2020 building demand likely to stay robust after reaching 5-year high last year

Published Wed, Jan 8, 2020 · 09:50 PM

Singapore

SINGAPORE construction demand is expected to remain strong this year after hitting a five-year high in 2019, said the Building and Construction Authority (BCA) on Wednesday.

Last year's total construction demand expanded by 9.5 per cent to reach S$33.4 billion - about S$1.4 billion higher than the upper bound of BCA's 2019 forecast of S$27 billion to S$32 billion. The robust showing was mainly due to a stronger than expected increase in industrial construction demand for petrochemical facilities, amid a manufacturing slowdown.

Construction of two mega petrochemical plants got underway last year. In April, energy giant ExxonMobil announced a multibillion-dollar expansion of its Jurong Island integrated manufacturing complex. In August, global industrial gases and engineering group Linde broke ground for its US$1.4 billion integrated manufacturing complex in Jurong.

Total preliminary construction demand last year for the public and private sector was S$19 billion and S$14.4 billion respectively.

The all-time high figure remains at S$38.8 billion, achieved in 2014.

BCA forecasts total construction demand (value of construction contracts to be awarded) to remain strong in 2020 due to sustained public sector demand. The total construction demand is expected to range between S$28 billion and S$33 billion this year.

The construction industry contributes 3.8 per cent to Singapore's gross domestic product. As of end-December 2018, it employed over 444,200, made up of over 116,000 locals and more than 327,000 foreigners, according to the Ministry of Manpower.

"Despite the economic headwinds and global uncertainties, we remain optimistic about the construction demand in the coming years," said Zaqy Mohamad, Minister of State for National Development and Manpower. He was speaking at the BCA-Redas built environment and property prospects seminar on Wednesday.

Public sector construction demand, which is expected to reach between S$17.5 billion and S$20.5 billion this year, will make up about 62 per cent of projected demand for this year. This is expected to be spurred by major infrastructure projects, which are larger and more complex in scale, such as the Integrated Waste Management Facility, infrastructure works for Changi Airport Terminal 5, Jurong Region MRT Line and Cross Island MRT Line.

Private sector construction demand is projected to be between S$10.5 billion and S$12.5 billion this year, supported by projects such as redevelopment of en-bloc sale sites, recreational developments at Mandai Park, Changi Airport new taxiway, and berth facilities at Jurong Port and Tanjong Pagar Terminal.

The forecast for 2020 excludes any construction contracts by the two integrated resorts (IR) pending confirmation on the timeline and the phasing of their multi-billion dollar expansion projects.

Construction demand is expected to hold steady over the medium term. It is projected to reach between S$27 billion and S$34 billion per year for 2021 and 2022, and between S$28 billion and S$35 billion per year for 2023 and 2024.

The public sector will continue to lead demand and is expected to contribute S$16 billion to S$20 billion per year from 2021 to 2024, with building projects and civil engineering works each taking up about half of the demand. Besides public housing developments, public sector construction demand over the medium term will continue to be supported by various mega infrastructure projects.

BCA expects private sector construction demand to stay at a moderate level in view of the likely continued global economic uncertainties and the current overhang in the supply of private housing units. Nonetheless, the planned expansion of the two IRs could provide further upside to private sector construction demand, depending on their eventual construction timelines.

Total nominal construction output in 2020 is projected to increase to between S$30 billion and S$32 billion, from the estimated S$28 billion in 2019. The anticipated further pick-up in total construction output in 2020 is supported by the improved construction demand since 2018, following the slowdown in 2015 to 2017.

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