European underinvestment in built assets may impact prosperity

China has become the world’s richest country measured by the value of its built environment, while Europe’s position deteriorates, according to the latest Global Built Asset Wealth Index published by Arcadis, the leading Design & Consultancy firm for natural and built assets.

"It is critical that each investment considers the whole lifecycle of assets to deliver the built environment that their society needs.”

The index, which was compiled for Arcadis by the Centre for Economics and Business Research (CEBR), calculates the value of all the buildings and infrastructure that contribute to economic productivity in 32 countries, which collectively make up 87% of global GDP.

Total built asset wealth now stands at an estimated US$218 trillion, which is the equivalent to US$30,700 per person alive today. China now has a built asset wealth of US$47.6trillion, overtaking the USA which comes in second place with a wealth of US$36.8trillion. 

In Europe, the almost decade-long economic slowdown has had the negative effect of holding back investment. European investment programs such as the so-called “Juncker Plan” are meant to boost investment in built assets and infrastructure. Governments and the private sector on the Old Continent might take advantage of such opportunities, in order to stem the tide of de-investment and deteriorating infrastructure and buildings.

European depreciation:

  • All European advanced nations underinvested between 2012 and 2014 resulting in an overall decline in infrastructure.
  • Globally, the largest depreciation of built assets was Japan, which has lost US$4.6 trillion in built assets since the millennium.
  • However, as a proportion of total built asset stock, Germany’s decline of 21% is the most substantial over this period.
  • Other developed economies to have undergone significant net de-investment since 2000 include the Netherlands (-5%), the UK (-8.9%), France (-10.2%) and Russia (-18.7%), while the US stock has remained largely constant (-0.8%).
  • Spain’s decline in built asset wealth over the past three years, amounting to 3.8% of it’s total built asset stock, is the greatest proportionally since 2012.
  • A ten-year forecast sees the European position deteriorate even further.
Between 2000 and now, Germany’s built asset stock declined with 21%.

Julien Cayet, Global Leader of Business Advisory at Arcadis explains: “The health and wealth of a nation can be measured in many different ways and while factors such as GDP or employment have great value, a prosperous society is underpinned by a well-developed built environment that meets the needs of its people and economy.”

Cayet continues: “Advanced economies, particularly in Europe, have seen prolonged de-investment in built assets, due to government austerity and the private sector’s lack of confidence. Due to the strong correlation between investment in built assets and economic growth, this might have a strong longer term impact on prosperity in Europe.”

“Developed economies have experienced a long-term stagnation and decline of their built assets stock, as aging infrastructure falls into disrepair and investment fails to keep up. This revelation comes at the very time they may need to tighten the fiscal belts and do more with less. It is critical that each investment they make – be it new buildings and infrastructure, or upgrade and repair – considers the whole lifecycle of these assets to deliver the built environment that their society needs.”

The shifting wealth to emerging economies The Global Built Asset Wealth Index shows a dramatic shift of wealth to emerging economies, with the traditional economic superpowers – the G7 – showing a net decline in the value of their built assets since 2012. Structural assets depreciate at a rate of around 5% per year, meaning that this level of investment is the minimum required to maintain the status quo, a figure that equates to US$1.4 trillion in the US.

In Europe, the almost decade-long economic slowdown has also had the negative effect of holding back investment. Meanwhile, economies including Indonesia, Thailand and the Philippines were amongst the biggest gainers.

Key statistics from the 2015 Global Built Asset Wealth Index:

  • China has the largest built asset stock in the world with a total of US$47.6 trillion, overtaking the US total of US$36.8 trillion.
  • China’s heavily investment-dependent growth model means that by 2025 its built asset stock will be worth over double that of the US, and will exceed in size those of the next four economies combined.
  • The stock of built assets is closely correlated with a nation’s economic output. On average, countries analyzed have a built asset stock worth 2.9 times GDP.  

Per capita leaders:

  • Europe’s built asset value per capita ranking is topped by Italy (US$129,588), followed by the Netherlands ( US$127,976). Belgium (US$125,436) scores bronze before Germany (US$123,558). Spain ends up fifth (US$122,520), before France (US$122,403), the UK (US$75,977), Russia (US$59,228), Poland (US$50,704) and Turkey (US$33,568).
  • The global per capita leaders are all Asian economic centres, with Singapore (US$191,500 per person) Hong Kong (US$160,000), Japan (US$143,500) and UAE (US$140,500) making up the top five behind Qatar.

When China’s vast built asset wealth is split across its 1.4 billion people, its per capita ranking, at just US$34,000 per person, falls to 24th in the world, behind Chile (US$48,000), Mexico (US$47,500) and Thailand (US$44,500).

 

Overall Arcadis Built Asset Wealth Ranking and Forecast

Ranking

Country

2015

Built asset value (trillion $)

2025

Built asset value (trillion $)

2025

Ranking

2015-2025

Ranking change

1

China

47,58

97,04

1

0

2

USA

36,82

45,25

2

0

3

Japan

18,24

16,4

4

-1

4

India

15,24

23,17

3

+1

5

Germany

10,21

10,43

5

0

6

Russia

8,44

5,76

13

-7

7

Italy

7,91

7,71

8

-1

8

France

7,91

8,14

7

+1

9

South Korea

6,12

7,63

9

0

10

Brazil

5,95

6,8

11

-1

11

Mexico

5,89

7,37

10

+1

12

Spain

5,77

5,39

16

-4

13

UK

4,82

5,69

14

-1

14

Indonesia

4,7

8,33

6

+8

15

Canada

4,56

5,66

15

0

16

Australia

3,27

4,3

18

-2

17

Saudi Arabia

3,15

6,8

12

+5

18

Thailand

2,99

4,5

17

+1

19

Turkey

2,55

2,43

23

-4

20

Netherlands

2,15

2,3

24

-4

21

Poland

1,94

2,43

22

-1

22

Malaysia

1,68

2,82

19

+3

23

South Africa

1,5

2,01

25

-2

24

Belgium

1,4

1,48

27

-3

25

UAE

1,33

2,44

21

+4

26

Egypt

1,2

1,16

29

-3

27

Hong Kong

1,16

1,47

28

-1

28

Philippines

1,14

2,55

20

+8

29

Singapore

1,06

1,9

26

+3

30

Chile

0,86

1,15

30

0

31

Qatar

0,45

1

31

0

32

Ghana

0,2

0,38

32

0

 

TOTAL

218,19

301,88

 

 

 Download the full report (PDF)

 

-Ends-

 

For further press information please contact:

Jochem Binst, Head of External Communications Europe

M. +32 471 20 26 79

 

About the study

This research, conducted by the Centre for Economics and Business Research (www.cebr.com) and based on over 20 independent global sources, calculates the value of the buildings and infrastructure in 32 countries, which collectively make up 87% of global GDP. Built asset wealth was broken down into construction (including infrastructure) and machinery and equipment and forecasts were made of stock increases and depreciation.

To forecast the composition of investment, or fixed capital formation, CEBR established econometric relationships in each of the countries within our sample to estimate its evolution over the forecast horizon. For each country this required an assessment of investment growth in constant purchasing power parity adjusted to US dollars, the composition of investment, the depreciation of the existing stock and the rate of population growth.

To forecast the depreciation of the existing stock an average service life for each of the components of fixed capital formation (residential and non-residential construction and machinery and equipment) was established, based on an extensive literature review. This works out around 14 years for assets of machinery or plant and approximately 70 years for construction assets. The rate of depreciation in each economy depends on the ratio between these two quantities in its overall stock of assets.

About Arcadis

Arcadis is the leading global Design & Consultancy firm for natural and built assets. Applying our deep market sector insights and collective design, consultancy, engineering, project and management services we work in partnership with our clients to deliver exceptional and sustainable outcomes throughout the lifecycle of their natural and built assets. We are 28,000 people active in over 70 countries that generate more than €3 billion in revenues. We support UN-Habitat with knowledge and expertise to improve the quality of life in rapidly growing cities around the world.  www.arcadis.com. Arcadis. Improving quality of life.
 
The first Global Built Asset Wealth Index was published in 2013.  For further information on Arcadis’ Built Asset Wealth Index, including the full per capita ranking, and regional breakdowns, please visit the Arcadis website: www.arcadis.com/builtassetindex

About Centre for Economic and Business Research

Centre for Economics and Business Research (Cebr) is an independent consultancy with a reputation for sound business advice based on thorough and insightful research. Since 1992, Cebr has been at the forefront of business and public interest research. They provide analysis, forecasts and strategic advice to major multinational companies, financial institutions, government departments, agencies and trade bodies.  For more information visit www.cebr.com


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Global Built Asset Wealth Index 2015

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