In a reflection of the weakness of demand in oil-reliant economies, the research also predicts zero cost inflation over the next 12 months for the United Arab Emirates and in the Omani city of Muscat.
The research also ranked the 38 markets according to current levels of construction activity. “Hotter” markets have a higher number of projects, and consequently there is less competition for tenders, which tends to drive up prices. The report predicts that activity levels will increase over the next year in nine of the markets, stay the same in 19, and fall in 10.
Seattle and New York are regarded as overheating; while Dublin, London, San Francisco and Kuala Lumpur are ‘hot’. At the other end of the scale are Moscow and Sao Paulo – both regarded as ‘cold’.
Turner & Townsend global managing director – real estate Steve McGuckin said: “Two macro-economic factors – the sharp fall in oil prices and China’s slowdown – have rippled across the global construction industry over the past year and triggered a rapid polarisation of the market.
“Some regions are now facing acute overstretch, with construction demand outstripping what the industry is able to supply. Meanwhile in markets with a heavy reliance on either trade with China or on commodities exports, both demand and levels of investment have fallen.
“However against this divergent backdrop, some challenges – and some solutions – are universal. Chief among the challenges is an endemic skills shortage, which risks driving up construction costs even in markets with weak demand.
“In overstretched markets both contractors and their clients must take urgent action to improve efficiency and keep cost inflation in check, while those operating in subdued markets should seize the opportunity to strip out waste and get the skills mix right for when demand returns.
“While advances in technology like Building Information Modelling (BIM) and modular construction can help, efficiency improvements of the scale required will only be achieved if the industry evolves – and develops leaner, more collaborative ways of working across the supply chain.”
