GLOBAL OVERVIEW
Global construction market conditions
Author: Steph Marshall, Managing Director, Cost Management
Across the world, a two-speed construction market is emerging. Demand has never been higher in tech-led sectors from data centres to advanced manufacturing. Yet global uncertainty and volatility, mixed with structural market constraints, is limiting investor confidence and appetite in areas such as residential and commercial development.
GLOBAL OVERVIEW
Global construction outlook
New demand profile
Demand has softened across the commercial and residential sectors, which have long-driven construction orders, reflecting higher borrowing costs and more cautious investment conditions. This has led to slower project starts and more measured pipeline growth across many markets.
The balance of work has shifted to growth areas including infrastructure and technology-led sectors. Investment in data centres, advanced manufacturing and AI-related infrastructure continues to expand at pace.
This fragmentation and reprioritisation of certain sectors is playing out in cost inflation. We are seeing a transition away from a broad-based inflationary environment towards one characterised by:
- Sector-specific demand dynamics
- Persistent labour constraints
- Increased exposure to energy-related risks
→
Tailwinds – Growth sectors; government incentives; major/long-term programmes; new technologies/AI.
←
Headwinds – Trade tensions/tariffs; rising interest rates and inflation; labour shortages; global conflict; higher energy costs.
A fragmented landscape
The backdrop to these emerging trends is a complex operating environment in the global economy as a whole. Evolving trade policy measures, including tariffs and restrictions, which alongside geopolitical tensions are contributing to a more fragmented landscape. While these factors have introduced periods of volatility, their impact is more contained than initially anticipated.
TOP PERFORMING SECTORS
Sector-by-sector construction performance continues to reflect a shift towards technology, logistics and public investment. This picture reveals the multi-speed construction market – which is shaping cost dynamics and contractor capacity globally.
Data centres
Remain the leading sector globally in our survey, expanding across South East Asia and Latin America. Growth is driven by investment in digital infrastructure, cloud services and AI capabilities.
Industrial and logistics
Continue to perform strongly, driven by nearshoring, supply chain reconfiguration and e-commerce growth, reinforcing the importance of digital and logistics infrastructure in construction demand.
Infrastructure and transport
Provides a stable pipeline of activity, underpinned by ongoing public sector investment, while renewables and clean energy are gaining prominence as part of the global energy transition.
Commercial and residential
Commercial and residential sectors continue to have a significant share of overall activity despite facing softening demand.
Figure 1:
Top-performing construction sector, by activity levels - 2025 vs. 2026
Source: Turner & Townsend Global construction market Intelligence survey 2026
OUTLOOK
Emerging geopolitical risk
The outlook for costs is finely balanced. Overall inflation has continued to moderate into 2026, supported by easing monetary conditions and ongoing investment in technology and infrastructure. However, geopolitical developments are introducing renewed uncertainty into the outlook.
Middle Eastern conflict
The conflict in the Iranian gulf has increased energy volatility on a global scale. Benchmark crude oil prices in January 2026 were around US$60 per barrel, but by June had reached almost US$90. Energy prices are spiking across the world, impacting broader economic growth.
For construction markets, the primary impacts are indirect but still significant. This means:
- Increased material production costs
- Higher transport and logistics costs
- Additional pressure on plant and equipment operations
Disruption to key shipping routes also contributes to longer lead times and greater supply chain volatility. The extent of these impacts will vary by market, depending on:
- Reliance on imported materials
- Exposure to global supply chains
- Sensitivity to energy price fluctuations
Scenario-based impacts
The baseline scenario adopted in this report aligns with the IMF April World Economic Outlook Update, although this assumes only a short-lived conflict and a moderate increase in energy commodity prices in 2026. The outlook remains fluid and prolonged or escalating conflict would likely result in more pronounced impacts on inflation, supply chains and construction costs.
"New dynamics are reshaping the drivers of construction cost performance globally. While demand remains uneven and increasingly concentrated in specific sectors, broader labour constraints, supply chain jeopardy and geopolitical risk are becoming more pronounced."
CLIENT IMPACT AREAS
Delivery confidence
Uncertainty has reduced market tolerance for further shocks. Clients should request clearer and more frequent updates from contractors and suppliers to support timely decisions on sequencing and affordability.
Market behaviour
In the short term we expect rapid repricing, higher risk premiums and cautious decision-making. Early, open dialogue between clients and contractors is crucial for flagging risks and developing pragmatic solutions.
Cost inflation
There is price pressure on fuel- and energy‑intensive inputs such as concrete and steel. This should prompt early conversations within project teams to review cost exposure, sense‑check assumptions and agree how best to monitor them.
Logistics and transport disruption
Reduced access through the Strait of Hormuz and consequent longer diversions are increasing lead-in times and freight costs. Regular check‑ins with suppliers will help to keep logistics risks visible and allow for accurate forecasting.
AUTHOR
Steph Marshall, Managing Director, Cost Management
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