Willis report reveals construction sector challenged by uptick in data centers for AI while facing labor shortages
Rhea-AI Summary
Willis (WTW) has released its Global Construction Rate Trend Report for Q1, highlighting significant challenges in the construction sector. The industry is experiencing a surge in data center projects driven by AI advancement, but faces severe labor shortages and rising material costs.
In North America alone, an estimated 500,000 new workers are needed to meet construction demand, with similar shortages reported in Europe, Latin America, and Asia. The labor scarcity is leading to quality and safety concerns, prompting increased scrutiny from insurers.
Recent California wildfires have caused $32-40 billion in insured losses, affecting over 16,000 structures, which is expected to drive up insurance premiums. However, the Builders' risk and Construction All Risk (CAR) insurance market shows resilience with stabilizing rates and increased capacity for larger risks.
Positive
- Insurance market showing resilience with stabilizing rates
- Increased capacity for larger construction risks
- Improving rates and terms for quality risks in Asian markets
- Growing demand for data center construction projects
Negative
- Critical shortage of 500,000 workers in North America alone
- Rising building material costs increasing project expenses
- Insurance premium increases due to $32-40B California wildfire losses
- Labor shortages leading to reduced construction quality and safety concerns
News Market Reaction
On the day this news was published, WTW gained 1.36%, reflecting a mild positive market reaction.
Data tracked by StockTitan Argus on the day of publication.
LONDON, March 24, 2025 (GLOBE NEWSWIRE) -- The global construction industry is experiencing a remarkable uptick in data center projects, propelled by the swift pace of technological advancement and the future demands of artificial intelligence (AI). However, this boom is set against the sobering reality of labor scarcities and escalating material expenses, which present formidable obstacles for both the construction and insurance domains, according to the latest Willis Global Construction Rate Trend Report for Q1, launched by Willis, a WTW company (NASDAQ: WTW).
In North America, the skilled labor shortage is reaching critical levels, with estimates suggesting that an additional 500,000 new workers are required to meet the pending construction demand. Similar labor shortages are a growing problem in Europe and Latin America, while in Asia, the shortage of skilled labor is particularly acute. These shortages can lead to poor quality construction and reduced adherence to safety protocols, prompting insurance markets to closely scrutinize project schedules and costs.
Other key findings highlighted
- Economic factors are also playing a significant role in the global construction insurance market.
- The ongoing rise in building material costs is pushing project expenses upward, resulting in increased insurance premiums and the recent surge in tariffs, particularly for construction material imports and exports, is anticipated to further amplify these cost pressures.
- Recent natural disasters, such as the fires in Los Angeles, have had a significant financial impact on the construction insurance market. Insured loss estimates from the California wildfires range from
$32 t o$40 billion , affecting over 16,000 structures. This is anticipated to result in insurance premium rate increases for construction projects in California and add pressure to the already strained labor and building material markets.
In the face of these obstacles, we are still witnessing encouraging developments within the global construction insurance sector. The Builders’ risk and Construction All Risk (CAR) insurance market is displaying resilience, with rates stabilizing and increased capacity for more extensive risks. In Asia, we are seeing a market that is on the mend, offering improved rates and terms for quality risks.
Bill Creedon, Global Head of Construction, Willis said “The global data center boom is not only transforming the technology landscape but also catalyzing investments in the energy sector, with a strong emphasis on sustainable energy sources like solar, wind, and green hydrogen. Moreover, the nuclear industry is increasingly exploring the potential of Small Modular Reactors (SMRs) to power these facilities. Nonetheless, we are witnessing a robust response from the insurance market, with a continued emphasis on meticulous underwriting to address the evolving technological landscape. With our unique specialist industry knowledge and expertise, we continue to help our construction clients navigate through this difficult business environment.”
The report can be downloaded here.
About WTW
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Media contact
Sarah Booker:
Sarah.Booker@wtwco.com / +44 7917 72240
FAQ
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