- Construction activity contracts across all regions in Q2 amid lockdown and impact of social distancing measures
- 25% of projects were halted in the second quarter, and on-site productivity is predicted to fall 12%
- Expected cost escalations to put significant pressure on markets over next twelve months
- Infrastructure expected to lead a sluggish recovery, highlighting need to attract greater private capital through standardised and reliable data
The full impact of government lockdowns on construction activity was realised in the second quarter of 2020, with 25% of projects put on hold according RICS’ latest Global Construction Monitor.
RICS’ Global Construction Activity Index, a measure of current and expected construction market conditions among construction professionals read -24 in Q2, highlighting both the hit to activity, and a subdued outlook. While this measure was negative across regions, it was lowest in the Middle East and Africa (-40), and highest in the Americas (-14).
Falling sentiment reflects the impact lockdown and social distancing measures have had on construction projects. Professionals in the sector report that 25% of projects globally were put on hold as a result of lockdowns, with more placed on hold in the Middle East and Africa than in other regions.
Looking ahead, respondents don’t envisage an immediate bounce-back in activity. Only 20% of projects on hold are expected to restart imminently. On average, these are expected to be on hold for another 131 days. The good news is that only 0.3% of projects globally are expected to be permanently cancelled.
And for projects that continue, social distancing and health and safety precautions will restrict activity. Professionals in the sector expect onsite construction productivity to contract 11.7% globally, although there is some variation. While respondents in Singapore expect a 26% pullback, European markets broadly expect to see a single-digit decline in productivity, as do respondents in China, Canada, Australia and New Zealand.
Globally, professionals in the sector expect private non-residential workloads to contract further. By contrast, work on infrastructure is expected to expand over the next twelve months, albeit modestly. This follows some governments’ attempts to expedite projects in order to stimulate economic activity, largely led by Asia Pacific and the Americas.
Sean Ellison, Senior Economist, RICS, said: “A V-shaped rebound in construction seems an unlikely prospect while concerns remain around the transmission of the virus. The sites that managed to remain open or have reopened are seeing productivity reduced by necessary steps to protect workers’ health and wellbeing. This may trigger greater innovation, whether through adoption of new technology or modular construction, to offset productivity losses. But even so, the economic backdrop presents an additional and more substantial challenge yet – dampening demand.”
