Construction Sector Report & Risk Analysis

Cyclical hurdles and long-term opportunities

HIGH RISK for entreprises

Fragmentation
Internationalization
Capital Intensity
Profitability

Fragmentation
Internationalization
Capital Intensity
Profitability

Updated in June 2023.

What to watch ?

Rising interest rates
Housing-market price correction
Green regulation, both an opportunity and a risk for the sector
Public policies on infrastructure

useful description of image if informative and not decoration only.

The global construction sector is going through significant growth and transformation. Demand for construction is on the rise, driven by factors such as urbanization, demographics and increased public and private investment in infrastructure. Global construction output is expected to grow to USD15.5trn by 2030, with three countries (China, the US and India) leading the way, accounting for about 60% of all global growth.

On average, the EBIT margin for the industry was around 5% in 2022 but there are large discrepancies from one region to another. Liquidity in the construction sector is a critical factor as firms get paid in instalments and need to finance inputs and labor out of pocket upfront. Although many construction firms faced liquidity issues during theCovid-19 pandemic, the situation has improved, despite working capital requirements remaining high.

In terms of segments, infrastructure is expected to witness significant growth due to increased public spending on infrastructure projects worldwide amid the green transition and development of emerging economies. However, the residential construction segment may face challenges, mostly due to rising interest rates and high valuations in the property market.

Residential construction: This segment includes the construction of new homes and apartments, as well as the renovation and repair of existing ones.

Non-residential construction: The construction of commercial buildings (offices, retail), industrial buildings (factories, warehouses, data centers) and public buildings (schools, hospitals etc.).

Infrastructure construction: Construction of large-scale public projects such as highways, bridges, railways, airports and utilities.

Construction services: Services related to construction, such as architectural and engineering services, project management etc.