The key trends of 2024 will persist into 2025: Material price stabilization, labor shortages, growth in digital infrastructure and renewable energy construction, with 2-6% average cost escalations. Alongside this, a prevailing sense of rapidly shifting uncertainty remains. Currie & Brown will be closely monitoring the impacts from government regime changes (including the U.K., U.S. and France), increasing protectionism attitudes (including the U.S. and China), and ongoing conflicts. These could dramatically impact costs, supply chain health and construction activity.

In 2025, it will be important to understand the scale and scope of uncertainties and potential risks for projects and build in resilience to weather any storm.

Europe and the UK

Europe’s construction outlook for 2025 presents a mixed picture. Growth is expected in high-tech, logistics, infrastructure and renewable energy sectors, in many cases fueled by government investment. Challenges in labor availability, financing, and regulatory uncertainty will demand careful planning and risk management. The focus on sustainability and digitalization offers opportunities for forward-looking firms to capitalize on emerging trends.

Political uncertainty in Germany and France is suppressing construction activity. The construction industry in Germany has been subdued by regulatory challenges and delays, slow decision making on fiscal policies, and declining investor confidence. Currie & Brown does not expect noticeable improvement on this until after the federal elections in mid-2025. In the U.K., higher cost increases are expected next year compared to in 2024. Additionally, the National Insurance contributions is set to rise in April while the threshold at which the tax needs to be paid is lowered. This increased tax burden for all employers could translate into higher construction costs.

Despite these challenges, my colleagues in Germany, France, Spain, the U.K. and Italy all anticipate strong demand for data centers to support high-tech construction activity in 2025 in their respective countries.

Construction cost escalation is expected at a rate of 2% in Italy, 2-3% in France, 3% in Spain, 3-5% in Germany and 3.3% in the U.K. over the next twelve months.

APAC and India

It’s a different story for the Asia-Pacific region in 2025. Construction slowdowns are anticipated 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 are set to contribute to increasing labor costs next year. As in Europe and the U.K., Currie & Brown is expecting to see growth in data center construction. Additionally, 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 is adding uncertainty to the industry.

Low to moderate cost escalations are anticipated across the region. There is a risk of higher cost escalation and price fluctuations on projects requiring imported materials, particularly in Thailand and Malaysia.

Middle East

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 fueling upgrades in stadiums, hotels and infrastructure.

In the UAE, government investment in initiatives such as Expo City Dubai and the 2050 Energy Strategy will continue to drive growth in infrastructure, tourism, and renewable energy.

Overall, rising demand for materials and labor will continue to put pressure on prices as supply struggles to keep up. Cost escalation of 2-5% in the UAE and 5-7% in Saudi Arabia are likely. Across 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 labor.

Latin America

Moderate cost escalations of around 3% are anticipated throughout Latin America as shortages of key materials, supply chain disruption, skilled labor shortages and inflation apply pressure on prices. We expect escalation in Mexico (3-4%) to continue to outpace Colombia (3%) and Peru (2%) in 2025. In all three countries, Currie & Brown’s forecast escalation is predicted to remain below the general inflation rate.

Investment in sustainability initiatives is likely to be prioritized in 2025, including renewable energy and urban resilience programs. This will create significant opportunities for construction.

Rapid population growth across urban centers in Mexico, Colombia and Peru is leading to increased demand for affordable housing options, providing a boost to the residential construction sector.

Conclusion

Labor shortages will prove a significant challenge for nearly every region in 2025, particularly skilled labor. This will be one of the key factors behind the moderate cost escalations we are anticipating around the world.

The high-tech construction sector, and data centers in particular, are buoying the industry in many countries. The pressure this puts on demand for key materials and skills may lead to further cost increases.

Significant political uncertainty and instability may inhibit investment and cause some major global construction players to adopt a “wait and see” approach. The true impacts of key regime changes will not be known until mid- to late-2025.

The ongoing uncertainty and rapid pace of change at a global and local level in 2025 must be met with built-in flexibility and resilience.