By admin 
The U.S. construction industry has faced its share of challenges in recent years.
Construction costs still sit close to 40% higher than in February 2020, before the onset of the COVID-19 pandemic. Meanwhile, labor shortages continue to negatively impact construction momentum, according to a recent Associated General Contractors of America report.
In addition, Associated Builders and Contractors’ Construction Confidence Index shows many U.S. contractors now expect profit margins to shrink over the next six months.
But despite these headwinds, the U.S. construction sector continues to show remarkable resilience when compared to the rest of the world.
U.S. project starts jumped 6% through the first eight months of the year compared to the same period in 2023, according to Dodge Construction Network. The Dodge Momentum Index, a benchmark that measures nonresidential construction planning, also posted a 31% increase in August compared to the same period last year.
Yet, while U.S. construction activity has remained strong, the same can’t be said for other major economies around the world. Here’s how other nations’ construction industries have performed recently:
- China: China’s construction sector remains sluggish, with declining demand due to a property market downturn and reduced infrastructure investment, according to Fastmarkets. Mounting government debt continues to burden the sector, leading to less new projects and investment, reports the Wall Street Journal. As opposed to the U.S., China’s interest rate cuts in September were aimed at spurring a slowing economy, rather than ramping down an inflation fight.
- Germany: The construction sector in Europe’s largest economy contracted again in August due to a steep drop in housing and commercial projects, according to an S&P Global report. Builders remain pessimistic about the year-ahead outlook for activity, citing declining bookings, high construction costs and overall concern for the German economy, according to the report.
- United Kingdom: The U.K.’s construction industry recently posted signs of recovery after a difficult start to 2024, said Tim Moore, economic director at S&P Global Market Intelligence, in a recent S&P Global report. However, the collapse of construction giant ISG, one of the largest construction firms in the country, has raised concerns about the stability of the supply chain and smaller contractors.
- South Korea: Construction activity is currently undergoing a slump, reports The Korea Times. The slowdown has caused a sharp rise in unemployment claims among construction workers, largely due to an increasingly pessimistic outlook around construction activity.
- New Zealand: About two-thirds of builders report less demand for their services compared to the same time last year in New Zealand, according to a builder sentiment report from EBOSS. That’s largely due to rising interest rates, increased material costs and a weak overall economy, according to the report.
A US construction surge
Many of the factors causing construction slowdowns in other nations — such as rising material costs and economic uncertainty — are also present in the U.S. In fact, some of these issues are even more pronounced in the states.
For example, the cost of building in major U.S. cities has skyrocketed, according to a 2024 international construction market survey from Turner & Townsend, a global real estate and infrastructure consultancy based in the U.K. The report gathers data from 91 markets globally.
“Six of the world’s top 10 most expensive cities to build in are in the U.S.,” said Michael Hardman, vice president of the North America region at Turner & Townsend. “New York is the world’s most expensive city to build in, with San Francisco a close second. Los Angeles, Boston, Seattle and Chicago also feature in the Top 10.”
The 10 most expensive cities to build in the world
Average construction cost per square meter
Nevertheless, construction spending has grown more than 41% in the U.S. from April 2020 to July 2024, according to ABC, an enviable increase for any region. That’s largely due to the relative strength of the U.S. economy post pandemic, said Simon Rubinsohn, chief economist at the London-based Royal Institution of Chartered Surveyors, a global construction standards authority.
“The U.S. economy has been more resilient than others during and after the COVID-19 pandemic,” said Hardman. “Targeted economic stimulus and energy autonomy have helped foster growth, improve productivity and temper inflation comparatively to other economies.”
US construction spending jumped more than 41% since April 2020
Seasonally adjusted annual rate of growth in the nonresidential sector
Public money
Federal dollars have played a key role in sustaining construction momentum in the U.S., said Jose Luis Blanco, senior partner at New York-based McKinsey, a global management consulting firm.
“When you think about the nonresidential space, there’s been a significant boost to spend driven by some of the federal incentives,” said Blanco. “This has created a significant push for transportation, infrastructure, clean energy infrastructure and manufacturing.”
Those initiatives such as the $1.2 trillion Infrastructure Investment and Jobs Act, $369 billion for climate and energy in the Inflation Reduction Act and the $52.7 billion CHIPS Act have funneled dollars into the infrastructure and manufacturing sectors, fueling sustained construction activity.
“Federal funding has played a significant part in the U.S. construction industry’s success in recent years,” said Hardman. “[It] has been a notable, and perhaps dominant, driver behind growth.”
Blanco said that onshoring trends have also helped the U.S. construction industry outperform other countries.
“Companies have decided to rethink their footprint when it comes down to the manufacturing facilities,” said Blanco. “That has resulted in a lot of nearshoring and driven a boom, especially when you think about semiconductors, automotive, even life sciences.”
That momentum should continue in the wake of the Federal Reserve’s 0.5 percentage point rate cut Sept. 18. Construction executives said the move is likely to spur even more project groundbreakings.
The ability to flex
Another crucial factor is the regional pliability of general contractors in the U.S.
For instance, many contractors have built out their portfolios geographically, shifting focus to new emerging markets such as Miami; Austin, Texas; and Phoenix, according to Hardman. That’s something contractors in Europe, for instance, might not be able to easily do across international borders.
“U.S. contractors have diversified and shown flexibility in their approach to the construction industry with many shifting their focus from their traditional markets and sectors to new markets and sectors,” said Hardman. “The larger U.S. contractors have started to look at smaller projects that they might not have considered before.”
Take Mycon General Contractors, a Dallas-based contractor. It recently broke ground on the Tucson Rehabilitation Hospital in Arizona, its first ground-up construction job in the Arizona market. Minneapolis-based Adolfson & Peterson also shared its expansion plans for Central Texas, where the contractor expects to nearly triple its revenue growth in 2024.
Blanco noted technological innovation in construction, while slight in comparison to the broader tech landscape, is another area where the U.S. continues to hold an advantage over its global counterparts.
“About 80% of the venture capital money that was being invested in construction innovation was being invested in the U.S.,” said Blanco. “That means that innovations in new companies are being fostered here. The U.S. has a leg up because of where investment money is actually going and where innovation is actually happening.”