The global construction sector reached roughly USD14.7trn in total spending in 2024 and is projected to grow to USD15.6trn in 2025. This represents about +3-6% annual growth in nominal value. However, in real volume terms, the industry is nearly flat: construction output will contract by about -2% in 2025 before returning to growth in 2026. The slight dip reflects significant headwinds in specific markets (notably China), partly offset by expansion elsewhere. Notably, infrastructure construction now accounts for about one-third of all construction activity by value and it remains the fastest-growing segment globally. Residential building has been the weakest segment recently. Ongoing housing downturns in China and some Western markets mean global residential construction is expected to fall about -4% in 2025. Outside of China, some housing markets are stabilizing (for instance, Europe’s residential sector may see a mild rebound in 2025 after a deep slump). Non-residential building (encompassing commercial real estate, offices, retail, industrial facilities and institutional projects) is also under pressure – worldwide, non-residential construction is forecast to decline -5% in 2025. High office vacancies (in a post-Covid/work-from-home era) and higher financing costs for developers are contributing to a slowdown in new commercial projects. In contrast, civil infrastructure is a bright spot: global infrastructure/civil engineering work is projected to grow roughly +3% in 2025. This growth is driven by big increases in government investment in transport, power grids, water systems and other public works – a trend observed across both advanced and emerging economies. Large-scale national programs (from the US highway and clean energy funds to India’s rail and highway initiatives) are underpinning this infrastructure boom.
Regionally, the US remains one of the largest and most dynamic construction markets. In 2024, US construction activity was buoyed by public and industrial projects – federal initiatives spurred a wave of infrastructure upgrades and new manufacturing facilities (e.g. EV battery and chip plants) – even as high mortgage rates cooled the housing sector. In contrast, Europe has been in a mild construction recession. However, lower rates and better affordability should support the sector in the region in 2025-2026. Meanwhile, the Middle East is experiencing a construction boom – flush with oil revenues, Gulf countries are investing heavily in mega-projects and urban development. In Asia, the situation is mixed. China is still shaking off its real estate turmoil. China’s overall construction output is likely to remain sluggish into 2025 but could bottom out going into 2026. India and other emerging Asian economies are rapidly expanding their construction activity, propelled by both public and private investment.
Net profit margins in the construction industry tended to stand in the low-single digits in 2024. This is in stark contrast to many other industries, but it reflects the highly competitive, project-based nature of construction contracting. Homebuilding firms (residential developers) typically earn 10-12% operating margins, with strong returns on capital around 21%. Companies supplying building materials and construction products fall in between, with margins often in the low teens. Despite thin margins, construction companies can generate reasonable returns on equity due to high asset turnover. Industry-wide, revenue growth is expected to be modest in the near term and profit margins to only mildly improve in a challenging environment.
