Building the Future: Global Trends and Opportunities in the Construction Industry

MOJTABA NAVID: Hi, and welcome to the Building the Future. I'm very excited to be here with you today. My name is Mojtaba. I have been with Autodesk for about eight years, and I still am excited about what we strive to do.

I have observed the Autodesk Construction Cloud's journey throughout these years, and I can say, it has got better and better at every turn. As our CEO Andrew said more than once, we are at the beginning of a new era, an era of new technologies, such as digitization, virtualization, AI, and many more new technologies with the objective to do more with less. So we collectively can be more efficient and drive sustainability.

To embrace these rapid developments at Autodesk and with Autodesk Construction Cloud, our product is ready. So we can support the industry, our customers, and our partners. By now, you should be familiar with the safe harbor statement. Now that it is out of the way, let's continue talking about building the future.

To accommodate population growth, an entire New York City needs to be built every month for the next four years. This is probably one of the reasons that, during the past five years, nearly $10 billion was invested in construction technology startups. By 2050, more than seven billion people will be living in our urban areas, which means we need to double the size of all cities in the next 25 years, and this is a big job.

Construction companies nowadays need to deal with an explosion of data and tools. Most of which are disconnected. The pace of the change has been extreme. Construction companies had to change more over the past three years than the previous 25.

At Autodesk, we specifically acknowledge the vast growth of data and intelligence in the construction industry, which is why about three years ago, we founded a dedicated team that focuses on exploring growth opportunities within the construction industry based on the profound data and combining insights from a multitude of sources. Two members of this very team are going to ramble on in front of you for the next half an hour or so. That would be me, Mojtaba, and my dear colleague Marcel Allweins.

MARCEL ALLWEINS: Yes, thank you. A lovely introduction, Mojtaba. When we are crunching our data, make up our fancy business stories, and present our recommendations to leadership, we are often asked to start with the big picture. So here's the world, more specifically, the global economy in 2022, and this not so little piece at all is the $14.3 trillion output value of the construction industry that contributes 14% to the $105 trillion global economy.

Depending on how we are segmenting our economy, this is the biggest piece of the pie, bigger even than agriculture. Now, let's put this into a time perspective. Towards the end of this year, global data estimates a nominal increase of 3.5% compared to 2022. Nominal means actual dollar value, and that includes price changes.

If we take inflation out, the construction industry will record a marked slowdown in 2023 with an expansion of just 1.2%. This is down from 2.2% growth last year. If we exclude China, the global construction industry will actually contract by half a percent in 2023.

This deceleration reflects the challenging conditions in most markets around the world. Noticeably, the high inflation and a tightening in monetary policy has quite dampened investment on a global scale. However, most economists believe that, especially here in the US, we might enter what is called a soft landing, instead of a full on recession next year.

A soft landing would mean low inflation, positive economic growth, and a stronger labor market. The interesting bit is that of all the industries, the construction sector, again and again, shows the strongest downturn in the beginning of a looming recession. But it also shows the strongest increase right after it. Now, global data expects a 2.5% increase-- there we go. --right after it. So the increase of 2.5% next year, sorry, and another 30% real growth right till 2030.

If the soft landing comes through, we expect these numbers to actually be even higher than that. Let's have a closer look on the very construction market for next year and split it into its five main sectors. The residential construction sector by itself stands the biggest and is expected to reach $5.4 trillion in 2024. With $2 trillion less in output, the infrastructure segment comes in as a second by volume. It focuses on heavy construction projects, including highways, bridges, tunnels, dams, dikes, subway, and any other mass transit projects.

The energy and utilities construction sectors entails energy and telecommunications related projects, oil and gas projects, and utility projects, such as water and sewage infrastructure. With $2.8 trillion, this equals the size of the total GDP of France. The commercial construction segment falls an even trillion short of that. It includes office buildings, sports complexes, golf courses, shopping centers, hotels, anything fun.

The industrial sector includes facilities for raw material processing, storage, and manufacturing industries, and others. It expects to reach $1.1 trillion by end of next year, which is, basically, just above the $1 trillion of the institutional sector, which focuses on government, public, and religious buildings. Now, more interesting than the size of each sector is the opportunity behind its growth trajectory. There we go.

Yeah, within the next year 2024, we estimate strong growth numbers for infrastructure, and energy, and utility construction. This is mainly driven by government spending across the world to fight economic downturns and catch up with emissions. Residential construction on the other side really suffers from the high interest rates and rising cost of living. This year, it is estimated to contract by a whopping 7.5%, and even next year is forecasted to decrease by another 2.2%.

Yeah, I'm not going to buy any house anytime soon. That's for sure. Also, worth noting is that the big chunk of this 4% growth that we see in the industrial sector up here, that comes from the US. Our domestic efforts of near-shoring our technology production and supply chains away from China back to the US, that really shows you.

The Inflation Reduction Act and the CHIPS and Science Act that were signed mid last year, they will also further bolster this growth. But for the sake of today, we want to focus on the four biggest sectors down here. We will dive into the growth trends on a country level, touch on specific challenges for this industry, and show use cases of relevant growing technologies.

OK, Marcel, I get it. He wants me to talk about the lower growing sector here. To be fair, it's the largest. Let's talk about what consists in this $5.4 trillion for the next year.

On the left of the screen, you can see a heat map of the countries based on their nominal construction volume into 2024. On the right, you can see the top countries in term of construction revenue ranked by their expected growth for the next year. The US residential sector is expected to decrease by 2.5% in 2024, which is the next year. This is far less than the 8% decrease we expect for the current year.

Western Europe also shows a similar trend at around 3% contraction. Although, generally, global construction had recovered well from the downturn of 2020 amid the COVID disruption with rising interest rates, inflation, rising cost of living, as well as builders having to pass on the surge in construction costs, growth in the residential sector slowed sharply in 2022 and is now predicted to contract by 7.8% in 2023 and drop further by 1.9% next year. Now, despite all these, there are still growing markets in the residential sector.

South Asia is expected to record robust construction growth within this and the next year. This will be driven almost entirely by the growth of the Indian construction industry, which is the number one on the list of the countries. You can see here. Elsewhere in the region, the outlook for construction activity is far bleaker, especially by tightening the fiscal policy in Sri Lanka, Bangladesh, and Pakistan will have dampening impact on the region.

In India, however, the 6.5 extraordinary growth will be supported by demand from the rapidly emerging middle class population. Let's look at the challenges. To summarize the challenges that you just talked about them in the residential sector, decreasing affordability of the houses due to construction cost, inflation, and high mortgage rates squeezes household buying power. Despite these challenges, there are some notable technology developments that can reduce and improve the efficiency of residential construction at scale.

One, of course, is prefabrication or prefab. You can literally order houses from Amazon today and build them in your backyard. The other technology we wanted to call out here is 3D concrete printing. Let's dive into 3D concrete printing.

3D concrete printing may be one of the most disruptive technologies in the construction industry since the advance of steel framed skyscrapers. Global 3D concrete printing market is valued at $310 million in 2021 and is projected to reach a value of nearly $41 billion by 2028 at an annual growth rate of 107%. 3D concrete printers are essentially robotic systems that extrude layers of mortar-like material to create structures based on our computer aided designs or building information models, BIM.

Recent developments have made it possible to use standard concrete with additives that make it suitable for 3D printing. This means that 3DCP might be very well ready to enter scalability. The advantages are at hand. A recent comparative study shows 3DCP can reduce the construction duration by about 95%.

Other sources claim a 50% to 80% decrease in labor cost. There is even a notion that 3D printing structures only cost $5K or $6K. However, I want to be clear that you can only achieve that when you are building things at a very large scale.

The price of technology, material, logistics, and so on creates a big overhead. But if you are building houses in the hundreds, then 3DCP can be a true game changer. 3D concrete printing also has less environmental impacts, and reduction in waste is significant. And it can utilize locally sourced materials, reducing greenhouse emissions from the transportation.

Let's look at one great example, Mighty Buildings. Mighty Buildings combines prefab modular construction and 3D concrete printing together to sell pre-printed homes and modular homes with printed panels. With that, they claim their process eliminates 95% of the waste.

We keep hearing that there is 30% waste due to rework orders. One way that 3D concrete printing can help is to reduce that rework too. Together with the Palari Group, Mighty Buildings is building a 30 home community in Rancho Mirage, California for which Palari estimates cutting construction time by 50%.

All right, that's the residential sector. Thank you for that. Now, we want to switch over and talk about non-residential starting with infrastructure. This sector really remains the biggest driver of overall construction output growth.

The sector expanded even in 2020, despite COVID-19 disruption. That really reflects the efforts by governments and public institutions to accelerate programs, to accelerate investments, and really, stimulate activity. This growth is set to remain strong in the coming years, particularly given major investment programs in the US and China predominantly.

The US alone is expected to grow by a whopping 12% next year. If we dive in here, we see that this is across subsectors with road infrastructure holding the biggest piece in the US naturally. Reason for this immense boom, of course, is what's happened in this day exactly two years ago.

The Infrastructure Investment and JOBS Act, also, known as the Bipartisan Infrastructure Law, was signed into law by President Biden. The $1.2 trillion bill includes $550 billion just for infrastructure spending, including transportation, water, and natural resources. This is more public investment than overseen in any other presidential term.

For the past 50 years, infrastructure has been strongly underfunded, and as these highways, railroads, and tunnel projects vary immensely in complexity and duration, we expect strong growth to continue for the next 10 to 15 years easily. However, there are still major challenges specific to this sector, especially supply side issues remain a key risk to project momentum. High material prices have delayed works and imposed large cost hikes.

Governments are also facing the higher borrowing costs, which could hamper spending on other publicly funded infrastructure development programs. When we look at ways to improve the efficiency of infrastructure projects, we should pay close attention to the development of reality capture technology and robotics. Reality capture can be used to create accurate as built models of construction sites.

These models can be used to track progress, identify potential problems, and resolve disputes. This is typically done with laser scanners and a sizable amount of working hours. However, if you combine that, like, this RC with robotics, you open up a whole world of efficiency gains. Let's dive into robotics technologies for construction.

There's a vast variety of robotics on construction sites. They perform tasks, such as bricklaying, welding, rebar tying, painting, demolition, and as we just saw, pouring concrete. Robots can perform these tasks with great precision and speed greater than humans can do, and the use cases are only multiplying and getting more.

According to a global survey done by ABB, so far, only 55% of construction companies use robots, while 84% in the automotive industry and 79% in manufacturing use them already. However, in the same poll, 81% of the companies that were surveyed said that they plan on implementing robotics in the near future. So it seems like the construction industry is ready to implement robotics at scale now.

Now, the kinds of robotics varies heavily depending on the use cases. So there are no real metrics we can state as general improvements. However, across near all cases, we see immense efficiency gains whenever you can really automate heavily repetitive tasks, like with rebar tying.

Improved safety is often a crucial return on investment factor for robots. For instance, in complex demolition cases. And when we think of bricklaying, concrete pouring, or paint jobs, we can also easily imagine the benefit of this precision and speed that robots bring to the site in comparison to humans.

The Hadrian X, for instance, is a great example of a mobile robot that can lay up to 1,000 bricks perfectly in speed and precision in just an hour. A good example of connecting robotics and reality capture is the MIT founded upstart Nexterra Robotics. Under the name of Didge, they program and deploy autonomous robots for construction progress tracking, visual documentation, and for safety monitoring.

These self-driving robots can precisely capture your entire jobsite area every day without human effort. From there, they automatically detect the work done and compare it with your BIM model. Pretty neat thing actually. Now, let's switch it to the next sector. Mojtaba?

MOJTABA NAVID: OK, the third sector is energy and utilities, $2.8 trillion. Similar to the infrastructure sector, the energy and utilities sector is strongly supported by government's investments. The need to diversify energy supplies was felt more recently as the prices are increasing and supply chain faces new challenges.

There is also growing global political will to decarbonize the economy. This is driving power generation and construction away from the carbon based energy sources to renewable energy sources, such as wind, solar, and nuclear power. We see strong growth in these sectors, domestically and internationally, especially in the UK. We forecast immense growth at 9% in 2024.

Let's dive in. The UK has several energy mega projects under construction. The country plans to transition to 100% clean electricity by 2035, which is a great vision. Several mega projects are in planning or are already in their way to make this happen.

For example, the fourth phase of the Hornsea project is starting, which brings offshore wind farms to life that, at the end, it will generate six gigawatts of electricity. There also is the new Connect project, a 2.5 million pound interconnector that will link the UK and Germany energy markets. The stations will be connected by sub-sea cables that will travel through British, Dutch, and German waters.

As the main challenge is specifically for the energy and utilities sector, we see supply side issues across the region, also, the growing skill gap and the geopolitical and local policies that come in the way of permits for energy projects more often than not. Considering these challenges, there is a growing need for innovative and more effective methods. Digital twins can connect digital models with the physical reality and help with simulation testing, monitoring, and maintenance.

On the other hand, drones can expedite the process and make it much more effective. Let's dive into how drones are changing the industry. The construction industry has experienced a 239% increase of drones usage over year over year, probably the highest compared to the other sectors. According to a '22 survey by drones deployed, 69% of construction respondents plan to expand their use of drones beyond aerial mapping.

Drones are a faster and safer alternative to traditional land based surveying methods in construction projects. They can complete survey work at 60% to 70% less time and eliminate risk to personnel. Previously, construction workers had to climb roofs or use scaffolding for inspection, which was dangerous and limiting.

With construction drones, you can ensure safety, inspect the entire site, and monitor in real time. According to a blue research report, state of drones in big business, 92% said their company saw a positive return on its drones investment within mere one year. Drones also enhance construction site communications by up to 65%. Real time video data enables accurate and efficient information exchange among team members, eliminating communication problems caused by radios and cell phones. Let's take a closer look at drone deploy.

Drone applications are a multitude, especially in the energy sector. Particularly, in the solar industry, drones bring intuitive benefits to the projects. Drone deploy is one example that provides drone applications to survey a construction site to determine where best to position solar panels for optimal performance.

They allow monitoring solar panel installation to ensure it stays up to code and enable routine inspection of active solar sites to locate defects and prevent maintenance issues later down the road. Drone deploy also integrates with Autodesk Construction Cloud and Autodesk BIM 360. This integration allow users to import drawing as an overlay, export drone deploy maps directly, collaborate seamlessly between the office and the field, and create digital twins.

Perfect. Now, let's talk about the last industry we want to cover today, the commercial construction sector. This one was really hit very hard by the pandemic. With the lift and travel restrictions, we saw some promising signs of recovery. However, the general weaker economic outlook and higher interest rates will hit underlying demand.

This will delay a full recovery in leisure and hospitality buildings, offices, and in the retail building sector. On a more positive note, there is growing investment in logistics, warehousing, and data centers. When we look at the growth trajectories for next year, it seems that Australia makes a big jump. But when we compare this with the previous growth rate, it becomes clear that Australia is just expected to recover from a very sluggish 2023.

Australia is way stronger in the civil engineering side than the commercial at the moment. So in the end, the bigger opportunity here stays in North America with the US and Canada showing strong growth, especially in office buildings and what is so elegantly clustered as other commercial construction. This mainly entails growth coming from investment in logistics, and warehousing, and data centers.

Similar to the previous sector, commercial construction has to wrestle with long lead times and a shortage of skilled labor. Another hurdle here is also the slow adoption of new technologies that keeps projects from reaching their efficiency goals. Not only for commercial. But, of course, across all industries, there's a major technology movement that will eventually change every step of your project life cycle, the infusion of artificial intelligence.

AI powered assistance can accelerate improvements in quality and safety, reduce costs, optimize schedules, and drive sustainability. According to an analysis by Extension Frontier Economics, construction is an industry that can see one of the largest increases in profits due to AI in the next decade. Industries that are more advanced in data and AI, like financial services, of course, are enhanced today. But because of that, construction can really catch up and realize even bigger gains.

Today, the industry estimates that 1/3 of time is wasted on non-optimal activities, something the right use of AI can actually diminish drastically. Rework, which is a symptom of deficient planning, design siloed project information. That's a major driver of waste, margin erosion, schedule delays, and also, safety incidents.

AI powered technology can, here, really help eradicate this $280 billion deep pit altogether. And while the amount of data now available in construction has grown exponentially through digitalization, mobility, and data capture devices, and we all recognize that data can help reduce rework, the reality is that 96% of construction data still goes completely unused. And data is eventually what fuels AI based transformation. By leveraging data driven AI and intelligence in a connected platform, the construction industry can gain efficiencies and better decision support across the project life cycle.

And when I say connected platform, I, of course, mean Autodesk Construction Cloud. I had to save the best for the end, of course. Autodesk has been an industry leader in every major technology disruption for decades. These early disruptions from the internet to mobile computing to cloud hosted services has aggregated data and increased compute that has made advances in AI possible.

Autodesk offered the first Construction Platform to release AI powered insights more than five years ago. Today, AI is already employed across the ACC to make work to automate workflows and features and to predict real time risk. Autodesk takeoff here is one example. It already comes with machine learning powered symbol detection for faster 2D takeoffs, and it can generate automatic quantities from 3D models all to save time, creating competitive bids.

Autodesk Build here is implementing Artificial Intelligence at an impressive state. It uses trained models for risk reviews and automated submittal logs to improve project management workflows. Build also uses AI driven image recapturing to audit, take photos, and make them easy to find. It already leverages construction IQ to predict higher risk design issues, so they can be addressed before they have costly impacts during construction.

The Autodesk Construction Cloud is an intelligent platform with AI powered automation insights across the solution. Now, imagine what we can do with all this data and research in the future. Imagine you could ask your project data anything, chat with your specs, create ad hoc insights, project updates all in natural language and in an instant. Imagine you have real, real time predictive risk analysis at your fingertips, surfacing things that need immediate attention or carry the highest risk.

Imagine you can easily analyze project opportunities, so that you can target the most profitable projects. Truly an exciting field, especially for the construction industry. It's a very exciting time to be in this industry. I know this was a lot right now. But we talked about residential construction in India, the energy sector in the UK, infrastructure and commercial construction in the US and Canada, drones, 3DCP, AI, robotics, and all this is only a piece of what is happening right now.

As cliche as it sounds, the construction industry is at a pivotal moment. The global economy is holding its breath about a potential recession looming over next year, lasting challenges from supply chain issues over labor shortages through price hikes continue to threaten your margins, and yet, an exciting variety of new technologies are ready for adoption and scale, many of those accelerated by the sudden burst of generative AI.

If we can leave you with one call to action, it will naturally be this. Be proactive in shaping the industry's future, be bold in exploring new technologies, and be vigilant in seizing your opportunities. Thank you very much.