Invest in digital capability

AI and digital technologies offer significant opportunities to improve construction delivery. Focus on strong data foundations, portfolio-wide adoption and building digital capability across project teams and supply chains.