Is construction stalling in the US and other global markets?

In the US, the construction market got off to a weak start in 2025, with January’s total new building starts falling more than 30% year-on-year. Since November, monthly construction starts have been unusually low, totalling just $186 billion. The last time a three‐month period reported such lacklustre totals was in February 2022. It is also a mixed picture when you look at other construction markets across the globe – so what is the next year likely to bring – writes John Ridgeway?

February, for the US market, typically marks a seasonal low point in construction starts, but the fact that the industry has already plummeted to multi‐month historic lows, is a concerning sign. Many commercial real estate (CRE) developers are grappling with unexpected challenges. Persistent inflation, which registered at 3.0% in January - the highest reading since May 2024 - and a monthly inflation increase of 0.5% (the highest 1‐month increase since August 2023) have put enormous pressure on budgets and planning.

Despite these challenges, many leading economists remain optimistic about the construction economy’s long-term prospects. Their outlook is based on the pro-growth mindset of the new presidential administration, the ongoing electrification of the economy, and America’s renewed focus on being a world leader in advanced electronics and other manufactured products. Moreover, the federal government’s ambitious plan to level the playing field for U.S. corporations could drive a new wave of private infrastructure investments.

But while these developments paint a complex picture for the United States, the question remains - is this weak start a uniquely American phenomenon, or are other parts of the world experiencing similar headwinds?

While the U.S. construction industry is facing significant challenges, the picture is not uniformly bleak across the globe. The dynamics of the construction market vary considerably by region, reflecting differences in economic cycles, government policies and local market conditions.

Europe - mixed outlook

In many parts of Europe, for example, construction has also been under pressure due to economic uncertainty and tight labour markets. Several European countries have seen declines in construction activity, partly driven by rising energy costs and regulatory uncertainties. However, unlike the U.S., Europe has experienced a more moderate pace of inflation recently, thanks in part to concerted fiscal policies and energy subsidies aimed at offsetting cost pressures.

In markets such as Germany and France, there is cautious optimism. Public investment in infrastructure, combined with private sector initiatives in green construction, has provided a counterbalance to weak private demand. Despite these factors, however, certain segments - such as commercial office spaces - continue to lag behind, mirroring some of the challenges seen in the U.S. Still, European governments’ proactive approach to supporting construction through targeted stimulus measures could help stabilise activity over the next 12 months.

Asia - divergent trends

Asia presents a more varied landscape. In countries like China, the construction industry has been recovering from a prolonged downturn in the property market. Chinese policymakers have recently introduced measures aimed at stimulating growth, including relaxed credit conditions and incentives for affordable housing. These initiatives have helped stabilise the market and are expected to drive a gradual recovery over the coming year.

Conversely, markets in Southeast Asia, such as Indonesia and Vietnam, are witnessing robust construction activity, driven by strong urbanisation trends and significant foreign investment. However, these markets are not immune to global headwinds. Rising raw material costs and supply chain disruptions - exacerbated by geopolitical tensions - pose risks that could dampen growth if not managed effectively.

India, one of the world’s fastest-growing construction markets, faces its own challenges. Although the country has seen rapid growth in residential and infrastructure projects, high inflation and volatile commodity prices have introduced uncertainty. Nonetheless, a strong push towards smart cities and digital infrastructure is expected to drive new projects, even as developers remain cautious.

Latin America and Africa – opportunities and challenges

Latin America and Africa, traditionally seen as emerging markets for construction, offer both opportunities and risks. In Latin America, countries such as Brazil and Mexico have experienced cycles of boom and bust in construction. Currently, many developers are grappling with high borrowing costs and political uncertainties. Despite this, there is cautious optimism as governments implement reforms to attract investment in infrastructure and housing.

In Africa, the construction sector is generally buoyed by population growth and urbanisation. However, many African economies face challenges such as inadequate infrastructure, political instability and limited access to financing. Yet, with significant investment from both public and private sectors in recent years, there is potential for a turnaround - especially in countries that are reforming regulatory frameworks and improving governance in the construction industry.

A global outlook

All this means that forecasting the construction market over the next 12 months is difficult. In the U.S., construction activity is expected to remain subdued in the short term. With inflation persisting at relatively high levels and interest rates remaining stable, developers may continue to delay non-essential projects. However, there are signs of potential stabilisation. The pro-growth stance of the current administration, coupled with renewed federal initiatives aimed at infrastructure investment, could stimulate a modest rebound by mid to late 2025. A hybrid workforce model - blending traditional employment with gig-based flexibility - might also help mitigate some labour shortages, fostering a gradual recovery.

Across Europe, the outlook is cautiously optimistic. Governments are actively investing in infrastructure and green construction projects to drive economic recovery. While challenges such as energy costs and regulatory changes persist, the collaborative approach among European Union member states to support construction sectors may lead to improved activity. Many analysts predict that by mid-2025, Europe could see a stabilisation in construction spending, particularly in residential and public infrastructure projects. However, the commercial sector may continue to face headwinds due to shifting work patterns and the legacy of the post-pandemic environment.

Asia’s outlook is highly segmented. China is likely to witness a gradual recovery as government stimulus measures begin to bear fruit. Although the market remains cautious, easing credit conditions and targeted incentives in the housing sector could help spur construction activity. In contrast, rapidly growing markets in Southeast Asia and India are expected to continue their upward trajectory, albeit with some volatility due to global commodity price fluctuations and supply chain challenges. Investors in these regions will need to balance the high growth potential with the inherent risks of emerging markets.

In Latin America, the next year is likely to be a period of gradual improvement as political uncertainties ease and infrastructure investments ramp up. Countries that implement robust economic reforms may see significant gains in construction activity, particularly in urban development and transportation sectors.

In Africa, while challenges remain substantial, the overall long-term prospects are positive. With ongoing investment from international financial institutions and government-led initiatives aimed at improving urban infrastructure, several African economies could experience a boost in construction activity over the next 12 months. However, regional disparities will be significant and progress will depend largely on local governance and investment climates.

Key drivers for change

The evolving landscape of the global construction industry will be shaped by several key drivers in the coming months. Persistent inflation is a common challenge globally. In the U.S., higher inflation is directly impacting construction costs and financing. In Europe and Asia, while the rates may differ, inflation remains a crucial factor in decision-making for developers. How central banks adjust monetary policy to balance inflation and growth will significantly influence construction activity worldwide.

As noted earlier, the integration of digital platforms and the gig economy is transforming the workforce model in construction. This trend is not limited to the U.S. - global markets are beginning to adopt similar strategies to address labour shortages and improve efficiency. The success of these digital solutions, however, will depend on local market conditions and the ability of stakeholders to adapt to new technologies.

Government stimulus and infrastructure spending are also critical to stimulating construction activity. In the U.S., federal initiatives and a pro-growth administration offer hope for a rebound. European governments are similarly investing in green infrastructure, while many Asian countries are launching major urban development projects. Latin American and African nations, though facing their own challenges, could see improved activity if political and economic reforms succeed.

The construction industry is heavily dependent on global supply chains. Fluctuations in raw material prices, often driven by geopolitical tensions or supply disruptions, can have a significant impact on project costs. Companies worldwide will need to adopt more resilient supply chain strategies to manage these risks in the coming months.

Environmental concerns and regulatory pressures are also driving a global shift towards sustainable construction practices. Investments in energy-efficient and green buildings are likely to grow, providing a counterbalance to the current downturn in other sectors. Regions that lead in sustainable practices may also attract more favourable financing and regulatory conditions.

That said, ultimately, construction is a sentiment-driven industry. If developers, investors, and financial institutions regain confidence, we can expect an upturn in activity. The next 12 months will be critical in determining whether current lows are temporary or indicative of a longer-term trend. Regional factors, such as political stability and economic reforms, will play an essential role in shaping market sentiment globally.

The weak start to construction in 2025 in the United States, as evidenced by a more than 30% year on year decline in January’s total starts and a historic three-month low of $186 billion, is a wake-up call for the industry. While the U.S. faces significant challenges - from persistent inflation and tight financing conditions to rising vacancy rates in certain property sectors - the situation is part of a broader global picture.

Across Europe, Asia, Latin America, and Africa, the construction market shows mixed signals. Some regions face similar challenges, particularly where inflation and supply chain issues are rampant, while others may benefit from robust government investment, urbanisation trends and technological advancements that improve workforce flexibility and efficiency.

Looking ahead, the next 12 months hold both uncertainty and promise. In the U.S., the combination of pro-growth government policies, potential shifts toward hybrid workforce models and an emphasis on new construction over existing property investments may pave the way for a modest recovery. Globally, the picture is one of regional divergence: mature markets like Europe might stabilise as stimulus measures take effect, while emerging markets in Asia, Latin America and Africa could either surge ahead or face setbacks depending on local economic and political conditions.

For industry stakeholders, the key will be to remain agile, invest in digital and sustainable solutions and adapt to changing market dynamics. By doing so, construction firms can mitigate current headwinds and position themselves for long-term growth in a rapidly transforming global landscape.