While 2023 will see huge construction projects continuing, such as the complexes and infrastructure for the 2024 Olympic Games in Paris, it’s undoubtedly going to be a year of twists and turns for many in the sector.
Ongoing sector volatility, rising interest rates, high inflation, the war in Ukraine are just some of the factors causing pressure on the sector right across Europe, the Middle East and Africa (EMEA).
While there are undoubtedly difficult times ahead, 2023 could also be time to thrive for construction businesses and contractors that can focus on sustainability, work smarter and harness the latest technologies to do more with less.
“Companies are certainly struggling with higher interest rates, increased material costs and uncertainties. The ones who press more gas on the digital transformation will come out as winners of this decade’s crisis,” says Sauli Lankinen, Strategic Account Executive, Autodesk, Nordics.
As recently as April 2022, Technavio was forecasting year-on-year growth of 4.4% for the construction market in EMEA. It pointed to the increase in the construction of green buildings, along with high demand for commercial and tourist industry construction as the key drivers of growth.
While those areas of the market continue to see demand, the overall picture is not quite so rosy as we head into 2023. According to EUROCONSTRUCT, the construction industry in Europe will barely grow in the next couple of years, with an 0.2% uptick expected in 2023 and zero growth forecast for 2024. That’s down from its earlier prediction of 2% growth in 2023. Meanwhile, residential construction rates are expected to contract by 2% over the year.
All of that is hardly surprising, given the macroeconomic conditions. According to ING, for example, the EU's construction output was 2.3% lower by June 2022 than it had been in February before the Ukraine war began. Demand has also dipped in some markets, at least on the residential side, as higher interest rates have affected consumer confidence.
Meanwhile, it’s not all doom and gloom on the economic front. The Economist Intelligence Unit points to likely growth in construction of 3.5 or 4% on average over the next two years for Gulf Co-Operation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates).
High energy prices have proven an export boon to countries in the region and the EIU describes a substantial pipeline of projects in energy, power, water and transport infrastructure, commercial and residential real estate, and industrial developments, with many contracts yet to be awarded.
Meanwhile, Research and Markets expects the South African construction industry to stabilise at an annual average growth rate of 3% from 2023 to 2026, with the recovery there supported by government investments in transport, energy, water and residential projects.
Diversification is certainly a smart path to follow, especially for companies with a heavy focus on residential projects. The good news is that there is extensive national and EU funding for ‘green’ retrofitting and construction projects so businesses that can cater to these markets will find themselves with plenty to do. [See trend 2 below.]
Regardless of the markets in which you operate, maintaining a keen focus on the bottom line is vital in the upcoming year. “Operational efficiency is key to thriving and not just surviving in more difficult years,” says Mohammad About Assali, Senior Customer Success Manager, Autodesk, Middle East & Africa. “By optimising operations, reducing error rates and rework, and keeping a careful eye on every aspect of projects, construction firms can succeed in riding out the turbulence,” he says.
As Autodesk’s report on green construction notes, green building is no longer just a trend. It’s a revolution that is here to stay. Construction companies can’t ignore it or they risk being left behind.
“ Strong focus on sustainable and energy efficient, low carbon footprint buildings, which are resilient for a long time.”
Sustainability is not just about constructing green buildings and using low-impact materials. The sector also has a huge contribution to make when it comes to everything from waste reduction and water use to careful site choice and use, and optimising indoor air quality by using healthier finishing materials.
While decarbonisation remains on everyone’s minds as an admirable objective, it’s certainly crucial to bear in mind that more stringent regulations are on the way, in the EU at least.
Under the Energy Performance of Buildings Directive (EPBD), all new public buildings in member countries must meet the zero-emission definition from 2027, while every new building will have to meet it from 2030.
In Sweden and Denmark, new requirements set out that a life-cycle assessment (LCA) must be performed for all new buildings over 1000m2.And not forgetting the EU also has other stringent requirements for retrofitting and remodelling with the goal of achieving a highly energy efficient and decarbonised building stock by 2050. At present, about a third of the EU's buildings are over 50 years old and about three quarters are energy inefficient. At the same time, only about 1% of the building stock is renovated each year.
At present, 40% of EU energy consumption is accounted for by buildings, making them the single largest energy consumer in Europe. They also cause 36% of energy-related greenhouse gas emissions.
There’s scarcely a corner of a construction project that can’t be made more sustainable. That cuts across everything from installing solar panels and using sustainably produced new materials to reducing waste, salvaging anything that can be reused and repurposed, and making use of every last scrap of raw material.
It’s also key at the design stage to consider if the volume of new raw materials can be minimised and planning what can be recycled at the end of a build. All in all, it’s a shift to a circular economy mindset.
While pandemic-related delays are slowly easing out, supply chains remain under pressure due to the war in Ukraine, high inflation and other complicating factors. Low water levels in parts of Europe mean barges on routes like the Rhine cannot be loaded to full capacity, for example.
As many as one in five construction companies are reporting shortages of materials and that is likely to continue into 2023, with this challenge being compounded by rising prices for raw materials. French cement producers, for example, are likely to add €22-€25 per tonne of cement, says CIC-Market Analysis.
How can project managers and procurement specialists optimise how they manage projects to address these issues? Putting a laser focus on materials use and costs is certainly a smart move.
“The data tells the story,” says Michael Goehler, Customer Success Manager, Autodesk, UK & Ireland. “When you manage construction projects with digital tools, you can understand exactly which materials are getting used, where waste is happening and where substandard materials are causing problems. With that insight, you can act to manage procurement more effectively.”
Diligent planning and making use of supply chain technologies that include smart forecasting features and that can reduce or cut out manual work is another way to address the ongoing difficulties in this area of any construction business.
Four million people work in construction in the EU alone, says Statista, but right across EMEA, the sector suffers from an ongoing, persistent talent shortage and tends to suffer a high turnover of workers.
Companies keen to tackle the skills shortage can take a multi-pronged approach. A heavy focus on upskilling and reskilling will also be crucial for any ambitious employer in construction in 2023. Only 42% of employees take up any opportunity to reskill or upskill in their roles, according to the World Economic Forum, so it’s vital to educate and incentivise existing employees on the benefits and importance of refreshing and upgrading their skill set.
Autodesk Construction Cloud’s recent surveys of construction professionals in the UK and Ireland found that the current skills shortages are limiting the performance of the construction industry. A third of companies are finding it difficult to recruit, with half unable to find the skills they need.
Seeking to increase diversity, equality and inclusion (DEI) in your organisation is another valuable path to strengthening the talent pipeline.
Women still make up a small minority of those working in construction – only 13% in the UK and about 9% across Europe, according to Women Can Build. Not only that, but only 1% of skilled trades professionals such as electricians, joiners and plumbers in the UK are women, according to the Office for National Statistics there.
The story is not much better in engineering. Only 9% of UK engineering professionals are women, with that figure rising to 18% in Spain, 20% in Italy and 26% in Sweden.
Likewise, people from different ethnic backgrounds and those with disabilities tend to be underrepresented in construction. “DEI is not just a box-ticking exercise or a nice-to-have,” says Brian Roche, Account Executive, Autodesk, Ireland.
“Developing the internal culture through awareness campaigns and training, while also engaging in tailored outreach programmes, can help to cast the recruitment net wider and welcome non-traditional candidates to the sector,” he adds. “Not only that, but younger job candidates tend to be keenly interested in corporate culture and seek out employers with a modern, inclusive approach.”
When it comes to improving efficiency, safety and sustainability on-site, not to mention boosting profits over the whole lifecycle of a project, digital data and smart technology are the keys to unlocking success.
For any contractor engaging in builds of significant scale or any contractor at all seeking to be innovative and steal a march on competitors, technologies such as artificial intelligence (AI), big data analytics, 3D printing, robotics and the Internet of Things (IoT) and are no longer nice-to-have optional extras. They are crucial to be competitive.
It will be critical in 2023 to own and manage your data. Stop thinking about it as a risk mitigation issue and treat it as one of your most important and valuable assets, like cash on the balance sheet or productive employees.
“Managing complex projects needs better data strategies,” says Sauli. “Moving files will become less important and focus will be on moving data faster in cloud-based processes. Data strategy must be linked to business results, the reason why to invest in tech capabilities.”
Aim for excellent 5G connectivity on-site too, which will enable better real-time data tracking and management.
It’s impossible to gain valuable ongoing insights from data without detailed processes in place to manage and analyse it. A single source of truth is vital on any project, for example, and all contractors need to focus on getting information out of silos and collating it in one place. That saves time and makes more of budgets, by minimising errors and eliminating wasted communication.
“Look at the big picture and focus on how to optimise whole processes, rather than trying to tweak single steps here and there,” says Brian. “Bring in experts in artificial intelligence (AI) and machine learning (ML) to understand how to tame your data.”
It’s also vital to act to beat bad data, which costs time and money. That means focusing on data literacy across your teams and subcontractors, helping them to understand that how they capture, input and interact with data directly affects how well a project is managed. Not only that, they should be able to see that it ultimately affects the bottom line.
“Taking the time to educate the workforce on the value of data-driven decision-making will also have another benefit,” says Michael. “It typically enhances organisational culture by increasing trust and transparency among colleagues and up the ranks.
If your company hasn’t done so already, 2023 is the year to examine and understand what new advances in robotics, 3D printing and sensor technology can do for your construction business.
“Not only can autonomous machinery and robotics help to combat the labour shortage by handling repetitive manual tasks, but they also boost on-site safety and reduce costs,” says Mohammad. “These savings aren’t always obvious, but if you can have someone operate machinery remotely from a different location, that can save you in travel and accommodation costs, while also helping to support work-life balance for certain employees.”
Likewise, it should also be standard practice in 2023 to check if everything needs to be built on-site. “In modular construction, most of a structure is built off-site before being brought to the site, while prefabrication involves building components off-site and assembling them into the overall structure on-site,” explains Brian. “Both are enjoying renewed popularity in Europe from the perspective of being able to produce affordable, sustainable residential and community buildings.
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