– Estimated 40% of global GDP will come from built environment in 2016 compared to 39% in 2014 – an increase of US$3trillion over the two years
– China continues to generate the most GDP from its built assets, nearly double the US at US$10.4trillion, Qatar has overtaken Singapore as the leading country in built asset returns per-capita with an average return of US$66,300 per capita
– Germany leads in Europe at US$1trillion returns from its built assets, followed by Turkey at US$807billion and France at US$794billion
– Emerging economies including Mexico (63.6% of GDP from built assets), Philippines (59.4%) and Turkey (56.1%) are the most reliant on built assets for the GDP
– Switzerland (20.3%), Russia (22.1%) and South Korea (24%) are the least reliant
(Monday 28 November 2016) China generates the highest returns to its economy from built assets – followed by the US, India, and Japan – according to the 2016 Global Built Asset Performance Index released today by Arcadis, the leading global Design & Consultancy for natural and built assets.
The index, developed in conjunction with the Centre for Economics and Business Research (Cebr) examines the income generated by buildings, infrastructure and other fixed assets – homes, schools, roads, airports, power plants, malls, railways, ports and all other fixed assets – across 36 countries that collectively represent 78 percent of global GDP.
Julien Cayet, Global Business Advisory Leader, Arcadis said “Governments and the private sector organizations around the world continue to invest in buildings and infrastructure to drive economic growth. This report seeks to quantify the combined value that these bring to national GDP. We can clearly see that many emerging nations are generating healthy returns from their new infrastructure, while developed nations are seeing a slowdown in its contribution as their economies diversify to service industries and their infrastructure ages. Both need to better understand how built assets can power more growth to their economies, especially in a world where funding challenges exist and the need for built assets that will stand the test of time are paramount.”
The report reveals China’s economic growth is highly powered from its built assets – accounting for 52.9% of GDP returns this year – and is expected to peak as its economy gradually rebalances towards services and consumption, as opposed to manufacturing and investment. This manufacturing intensity enables China to stand far ahead of the US, who are still experiencing a decline in the effectiveness of existing assets, reducing productivity, and pulling negatively against GDP’s return on assets at $5.4 trillion.
Top ten countries by overall built asset income (US$)
|Country||GDP from built assets – 2014||GDP from built assets – 2016|
The full findings of the Arcadis Global Built Asset Performance Index are available at: www.arcadis.com/GBAPI2016
Cayet continues: “New technologies and business models can help countries. The conditions have never been so favorable for achieving groundbreaking progress in asset intensive sectors. As labor productivity, investment and population growth slows over the next decade, asset productivity is going to be a critical driver of economic growth and embracing more effective asset management models can drive better short and long-term returns.”
Measuring return on built assets per capita
Across all countries analyzed in the index, four economies with relatively small populations – three of which are city-states – top the rankings in 2016. Qatar is the leading country in built asset returns per-capita with an average of US$66,300. Followed by the United Arab Emirates at US$37,900, Singapore at US$35,900, and Hong Kong at US$21,400. The US is the best performing large economy, in per-capita terms, at an average of US$16,800 per person.
China’s economic growth is powered by its built assets, which sees the country rank number one in terms of absolute returns from built assets. The share of GDP returns accounted for by built assets increased from 39% in 1990 to 52.9% this year. While China’s economy is clearly experiencing a slowdown, GDP is still forecast to grow at around 7%, and expected to continue investing in built assets at an unprecedented level. Whilst South East Asian countries such as Malaysia, Vietnam and Indonesia have rich commodity endowments, they will see the greatest percentage increase in built assets over the next decade as they continue to invest in manufacturing. Indonesia’s returns from built assets are forecasted to significantly increase from US$1.1 trillion in 2016 to $2.1 trillion in 2026 and Malaysia’s returns will nearly double in the next ten years to US$520 billion.
Germany leads in Europe at US$1 trillion returns from its built assets, followed by Turkey at US$807 billion and France at US$794 billion. Most European countries do not generate particularly high returns on a per-capita basis compared to their stocks of assets, which are generally high. The region will have to improve asset productivity as aging infrastructure is depreciating faster than rebuilding. On the contrary in the UK, due to low rates of both public and private investment, returns from built assets fell from 27.2% to 26.3%.
The US and Canada have not seen the same slowdown in GDP expansion that Europe has, although their post-crisis performance has not been strong. In 2016, built assets contributed 30.2% of GDP in the US (compared to 30.6% in 2014) and 29.8% in Canada (compared to 29.2% in 2014). While Europe has been seeing net depreciation for some years now (although this is expected to turn around as growth accelerates), the US has been expanding its built asset stock throughout. The US is also experiencing a decline in the effectiveness of existing assets reducing productivity due to a chronic under investment over decades, pulling negatively against the GDP’s return from assets. The current focus is getting significant public and political attention as cities across the country experience increased urbanization that strain existing systems.
Australia achieved a consistent overall growth in the proportion of its wealth coming from built assets, moving up from 29.7% to 31.7% in 2016, which has increased consistently in terms of both size and productivity to US$375 million. Australia is also the second best performing large economy, in per-capita terms, at an average of US$15,460 per person. The ongoing changes in Australia’s built asset investment will likely show a substantial shift in the types of assets being invested in.
Economies in the GCC have managed to reduce their reliance on commodities in recent years. One aspect of the UAE’s diversification program is to build infrastructure geared towards international aviation and tourism, and today equates to almost 50% of the UAE’s total annual GDP, the sixth highest percentage in the index. Following the same direction, Qatar has overtaken Singapore as the leading country in built asset returns per-capita showing its success in economic diversification away from hydrocarbons and making up 44% of GDP.
For further information please contact Julie Nguyen, Global Corporate Communications Manager at Arcadis: +971 (0)56 188 2465 / Julie.email@example.com
Notes to Editor:
- The US$36.1 trillion figure is based on the collective built asset income of the following 36 countries: Australia; Belgium; Brazil; Canada; Chile; China; Denmark; Egypt; France; Germany; Ghana; Hong Kong; India; Indonesia; Italy; Iran; Japan; Malaysia; Mexico; Netherlands; Philippines; Poland; Qatar; Russia; Saudi Arabia; Singapore; South Africa; South Korea; Spain; Sweden; Switzerland; Thailand; Turkey; UAE; UK; and USA.
- For the purpose of this research, built asset performance is measured by two quantities: the total stock of assets, and the total return from assets. The ratio between them can be seen as the return on built assets in that economy. If the return, expressed as a share of GDP, is relatively high compared to the average, while the stock of assets is about average for an economy of that size, then built asset performance is above average.
- In order to compare the relative value of assets appraised in different currencies, a Purchasing Power Parity (PPP) measure is used to account for the sometimes significant variation between price levels across countries and to correct for currency fluctuations.