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EUROPEAN CONSTRUCTION CONFERENCE2008

WESTERN EUROPE CONSTRUCTION

Gerard O Sullivan FRICS FSCS president CEEC

DUBLIN JANUARY 2008

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AGENDA1. CEEC brief introduction

who are we? what do we do? Current projects! events

2. European Construction –comparisons /trends 2006/2007• European construction industry 2006 –year of growth• Performers -The top 5• The middle ranking• the new guys

3. Germany-briefing 4. Spain-briefing5. France -briefing6. Some Middles rankers,Denmark-Netherland-Finland -Belgium-Poland7. Conclusion

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CEEC MEMBERSRepresentative Forum for European National Institutions for Construction Economics

Professionals.

• Belgium Union Belge des Quantity Surveyors• Denmark Danish Association of Construction Economists• Finland Association of construction economists Finland RAKI• France Union Nationale des Economists de la Construction et Coordonnateurs UNTEC• Ireland The Society of Chartered Surveyors• Holland Nederlandse Vereniging Van Bouwkostendeskundigen NVBK• Spain Consejo General de la Arquiectura Tecnica de Espana CGATE• Switzerland Swiss Professional Association for Construction Economists• UK The Royal Institution of Chartered Surveyors• Full Membership pending Poland and Czech Republic• Individual members – Germany, Poland, Rumania

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• Objectives

• Promote the construction economist and the service they provide

• Represent the interests to EU Institutions and other bodied• Promote education, training and qualification standards• Establish common Professional Codes of Practice

• Google – ceecorg.eu

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PROJECTS• Infrastructure cost planning survey• Code of Measurement• Steel Price Book for German Construction• Office Cost Model• Professional Construction Economists-Standard

European self assessment model

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Working in EUROPE KEY ISSUES

• Registration of professions• Limited cross border trading• Language differences• Contractual differences –France-Germany• Construction cultures –eg Steel not popular in Germany• Preponderance of small SMEs

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• Legal system –codified law• Insurance – French project insurance restricts access• National and local construction culture-socialism-cronyism• Labour shortages• Local regulations• Lack of EU conformity

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EUROPEAN CONSTRUCTION

• European Construction 2006 key figures• Investment (EU -27+2) – 1,258 billion• 10.4% of GDP (EU27)• 50.5% of Gross fixed Capital Formation• 2.8 million enterprises (93% Sees < 10)• 15.7 million operatives • (EU 27-7.2% Europe’s total employment/30.4% of industrial employment)• 26 million dependent workers• Source FIEC report 2007

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EUROPEAN CONSTRUCTION

BREAKDOWN• NON RESIDENTIAL 30%

• HOUSEBUILDING 27%• REFURBISHMENT/MAINTENANCE 23%• CIVIL ENGINEERING 20%

• INTERNATIONAL ACTIVITY 44 BILLION• SOURCE FIEC REPORT 2007

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The Major Players• GROSS INVEST JOBS NO ENTERPRISES

BILLION € X 1000 X1000

• GERMANY 216 18% 2,156 14% 227 av. 9.5p/e • SPAIN 186 15.5% 2,546 16.5% 448 av.5.4 p/e

• UK 166 14% 1,822 12% 209 av.8.7 p/e

• FRANCE 151 12.6% 1,798 11.8% 315 av.5.7 p/e

• ITALY 144 12% 1,900 12.4% 563 av.3.7 p/e

• SOURCES FIEC REPORT 2007

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The Major Players

• 72% of investment• 67.7% of employment• 64% of the enterprises• Average size of enterprise 5.8 persons

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THE MIDDLE RANKS

GROSS INVEST JOBS NO ENTERPRISESBILLION € X 1000 X1000

NETHERLANDS 52 4.3% 445 2.9% 82 av. 5.4 p/e IRELAND 36 3% 260 1.7% 10 av.26 p/eBELGIUM 29 2.4% 248 1.6% 71 av. 3.5 p/eDENMARK 29 2.4% 180 1.1% 29 av. 6.2 p/eAUSTRIA 29 2.4% 257 1.7% 24 av.10.7 p/ePOLAND 26 2.1% 690 4.5% 113 av. 6.1 p/e FINLAND 24 2% 270 1.0% 32 av.5.0 p/eSWEDEN 21 1.7% 248 1.8% 61 av. 4.4 p/ePORTUGAL 19 1.6% 551 3.6% 113 av. 4.8 p/eGREECE 16 1.3% 300 2.0% 108 av. 2.8 p/eLUXEMBOURG 3 0.3% 30 0.2% 2 av. 15 p/eSWITZERLAND 32 275 36 av.7.6 p/e NORWAY 30 187 37 av.5.0 p/e

SOURCES FIEC REPORT 2007

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THE MIDDLE RANKS

• 23% of investment• 22% of employment• 23% of the enterprises• Average size of enterprise 5.3 persons

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THE NEW GUYS

GROSS INVEST JOBS NO ENTERPRISES• 11 BILLION € X 1000 X1000

• HUNGARY 11 0.9% 325 2.1% 72 av. 4.5 p/e

• CZECH REP 10 0.8% 363 2.4% 150 av.2.4 p/e

• ROMANIA 8 0.7% 380 2.5% 250 av. 1.5 p/e

• SLOVAKIA 5 0.4% 156 1.0% 3 av. 52 p/e

• SLOVENIA 3 0.25% 71 0.5% 13 av.5.5 p/e

• BULGARIA 3 0.25% 150 1.0% 10 av. 15 p/e

• BALTIC STATES 7 0.6% 189* 1.2% 9 av.21 p/e

• CYPRUS 1 0.1% 38 0.25% 5 av. 7.6 p/e

• MALTA 1 0.1% 12 0.1% NA

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THE NEW GUYS

5% of investment• 10.3 % of employment• 13% of the enterprises• Average size of enterprise 3.3 persons

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• GERMANY• (p schmid ceec germany)• VOLUME CONSTRUCTION

WORKS COMMERCIAL • +2% 2007• +3% FORECAST 2008• INFRASTRUCTURE INCREASE• RESIDENTIAL VOLUME GOING

DOWN –END CO-FINANCING WITH PRIVATE PROPERTIES

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• GERMANY• CONSTRUCTION COSTS • 2006 4Q -2007 4Q 6.4%• SOURCE BUNDESBANK

• MATERIAL COSTS 10% 2006• VAT PRIVATE WORKS 16% TO

19% IN 2007• STEEL RISE 5% 2008• EAST LAGGING BY 10%• RIGID MARKET

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GERMANY• PROPERTY• Market for investors-retail, residential, offices increasing value –too few

properties on market -up to 15 times

• Key cities• Hamburg and Munich –attractive – prosperous economies –interesting

cities –projects Hafen City-Airport Extension-New Central Station• Frankfurt –banking centre-new high rise• Berlin –stand by role – major renovations public buildings- embassy row

– left wing government not convincing –new airport Schoenfeld• Stuttgart 21 -new central station –major tunnelling project

• OUTLOOK not bad- no extremes • P Schmid -

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• SPAIN• SECOND LARGEST

INVESTMENT IN EUROPE• KEY CITIES –MADRID -4

TOWERS• BARCELONA –VALENCIA-

COAST• TRENDS FOR FIRST 10

MONTHS UP ON 2006

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• FRANCE (UNTEC/CEEC)• CONSTRUCTION OUTPUT 2007• Year on year• Authorised -0.2%• Notified starts +6.2%• Last 3 months• Authorised -10.3%• Notified Starts -2.8%

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FRANCE

• CONSTRUCTION JAN 2008• Building type 3 month % annual %• Offices authorised 1433.7 -12 6019.8 8.3• Offices starts 1026.0 -6.5 4477.8 7.6

• Commercial auth. 1535.8 5.6 5896.6 -1.0• Commercial start 1037.4 -18.9 4714.9 1.3

• Industrial auth. 2726.4 2.9 11129.8 8.2• Industrial start 2242.1 30.3 `8868.2 11.3

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FRANCE

• Construction Jan 2008• Building type 3 month % annual %• Warehouses Auth 1066.4 19.3 3894.9 3.9• Warehouse start 705.3 11.3 3045.5 12.9

• Agriculture auth. 2276.4 -26.6 13578.6 -3.2• Agriculture start 2262.9 - 7.0 11307.4 -0.3

• Hotels etc auth. 268.5 8.6 873.6 -0.7• Hotels start 171.9 13.3 647.4 20.4

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FRANCE

• Construction Jan 2008• Building type 3 month % annual %• Educational auth 566.0 -27.3 2408.6 -7.3• Educational start 492.3 -9.6 2089.2 8.6

• Health auth. 959.0 -18.4 3765.7 -11.0• Health start 757.0 - 21.6 3446.4 14.5

• Culture etc auth. 593.3 -24.7 2381.8 -9.6• Culture start 475.5 -23.2 2198.3 -4.1• Source SESP Ministre de L ‘ecologie ,du Developpement et de l’Amenagement durables

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FRANCE

• Regions -% change year on year• authorisations starts

• Alsace (19/21) 30.0 -6.8• Nord /Pas de Calais(7/21) 14.2 4.5• Haut Normandie(17/21) 11.6 44.2• Ile de france (1/21) -3.5 1.9• Provence (9/21) -14.9 -18.5• Bretagne (4/21) 8.3 14.9

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some middle rankers

• Netherlands• Rotterdam,De Hague• High rise• Strong growth but

see Belgium

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some middle rankers

• Denmark– Confidence indicators

down 2007 from jan to dec – 22 to 4

– Prices dropping 4 to -7– Stock orders 30-7– 6.7 % costs up

Some middle rankers

• FINLAND

– Key indicators 2006 2007 2008 forecast

Construction vol. change 3.3% 5.0% 3.0%Building 3.2% 6.0% 3.0%Renovation 3.5% 3.0% 3.0%Engineering 3.7% 4.0% 3.0%

Building Start,Mill cum43.3 48.0 42.5

House starts 000’s 34 32 31

Building Cost Index% change 3.8 6.0 4.0

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some middle rankers• BELGIUM• The year 2006 has been one the best years for the Belgian economy and the growth,

in comparison with 2005, is approximately +2,5 %.• The increase of the PIB (Produit Intéieur Brut) has been of 2,9 % compared to the

european average of 2,8 %.• The inflation rate was +2,3 % compared to the European average of 2,2 %.

• The construction represents about 5 % of the P.I.B.• There is an increase of the non residential constructions and it is

anticipated to have a decrease of the public investments of approx. -10 %.• However, there are a few huge projects such as extensions of the

infrastructure for high speed trains and connection to the airport.• The increase of the materials costs have lead to the increase of the

construction costs and the construction sector is facing a lack of qualified labour.

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BELGIUM

• According to the “Annual Report – Construction” issued by the Confédération de la Construction, the breakdown of the figures in the construction sector is the following – Residential – new construction : 20 %– Residential – refurbishment : 24 %– Non residential – refurbishment : 15 %– Non residential – new construction : 23 %– Civil works : 18 %

• According to the last information it appears that in the residential sector, there is a significant increase of the refurbishment works and a decrease of the new constructions. The forecast for 2007 is a significant decrease of the activities in the construction sector.

• SOURCE WIDNELL –christian deprez – belgian QSs

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Poland

• Report from Warsaw • Offices in prime cities –Warsaw,( reserve office

space down to 2.55%) Tri City , Poznan ,Lodz,Wroclaw,Krakow.Katowice -

• Residential –decreasing trend• Public works –Poland ranked 156th for efficiency in

granting building permits• Retail booming

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Poland

• Cost materials decreased – overall 8%• Labour increasing –up 12-15% • SKILL TRADES +25%• PROJECTS –ALL LATE – EURO STATDIUM,

WARSAW AIRPORT, NEW BUDGET AIRPORT,RESIDENTIAL TOWERS

• Source Adam Grabski –Polish CEEC rep

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CONCLUSION

• AFTER RECORD YEAR OF 2006 TREND CAN ONLY BE ONE WAY

• WEST MAY BE SLOWING• MIDDLE RANKERS –SOME MAY BUCK

TREND• DON’T UNDER ESTIMATE DIFFICULTIES

AND CULTURE DIFFERENCES• EAST HAS TO KICK OFF AND HAS A LOT

OF CATCH UP TO DO• NEEDS TO DISCOVER WEST ERN

EFFICIENCIES AND LOOSE LABOUR INTENSIVE OUTLOOK