Key trends from 2024 will persist into 2025: stabilization of material prices, labor shortages, growth in digital infrastructure and renewable energy construction, with an average escalation of 2-6% of the costs. Alongside this, there remains a rapidly changing sense of uncertainty. Currie & Brown will closely monitor the impacts of government regime changes (including the UK, US and France), rising protectionist attitudes (including the US and China) and ongoing conflicts. This could dramatically impact costs, supply chain health, and construction activity.
In 2025, it will be important to understand the scale and scope of potential project risks and uncertainties and build resilience to weather any storm.
Europe and the United Kingdom
Europe’s construction outlook for 2025 presents a mixed picture. Growth is expected in the high-tech, logistics, infrastructure and renewable energy sectors, driven in many cases by government investment. Challenges in labor availability, funding and regulatory uncertainty will require careful planning and risk management. The focus on sustainability and digitization offers opportunities for forward-thinking companies to take advantage of emerging trends.
[In Europe] The challenges of labor availability, funding and regulatory uncertainty will require careful planning and risk management.
Political uncertainty in Germany and France is holding back construction activity. The construction industry in Germany has been weighed down by regulatory challenges and delays, slow decision-making on tax policies and declining investor confidence. Currie & Brown does not expect a noticeable improvement in this until after the federal election in mid-2025. In the UK, higher cost increases are expected next year compared to 2024. In addition, contributions to the national insurance will increase in April while reducing the threshold at which the tax must be paid. This increased tax burden on all employers could translate into higher construction costs.
Despite these challenges, my colleagues in Germany, France, Spain, the United Kingdom and Italy foresee strong demand for data centers to support high-tech construction activity by 2025 in their respective countries.
Over the next twelve months, construction costs are expected to rise at a rate of 2% in Italy, 2-3% in France, 3% in Spain, 3-5% in Germany and 3.3 % in the United Kingdom.
APAC and India
It’s a different story for the Asia-Pacific region in 2025. Construction slowdowns are forecast in China and Hong Kong, while in Japan the industry should stabilize. Growth is expected in Singapore, Taiwan, Australia, Malaysia, India and Thailand.
Despite these differences, labor shortages will contribute to higher labor costs next year. As in Europe and the UK, Currie & Brown expects to see growth in data center construction. In addition, Taiwan, Japan, India and Singapore will see strong semiconductor manufacturing construction. Government policies in India are expected to support construction activity growth of around 7% next year, but the potential impact of changing government policy and taxation adds uncertainty to the industry .
Low to moderate cost escalations are forecast across the region. There is a risk of higher cost escalation and price fluctuations in projects that require imported materials, especially in Thailand and Malaysia.
Middle East
[In the Middle East] increased demand for materials and labor will continue to pressure prices as supply struggles to keep up.
Saudi Arabia’s construction activity is expected to increase in 2025, with strong contributions from infrastructure, hospitality and residential developments. The kingdom’s successful bid to host the 2034 FIFA World Cup and Expo 30 in Riyadh is driving upgrades to stadiums, hotels and infrastructure.
In the UAE, government investment in initiatives such as Expo City Dubai and the Energy Strategy 2050 will continue to drive growth in infrastructure, tourism and renewable energy.
Overall, increased demand for materials and labor will continue to pressure prices as supply struggles to keep up. Costs are likely to increase by 2-5% in the UAE and 5-7% in Saudi Arabia. In the UAE and Saudi Arabia, infrastructure, renewable energy projects and luxury residential developments may face even higher cost escalation as they require specialized materials and skilled labour.
Latin America
Moderate cost escalation of around 3% is forecast across Latin America as key material shortages, supply chain disruption, skilled labor shortages and inflation apply pressure about the prices We expect the escalation in Mexico (3-4%) to continue to outpace Colombia (3%) and Peru (2%) in 2025. In all three countries, the escalation in the Currie & Brown forecast is expected to continue below the general inflation rate.
Investment in sustainability initiatives, including renewable energy and urban resilience programs, is likely to be prioritized by 2025. This will create significant opportunities for construction.
Rapid population growth in urban centers in Mexico, Colombia and Peru is driving increased demand for affordable housing options, giving a boost to the residential construction sector.
conclusion
Labor shortages will be a major challenge for almost all regions in 2025, especially skilled labor. This will be one of the key factors behind the moderate cost escalations we expect around the world.
The high-tech construction sector, and data centers in particular, are driving the industry in many countries. The pressure this brings on the demand for key materials and skills can lead to increased additional costs.
Significant political uncertainty and instability may inhibit investment and cause some of the world’s major construction players to adopt a “wait and see” approach. The true impacts of key regime changes won’t be known until mid-to-late 2025.
Today’s uncertainty and the rapid pace of change at global and local levels in 2025 must be met with built-in flexibility and resilience.
