The limits of construction productivity
Labour shortages, rising material costs and the pressure to build faster and more sustainably are increasingly shifting attention toward the productivity of the construction industry. The latest RICS Construction Productivity Report shows that the sector’s biggest deficits lie less in missing technology than in its structures, processes and shortage of skilled workers.
Construction Industry Between Growth Pressure and Productivity Crisis
The demands placed on the construction industry have been increasing for years. There is a shortage of housing, infrastructure requires modernization, and expectations regarding climate protection, speed and cost control continue to rise. Yet the industry’s productivity has barely improved for decades. According to a McKinsey analysis cited in the report, global construction productivity grew by only an average of 0.4 percent annually between 2000 and 2022, while the overall economy expanded by around two percent per year. At the same time, global construction output is expected to increase from 13 trillion US dollars in 2023 to 22 trillion US dollars by 2040. This significantly increases the pressure on the sector.
In addition, productivity in the construction sector is often not even measured consistently. According to RICS, there is no globally dominant definition of productivity. Benchmarking is used by only five to 16 percent of companies, and in the United Kingdom one in five firms does not measure productivity systematically at all. While many companies are trying to organize their operations more efficiently, comparable standards and common metrics are often lacking. At the same time, economic pressure is intensifying considerably. RICS’ current Global Construction Monitor reports rising material costs, tighter credit conditions and increasing supply chain pressures worldwide. Material cost forecasts in particular have risen sharply. Global expectations for the next twelve months increased from 4.0 to 6.4 percent. In Europe, the Construction Sentiment Index lost significant momentum within one quarter, falling from +14 to +7 points. Although Germany remains one of the stronger European markets, the index there also declined from +34 to +27.
Productivity Is Created on the Construction Site
The findings contradict many current debates surrounding AI and digitalization. Technology-driven promises now dominate numerous conferences and strategy papers. However, respondents in the RICS report identified the shortage of qualified skilled workers as the single biggest obstacle to productivity worldwide. In Europe, 56 percent of respondents consider it a factor with a major impact on productivity, compared to 53 percent in North and South America and as much as 59 percent in the Middle East and Africa. A similar picture emerges regarding possible solutions: workforce qualification is regarded as the most effective lever for improving productivity in almost every region. On average, 47 percent of respondents rated training and upskilling as particularly effective measures.
This reflects a fundamental structural issue within the industry. Unlike industrial production processes, construction remains highly project-based to this day. Land conditions, permits, construction processes and stakeholders differ from one project to another. In addition, the industry faces fragmented responsibilities, complex coordination processes and constantly changing site conditions. Accordingly, the RICS report identifies not only labour shortages but also scheduling, coordination and construction site management as key factors influencing productivity. The real challenge therefore lies less in implementing individual technologies than in the ability to standardize processes and organize collaboration more efficiently.
At the same time, the industry is increasingly placing its hopes on infrastructure projects. Globally, the infrastructure sector is emerging as the most stable segment of the construction industry. In Europe, twelve-month expectations for infrastructure improved from +24 to +38 percent, while expectations in the residential construction sector declined significantly from +31 to +14 percent. Worldwide, infrastructure continues to be the strongest growth driver.
Between Optimism and Structural Limits
Despite all these challenges, optimism within the industry remains remarkably high. Across nearly all regions of the world, expectations for future productivity improvements are significantly higher than the actual gains achieved in recent years. In this context, RICS explicitly refers to a possible “optimism bias”—the systematic tendency to overestimate the impact of planned changes while underestimating external pressures. Given rising financing costs, geopolitical uncertainties and increasing material prices, this discrepancy is becoming increasingly relevant.
This is currently particularly visible in Germany. Although market sentiment has improved slightly compared to the low point of previous years, the overall market environment remains tense. The latest RICS monitor points to weak investment momentum, negative capital value expectations and significantly deteriorating credit conditions. At the same time, the number of new project developments has remained consistently negative despite slight improvements since the end of 2019. While infrastructure projects continue to provide some stabilization in many regions, the residential and office construction segments are coming under increasing pressure. As a result, the issue of productivity in the construction industry is likely to become even more important—particularly with regard to housing construction, infrastructure and the modernization of existing buildings.
Source:
Royal Institution of Chartered Surveyors (RICS): Global Construction Monitor Q1 2026