Around the globe
Asia
General economic overview
Following widespread slowdowns in the Asian economies during 2020, most economies bounced back in 2021 with large increases in GDP growth. China grew by 8.1 percent, India by 9 percent and Japan, where less of a deceleration was seen during the pandemic, grew by 1.6 percent.
COVID-19 is still a significant problem across the region. China saw a new peak in cases at the start of April leading to a decision to shut down Shanghai in pursuit of their Zero-COVID strategy. This is a significant setback as Shanghai is a major financial hub and port with global importance to trade.
To date, there has not been a take-off in consumer inflation in Asian countries to the extent that other developed nations have seen. However, higher commodity and energy prices are inflating producer prices. Singapore, India, and South Korea are seeing higher-than-normal inflation and higher fuel costs may add to this over the course of 2022.
In China, inflation remains low, but producer prices increased by 8.8 percent in the year to February 2022, and this is likely to be passed along in the supply chain to global export prices. It is a similar story in Japan, where higher commodity prices for steel, chemicals, plastics and resins, copper and shortages of semiconductors are driving up costs of production.
Construction sector performance
Construction is increasing in all regions, but the capacity of the Asian workforce to service the increased workload is being pushed to its limit. Longer lead times and high workloads are causing tender prices to rise.
In 2021 several Chinese developers defaulted on loan payments, most notably Evergrande, as the Chinese government took steps to control the extreme debt levels in the sector. With residential property comprising 28 percent of the Chinese economy, there is concern the effects of these debt issues may spread through the whole Chinese real estate market and even have negative impacts globally.
Top-performing sectors
There is considerable activity in the industrial, science and technology space as home-working and telecommuting have increased across Asia. Demand for new and expanded data centres remains strong. Both Apple and Tesla have announced new or expanded facilities in China. BDx announced the launch of its data centre campus in Nanjing. GDS is building campuses in Beijing, Shanghai and Hebei. Google and Microsoft have projects in Taiwan, where strong domestic demand and strong data protection laws are attractive. Singapore, Malaysia, Indonesia and India all have projects under way.
Semi-conductor manufacturing is expanding in Malaysia, Vietnam, Taiwan and Japan, driven by the chip shortages affecting supply chains in vehicle and other manufacturing. Several major battery plants are in the planning stage.
Logistics is also a growth sector as confidence returns to pre-pandemic levels. To date, much of the construction is in the warehousing sector rather than advanced handling facilities. Japan is the exception with several large projects under consideration to set up fully automated advanced-handling facilities.
Several infrastructure projects, such as Changi airport third runway, were stalled during the pandemic. However, demand for infrastructure across the region remains strong and we have since seen a quick rebound of government activity and investment in this sector.
Progress of the environmental agenda
Energy demand fell during lockdowns and it was hoped that when recovery came it would promote the use of more renewable energy sources. Recovery, however, has been quicker and stronger than expected and this has caused emissions to rise.
China is the largest consumer of energy and the rapid recovery from the pandemic has seen emissions increase by 740 million tonnes. China produced 33 percent of the world’s global carbon emissions in 2021, largely as a result of electricity production, relying heavily on coal-powered production. According to the International Energy Agency, China’s increase in emissions exceed the reductions made in the rest of the world during 2020/21.
India also saw coal-fired power reach an all-time high. Despite these setbacks, renewables are playing an ever-increasing role in energy production in the region. Electricity generation from renewables in China reached 2500 TWh in 2021 or 28 percent of the total generation of the country.
While most countries across Asia are early in their journey to amend building codes, Japan, South Korea, and China have policy commitments to achieve net-zero emissions by 2050 and 2060 respectively. Singapore has also set a target to work towards achieving net-zero emissions as soon as viable in the second half of the century.
Future outlook
The outlook for the region is best described as positive but cautious. Construction is likely to focus more on the industrial, science and technology industries, along with a steady pipeline of infrastructure.
However, higher producer prices and higher construction costs may impact projects where the business case is marginal. The construction sector may struggle to deliver the increasing workload without further cost rises. Also, a further challenge is the ability of the Chinese authorities and real estate sector to navigate away from its highly leveraged financial position to a more sustainable model, without negative impacts spreading to other sectors and overseas.
Current tendering condition
Future market outlook
“The outlook for the region is best described as positive but cautious. Construction is likely to focus more on the industrial, science and technology industries, along with a steady pipeline of infrastructure.”
Brian Shuptrine, Managing Director
Construction market
metrics
Top three regional
construction challenges
of respondents said that rising costs of construction had a significant or high impact on the delivery of construction projects
of respondents said that government red tape, bureaucracy, delayed approvals had a significant or high impact on the delivery of construction projects
of respondents said skilled labour shortages had a significant or high impact on the delivery of construction projects
Regional construction
cost performance
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