If you're in construction and you do business in more than one country – or want to – you need to take note of the picture on the left. Based on reports from quantity surveyor Gardiner & Theobald's international offices, it shows which cities are swept up in the eternal boom–bust cycle – and which are stuck in the doldrums.
The picture is more than just a fanciful impression, however. It also provides clues to where these cities will be in a few years' time. Take San Francisco. In the late 1990s, when the internet boom was in full swing, builders in Silicon Valley had as much work as they could handle. Now, the area is in a downturn – but you wouldn't bet against it bouncing back in three years' time.
The importance of looking at the market city by city, rather than relying on national data, is clear in the case of, say, China. Talk to Neville Smith in G&T's Shanghai office, and you get a whiff of the heady optimism of the dotcom era; but HK Yu, his colleague in Hong Kong, reports that the former colony has been stuck in a rut ever since the British left in 1997.
Smith says: "There's lots and lots of commercial activity based on foreign direct investment. Many of the plans that were put on the table because of World Trade Organisation entry are now coming through. Take-up of office space is a lot higher than two years ago, and the expats are supporting the housing market. There are 200,000 now, but there could end up being as many as 700,000." What's more, Smith says, the whole of China's east coast is booming – the industrial city of Wuxi, for example, is "one big building site".
We’ve reached the bottom. New York has been hit harder than other parts of the USA
Andrew Mann, Gardiner & Theobald, New York
However, an increase in trade from the mainland is the only silver lining in Hong Kong's cloudy outlook. Yu says: "Hong Kong is probably at the trough of the economic cycle, with a record fiscal deficit, high unemployment, deflation and a very weak property market." A high vacancy rate in prime office locations is a deterrent to commercial development, and the abolition of a government-subsidised home ownership scheme last year put a further retarded a slow housing market. However, solid infrastructure spending and the construction of 20 hotels are taking the edge off the downturn, and there is the opening of Hong Kong Disneyland to look forward to in 2005 or 2006.
The rest of South-east Asia is on the up, according to Mike Betts, analyst at JP Morgan. The region's cement consumption, for example, has been rising 5-7% per year, and is expected to continue at that rate into 2004. Last year Thailand's cement consumption increased 18%, and Vietnam's increased 26%. Australia is the region's wild card. Betts says: "Australia is the most cyclical of any construction market – it goes from boom to bust in two years, then back again." Betts forecasts 2% growth in Australian output this year, following growth of 11% last year and a 9% contraction in 2001.
Europe is a mixed bag, with Madrid and Berlin at opposite ends of the cycle. Betts reckons Berlin and Frankfurt are still declining, and predicts a 2% drop in German construction output this year. He also says Paris' figures deteriorated in 2002 and will drop even further in 2003, although he believes they will turn the corner in 2004. He observes that Stockholm's performance was disappointing last year because the high-tech sector declined and housing failed to live up to expectations, but he still reckons that Sweden is further along the road to recovery than its southern neighbours.
The USA is going through a tough period, beset by the knock-on effects of a recent recession and lingering fears of a double dip. New York weighs heavily on the country's economy, not just because of the terror attacks of 9/11 but also because Wall Street, the beating heart of the all-important financial sector, is at a low ebb. "The market is substantially down on 9/11," says Andrew Mann in G&T's New York office. "The economy dropped dramatically, and companies' downsizing staff brought a lot of space onto the market. There's been a 20% drop in construction prices in the past two years."
But he adds that, for New York at least, there are better times around the corner. He says: "We've reached the bottom. New York has been hit harder than other parts of the country, but we feel the market will be coming back in late 2003."
So where does all this leave Britain? "Comparatively stable" is the stock answer from G&T's senior partner Roger Fidgen. He explains: "International conditions are unstable with turmoil in the Middle East, a weakening dollar and flat growth in Europe; compared with some of these uncertainties, the UK, although beset by a weakening investment market, seems comparatively stable." The spendthrift British public is keeping up demand for housing and retail developments, and the public sector is spending more and more on PFIs and urban regeneration. But Fidgen doesn't thank the government, which he says is wobbling on transport and infrastructure when it should be piling in to make up for years of underinvestment.