Market Overview

The total eight major construction category market (total of eight categories: housing, commercial stores, office buildings, hotels, factories/plants, warehouses for logistics, schools, and hospitals) for FY2023 increased to 24,298,900 million yen, based on the estimated construction cost (104.8% of the previous fiscal year).
Driven by the resumption of construction projects that were delayed during the COVID-19 crisis and a return to overall construction demand, the market for the eight major construction categories is on an upward trend. Growth is particularly fueled by strong demand for logistics warehouses and factories/plants.
However, industry has been facing sharply rising construction costs since 2021, with increases in both material and labor expenses. As a result, some companies have reduced the planned floor sizes of buildings to manage costs, while others have postponed or canceled their projects altogether.

Noteworthy Topics

Higher Construction Costs

Construction costs have surged since 2021, driven by skyrocketing labor and material expenses. The labor cost increase is largely due to a supply-demand imbalance in the construction workforce. This issue stems from a decline in the number of jobseekers in the industry, leading to an aging workforce and a shrinking overall labor pool. Meanwhile, the rise in material costs is primarily attributed to what's been dubbed the 'Wood Shock' *1 and 'Iron Shock.'*2


*1 ‘Wood Shock’ refers to a global surge in lumber prices, driven by a spike in new housing construction, particularly in China and the U.S. following the pandemic. This surge caused a sharp increase in lumber material costs.
*2 ‘Iron Shock’ describes the rise in iron and steel prices, fueled by a rapid global increase in demand for these markets in the wake of the COVID-19 crisis.

Future Outlook

The total eight major construction category market (total of eight categories: housing, commercial stores, office buildings, hotels, factories/plants, warehouses, schools, and hospitals) for FY2024 based on the estimated construction cost is likely to expand to 24,561,800 million yen (101.1% of the preceding fiscal year) due to higher construction expenses accompanying rising commodity prices.

Looking at demand by sector, there is strong interest in large-scale redevelopment of office buildings and commercial facilities in central Tokyo, as well as in logistics warehouses and semiconductor factories. As a result, we can anticipate steady growth in these markets. However, across the eight major construction categories overall, the market is expected to shrink due to the negative effects of population decline, reduced building sizes (driven by soaring construction costs), and delays in project starts. The size of the total eight major construction category market is forecasted to drop to 22,488,900 million yen by FY2030 (92.6% of that of FY2023).

Research Outline