The global construction and real estate industry recorded robust growth in value after COVID-19, stimulated by infrastructure investment and rebounding consumer and business confidence. Booming steel, structural metal and energy prices will play a key role in diminishing profitability, with rises in costs and property prices. Residential construction is projected to see slower growth, given increased uncertainty and an anticipated rise in borrowing costs.
Rising prices of construction materials in the medium term will encourage builders to look for alternative materials and innovative solutions to mitigate cost increases. For instance, using larger prefabricated modules could allow builders to use a wider variety of materials, while modular designs can reduce construction time.
Supply chain disruptions during COVID-19 have already fostered diversification and localisation, while Russia’s invasion of Ukraine has also posed similar issues for European countries. Construction companies are projected to continue investing in supply localisation and diversification to avoid similar disruptions.
Energy and construction prices picked up as the industry entered a robust recovery. Russia’s invasion of Ukraine added more fuel to the flame, leading to skyrocketing oil, gas, metal and cement prices. Booming logistics costs will lead to substantial increases in construction budgets and final property prices, which in turn might negatively affect both industry profitability and demand.
The construction sector and its supply chain play a major role in CO2 emissions. Hence, with rising environmental awareness, companies are increasing their sustainability investments. For instance, the industry is searching for alternative renewable and more environmentally-friendly materials, such as timbercrete (mix of sawmill waste and concrete), hempcrete and bamboo. Consumers are also seeking better energy efficiency, fuelling a shift towards greener buildings.
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