North American Megaprojects
2019 Methodology and North American overview
Megaprojects Defined: Study Map: Shading illustrates historical volume of spend by country, 2007-2019. There is no one universal definition of a megaproject. FMI, using a threshold of $1 Billion or more, identified historical and planned engineering megaprojects across multiple sources and databases. Large, long-term capital plans were excluded from this analysis.
Megaprojects are widely defined as large-scale, complex ventures that typically cost $1 billion or more and may take years to develop and build, involve multiple public and private stakeholders, are transformational and impact millions of people (Flyvbjerg, 2014). FMI’s North American megaproject database includes just over 1,250 Megaproject Segmentation: projects valued at $1 billion or more, or more than $3.4 trillion in Commercial and Mixed Use – Includes projects total engineering and construction predominantly within lodging, office, retail, warehouse and investment. Approximately 71% of distribution, amusement and recreation, and communication this identified opportunity ($2.4 segments. Also includes residential single-family and trillion) is for megaprojects still in multifamily mixed-use developments. planning and design stages.
Institutional – Includes projects predominantly within health care, educational, religious or public safety segments. Past and underway megaprojects Megaprojects in planning and design Transportation – Includes nonresidential building projects North America, 2007-2019 $ millions North America, 2019-2050 $ millions for airports, railways (including both transit and freight rail) ~$1 Trillion ~$2.4 Trillion and/or ports (including both waterway or inland ports). Canada Industrial – Includes all manufacturing and industrial Canada 27% 23% projects.
U.S. U.S. Infrastructure – Includes all nonresidential structures 73% involving power, highway and street, sewage and waste 77% disposal, water supply, and conservation and development investment.
Source: FMI, Building permits, Reed, Dodge 2 Megaproject trends and drivers
The world need to spend an estimated $57 trillion on infrastructure by 2030 to enable the anticipated levels of GDP growth. Two-thirds of spending will be required in developing countries to support rising middle classes, population growth, urbanization and increased economic growth.
Reasons megaprojects fail: Historical megaproject performance • Overoptimism and overcomplexity • Nine out of 10 megaprojects go over budget • Poor execution • Low productivity • Time overruns are a perennial problem • Weakness in organizational design and capabilities • Rail megaprojects go over budget on average • Lack of resources 44.7%, and demand is overestimated by 51.4% Known solutions to megaproject challenges: • Bridge and tunnel megaprojects on average • Stakeholder alignment and confirmation of justification incur 35% cost overruns. • Resource and expertise acquisition • Upfront planning (3% to 5% of capital costs on • Road megaprojects on average incur 20% cost overruns. early stage engineering and design) • Oversight rigor across benefits, goals, schedules and costs
Megaprojects are economically transformative. The world needs megaprojects to deliver economic growth and, theoretically, they pay for themselves. Getting them right, or at least making improvements, is win-win. Other lasting benefits span innovation and technological advancements, co-leveraging resources across various public and private organizations, sustainability and ultimately inspiration toward future achievements.
Planned start dates on megaprojects are difficult moving targets, given their inherent complexities and typical opposition. Likewise, in the event of widespread national or international economic slowdown, FMI expects planned megaprojects will be among the first group of projects to be redrawn, shelved or abandoned (depending on associated stakeholders and motives). Source: FMI, McKinsey, KPMG, METU 3 U.S. megaproject highlights
The average U.S. megaproject size is expected to U.S. Regional Study Map (Census Regions): increase 37%, from $2.1 billion to $2.9 billion, comparing Shading illustrates historical volume of spend by region, 2007-2019. awarded/historical projects between 2012 and 2018 with those in the forecast period between 2019 and 2023. • Since 2012, 320 U.S. megaprojects have been awarded, representing $718 billion in investment. West
• FMI identified 674 U.S. megaprojects in planning, Midwest Northeast representing $2 trillion in investment.
The annual value of megaproject starts in the U.S. has increased from 3% of total U.S. starts in 2013 to approximately 33% of total U.S. starts in 2018. Growth in South historical megaproject spending has been led by industrial and infrastructure investments.
U.S. planned projects show an increasing share of spending into western states and into infrastructure and transportation.
• The South and the West Census regions are Largest Five Megaprojects, Past and Planned expected to represent the majority of planned megaproject spending across the U.S. at 37% and Past Projects, 2007-2019 ($B) Planned Projects, 2019-2050 ($B) 30% of total, respectively. Plant Vogtle Nuclear Reactor Westchester to Long Island Tunnel, $25.2 $55.4 • The top three states across the U.S. for planned Expansion, Georgia (2010) New York (~2023) megaproject spend represent 40% of the national Nextgeneration NYCHA PACT Alaska Natural Gas Pipeline, $24.0 $43.4 total. These states include New York (15%), California Sites, New York (2019) Alaska (~2021) (15%) and Texas (10%). Exxon Mobil Plastics Plant, G2 LNG Plant Expansion, $10.0 $24.0 Texas (2017) Louisiana (~2019) Annual megaproject construction put in place (CPiP) is Corpus Christi LNG Export FP&L Turkey Point Reactors, expected to increase ~460% over the next five years, $10.0 $20.0 Terminal, Texas (2015) Florida (~2023) growing from $53 billion to just over $295 billion. Over the Golden Pass Products Expansion, Texas Central High-Speed Line, next decade, annual megaproject spending is expected $10.0 $18.0 to increase nearly 600%, reaching just over $350 billion. Texas (2019) Texas (~2020) Source: FMI, Building permits, Reed, Dodge
4 U.S. megaprojects, historical and planned activity Construction starts/awards, as reported
Count of Megaprojects History Forecast Past/Awarded Planned Projects 400 The average U.S. megaproject size is expected to increase 37%, from $2.1 350 billion to $2.9 billion, comparing awarded/historical projects between 2012 and 2018 with those in the forecast period between 2019 and 2023. 302 300 • Since 2012, 320 U.S. megaprojects have been awarded, representing $718 250 billion in investment. 237 • FMI identified 674 U.S. megaprojects in planning, representing $2 trillion in 200 investment.
150 126 119
100 73 35 50 22 26 5 11 12 14 12 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 No Schedule
Value of Megaprojects $784.6 $800 Megaproject Starts as a Percent of Total U.S. Construction Starts ($) $700 40% 30% 33% $597.8 $600 20% 19% $500 10% 9% 10% 3% 3% 3% 0% 2012 2013 2014 2015 2016 2017 2018 $400 $344.4
$300 The annual value of megaproject starts in the U.S. $264.3 has increased from 3% of total U.S. starts in 2013
Billions Billions of Current Dollars $200 to approximately 33% of total U.S. starts in 2018. $149.3 $93.4 $109.5 $59.6 $75.6 $100 $37.9 $16.7 $17.8 $18.6 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 No Schedule
Average Project $3.3 $1.6 $1.6 $2.7 $2.2 $2.0 $2.1 $2.6 $2.9 $3.6 $2.7 $9.1 $2.5 Size, Billions $2.1 (2012-2018 Full History) $2.9 (Full Forecast)
Source: FMI, Building permits, Reed, Dodge 5 Historical Megaproject Starts as a Share of all U.S. Construction Starts ($)
Growth in historical megaproject spending has been led by industrial and infrastructure investments.
40%
75% Total Construction U.S. industrial and infrastructure segments have increasingly embraced megaprojects as a means for expansion. Megaproject 61% starts in 2018 represented the majority share, or 61% of dollars, 33% of all projects started across those segments. 50% 30% Commercial and Residential 42% Institutional and Transportation
Industrial and Infrastructure 25% 23% 19% 22% 17% 17% 10%
Share of Starts by Share ofStartsSegment by ($) 7% 8% 5% 5% 9% 20% 4% 7% 1% 4% 2% 19% 0% 0% 1% 2012 2013 2014 2015 2016 2017 2018
Summary of total U.S. construction starts by segment $217 (Billions, 2018) 10% $445 10% $146 9% Megaprojects Share of all U.S. Construction Starts ($) Starts Construction U.S. all of Share Megaprojects
3% 3% 3%
0% 2012 2013 2014 2015 2016 2017 2018 Starts Value $17 $18 $19 $60 $76 $149 $264 ($B) Starts Count 5 11 12 22 35 73 127 Source: FMI, Building permits, Reed, Dodge 6 Large-Project* Starts ($500M-$1B) as a Share of all U.S. Construction Starts ($)
Consistent with the trend seen prior, historical growth in large-project spending between $500M and $1B has also been led by industrial and infrastructure investments. However, at these size ranges, we are also finding that commercial and residential projects are consistently and more frequently becoming larger as well as increasingly complex. 40% 20% Total Construction 19% Commercial and Residential 17% Institutional and Transportation 16%
Industrial and Infrastructure 12% 30% 10% *Large projects are defined as those 9% 10% 9% 8% with engineering and construction 8% 8% 7% values ranging between $500 million 5% 6% and $1 billion. 4% 4% 4% 5% 4% 4% Share of Starts by Share ofStartsSegment by ($) 2% 20% 1% 0% 2012 2013 2014 2015 2016 2017 2018
Summary of total U.S. construction 13% starts by segment $217 (Billions, 2018) 11% 10% $445 $146 9% 8%
5% 4% Large Project Starts as Share of all U.S. Construction Starts ($) Starts Construction U.S. all of Share as Starts Project Large 3%
0% 2012 2013 2014 2015 2016 2017 2018 Starts Value $13 $21 $28 $52 $80 $71 $108 ($B) Starts Count 22 31 41 79 121 109 169 Source: FMI, Building permits, Reed, Dodge 7 U.S. megaproject segmentation and distribution of spending
U.S. planned projects show an increasing share of spending in western states and in infrastructure and transportation.
Past and underway projects Upcoming projects in planning and design U.S., 2012-2018 $ millions U.S., 2019-2050 $ millions
Midwest Midwest 12% 9%
South South 37% 42%
Northeast Northeast 23% 22% U.S. Census Regions
West West 24% 30%
Institutional Institutional 2% 2% Transportation 10% Transportation Commercial and Commercial and 19% Mixed Use Mixed Use 28% 36%
Industrial 20%
Industrial 12% Construction Segments Infrastructure Infrastructure 38% 32%
Source: FMI, Building permits, Reed, Dodge 8 U.S. planned megaprojects by region
The South and the West Census regions are expected to represent the majority of planned megaproject spending across the U.S. at 37% and 30% of total, respectively. • Across the South significant states (by spend) include Texas (28%), Louisiana (17%) and Florida (16%). Across the West significant states Bubble size illustrates value of planned megaproject construction spending by county. include California (48%), Alaska (9%) and Nevada (8%). • The top three states across the U.S. for planned megaproject spend represent 40% of the national total. These states include New York (15%), California (15%) and Texas (10%).
West (30%) Northeast (23%) Midwest (9%)
South (37%)
Source: FMI, Building permits, Reed, Dodge
9 U.S. megaprojects, historical and planned activity Construction put in place forecast, 2012-2028 $2,000 100% …History Forecast …
Key assumptions: Highlights $1,800 1) Megaproject adjusted starts (light blue bar) are estimates based on actual projects in 90% • The trend in increasing megaproject starts has planning (i.e., slide 5), including expected delays and likelihood of occurrence, only begun to appear in annual construction put in alongside estimates for future projects that have not yet been identified or announced. place spending. (adjusted forecast starts include $3.6 trillion in project values vs $2 trillion reported) $1,600 2) Historical starts are forecast to realize full project value through completion, as reported. 80% • Annual megaproject CPiP is expected to 3) Recent shifts within the construction cycle, alongside slowing economic growth between increase ~460% over the next five years, late 2019 and 2021, will reduce short-term and midterm opportunities for commercial $1,400 growing from $53 billion to just over $295 and private project and megaproject starts (e.g., mixed use and various P3). 70% billion. Over the next decade, annual 4) Megaproject starts assume an eight-year average life span of construction spending. megaproject spending is expected to increase Estimated distribution of annual spend is illustrated below: nearly 600%, reaching just over $350 billion. $1,200 Megaproject CPiP spending distribution* 60% 25% 20% • Total annual megaproject spend as a percent 15% 10% 13% of total CPiP is expected to increase from 4.0% 5% 8% 5% $1,000 in 2018 to just over 20% by 2023 and remain 50% stable between 19% and 20% through 2028. Y1 Y2 Y3 Y4 Y5 Y6 Y7 Y8 *Distribution assumes an eight-year average project life span
$800 Total Construction Put in Place (CPIP) $ Historical Megaprojects CPiP as 40% CPiP Total of Percent
Billions of Current Dollars % of Total (2012-2018) = 1.8% Megaproject CPiP - Expected Planned Project Spend $ Forecast Megaprojects CPiP as Megaproject CPiP - Expected Underway Project Spend $ % of Total (2019-2028) = 16.7% $600 30% Megaproject Starts - Adjusted $
Adjusted Planned Megaproject Starts as Percent of Total CPiP % $400 20% Total Megaproject CPiP as Percent of Total CPiP %
$200 10%
$ 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Megaproject $3.8 $6.0 $8.5 $13.9 $20.4 $32.0 $52.9 $87.7 $133.8 $185.4 $242.0 $295.2 $330.2 $336.7 $331.4 $332.8 $352.0 CPiP ($B)
Percent of 0.4% 0.7% 0.8% 1.3% 1.7% 2.6% 4.1% 6.6% 10.0% 13.5% 16.9% 19.7% 21.1% 20.8% 19.7% 19.5% 20.3% CPIP
Source: FMI, Building permits, Reed, Dodge 10 U.S. megaprojects, historical and planned activity Construction put in place forecast, 2012-2028 $2,000 100% …History Forecast …
$1,800 90%
$1,600 80%
$1,400 70%
$1,200 Total Construction Put in Place (CPIP) $ 60%
Megaproject CPiP - Expected Planned Project Spend $ $1,000 50%
Megaproject CPiP - Expected Underway Project Spend $
$800 40% CPiP Total of Percent
Billions of Current Dollars Total Megaproject CPiP as Percent of Total CPiP %
$600 30% Historical Megaprojects CPiP as % of Total (2012-2018) = 1.8%
20% $400 Forecast Megaprojects CPiP as % of Total (2019-2028) = 16.7%
$200 10%
$ 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Megaproject $3.8 $6.0 $8.5 $13.9 $20.4 $32.0 $52.9 $87.7 $133.8 $185.4 $242.0 $295.2 $330.2 $336.7 $331.4 $332.8 $352.0 CPiP ($B)
Percent of 0.4% 0.7% 0.8% 1.3% 1.7% 2.6% 4.1% 6.6% 10.0% 13.5% 16.9% 19.7% 21.1% 20.8% 19.7% 19.5% 20.3% CPIP
Source: FMI, Building permits, Reed, Dodge 11 Canadian Megaproject Highlights
The average Canadian megaproject size is expected to Canada Regional Study Map: increase 36%, from $2.8 billion to $3.8 billion, comparing Shading illustrates historical volume of spend by region, 2007-2019. awarded/historical projects between 2012 and 2018 with those in the forecast period between 2019 and 2023.
• Since 2012, 95 Canadian megaprojects have been awarded, representing $272 billion in investment.
• FMI identified 153 Canadian megaprojects in West planning, representing $550 billion in investment.
The annual value of megaproject starts to CPiP in Canada has steadily increased from 7% in 2012 to just under 17% in 2018 with year-over-year volatility tied to major industrial investments. East
Canadian planned megaprojects show an increasing share of spending in western provinces and in industrial and commercial and mixed use segments.
• The West Canada provinces are expected to Largest Five Megaprojects, Past and Planned represent the majority, or 62% of total, of planned Past Projects, 2007-2019 ($B) Planned Projects, 2019-2050 ($B) megaproject spending. Hebron Oil Platform, Kitimat Clean Refinery, British $14.0 $22.0 • Across the West significant provinces (by spend) Newfoundland (2015) Columbia (~2020)
include Alberta (47%) and British Columbia (41%). Fort Hills Oil Sands Mine, Frontier Oil Sands Mine Project, $13.5 $20.0 Across the East significant provinces include Quebec Alberta (2014) Alberta (~2019) (40%) and Ontario (30%). LNG Canada Export Terminal, Kwispaa LNG, British Columbia $10.0 $20.0 British Columbia (2018) (~2020) • The top three provinces across Canada for planned Cement Factory, Ells River Oil Sands Facility, megaproject spend represent nearly 70% of the $10.0 $16.8 national total. These provinces include Alberta (29%), Quebec (2015) Alberta (~2021) British Columbia (26%) and Quebec (15%). Kearl Oil Sands Expansion, Eagle Spirit Oil Refinery and $9.0 $14.0 Alberta (2013) Pipeline, British Columbia (~2020)
Source: FMI, Building permits, Reed, Dodge
12 Canadian Megaprojects
Count of Megaprojects Planned Projects Past/Awarded History Forecast 60 The average Canadian megaproject size is expected to increase 36%, from 49 50 $2.8 billion to $3.8 billion, comparing awarded/historical projects between 2012 and 2018 with those in the forecast period between 2019 and 2023. 40 40 • Since 2012, 95 Canadian megaprojects have been awarded, representing $272 billion in investment. 36 • FMI identified 153 Canadian megaprojects in planning, representing $550 billion 30 in investment. 20 20 20 15 16 15 12 9 10 7 6 3 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 No Schedule
Value of Megaprojects
$200 50% The annual value of megaproject starts to CPiP in Canada has 40% steadily increased from 7% in 2012 to just under 17% in 2018 with year-over-year volatility tied to major industrial investments. $157.5 $160 30% $152.6 23.0% 22.9% $140.2 20% 15.9% 16.6% 14.2% Percent Percent of Total CPiP 10% $120 6.9% 7.2% 0% 2012 2013 2014 2015 2016 2017 2018 $80 $59.6 $53.6 $57.4 $43.3 $41.4 Billions Billions of Current Dollars $40 $34.9 $32.2 $15.0 $17.5 $17.5
$0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 No Schedule
Average Project $5.0 $2.3 $3.6 $3.3 $2.5 $2.9 $2.2 $3.5 $4.4 $4.0 $3.5 $2.9 $3.1 Size, Billions $2.8 (Full History) $3.8 (Full Forecast)
Source: FMI, Building permits, FMI, Reed, Dodge 13 Megaproject segmentation and distribution of spending
Canadian planned megaprojects show an increasing share of spending in western provinces and in industrial and commercial and mixed use segments.
Past and underway projects Upcoming projects in planning and design Canada, 2012-2019 $ millions Canada, 2019-2050 $ millions
East Canada West Canada West Canada 40% 60% 62%
East Canada 38% Canadian Regions
Institutional Institutional Commercial and 3% Commercial 4% Mixed Use and Mixed Use 5% 9% Infrastructure Transportation 25% 12% Infrastructure 41% Transportation 13%
Construction Segments Industrial Industrial 49% 39%
Source: FMI, Building permits, FMI, Reed, Dodge 14 Canadian planned megaprojects by region
The West Canada provinces are expected to represent the majority, or 62% of total, of planned megaproject spending.
Bubble size illustrates value of planned megaproject construction spending by county. Across the West significant provinces (by spend) include Alberta (47%) and British Columbia (41%). Across the East significant provinces include Quebec (40%) and Ontario (30%). The top three provinces across Canada for planned megaproject spend represent nearly 70% of the national total. These provinces include Alberta (29%), British Columbia (26%) and Quebec (15%). Western Provinces (62%)
Eastern Provinces (38%)
Source: FMI, Building permits, Reed, Dodge
15 Brian Strawberry Senior Economist, FMI Corporation
Brian Strawberry is a senior economist with FMI. Brian’s expertise is in economic and statistical modeling. He leads FMI’s efforts in market sizing, forecasting and building product/construction material pricing and consumption trends. The combination of Brian's analytical skills and creative problem-solving abilities has proven valuable for many contractors, owners and private equity groups as well as industry associations and internal research initiatives.
Brian earned his Master of Business Administration degree from the University of North Carolina at Greensboro. He received his Bachelor of Science in business with a concentration in finance from Elon University.
Tel: 919.785.9246 Email: [email protected]
16 About FMI
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