The construction industry faced several challenges following the COVID-19 outbreak. Since 2020, companies all over the world have had to contend with supply chain shocks, labor shortages, rising material costs, shrinking profit margins, and falling demand.
Fortunately, there is light at the end of this tunnel and the future of construction is expected to be much brighter than its recent past.
So what’s in store for the construction industry in the future?
Let’s take a look.
The Impact Of COVID-19 On Construction
According to the U.S. Chamber of Commerce Commercial Construction Index report, 83% of U.S. contractors experienced project delays by the end of 2020. 85% of them expected delays to continue into 2021.
Another challenge was the shortage of skilled labor, which concerned 87% of contractors in 2020 and 2021. It also forced 58% of them to put in higher bids in Q42020 to land subcontractors. About 90% of contractors also believed that the challenge will stay the same or get worse in 2021. All these numbers show that the outlook was fairly gloomy among industry insiders in the months following the Coronavirus outbreak.
Nonetheless, the report also provided plenty of good news.
For one, the number of delayed projects was expected to drop to 18% by mid-2021. Even contractors were optimistic about their medium to long-term prospects, with 85% saying they had “moderate to high confidence” that they will have new business opportunities in 2021. Furthermore, in Q4 2020, 20% of contractors expected their profit margins to increase in 2021, a full 3% increase from the 17% who had the same optimistic outlook in Q3 2020.
The Key To A Brighter Future For Construction: Technology
One McKinsey study found that inefficiency is one of the biggest problems in the construction sector, which is why large projects typically exceed their budgets by 80% and their timelines by 20%.
The study also found that productivity had consistently declined in the industry since the 1990s and had failed to keep pace with overall economic productivity. This is a huge problem because construction plays a key role in economic growth and national development, and has a direct impact on global GDP.
Finally, the construction sector is among the “least digitized” according to McKinsey, which creates many challenges around project planning, performance management, supply chain reliability, and innovation.
Thankfully, the industry has started to embrace new technological advances and smart Industry 4.0 technologies in the post-pandemic era. This includes technologies like digital twins, Augmented Reality (AR) and Virtual Reality (VR), robotics, drones, blockchain, and digital construction practices like CAD, BIM, and VDC.
As more organizations adopt these new-age offerings, they will be able to reduce the costly budget and schedule variances, increase productivity and efficiency, and meet the increasing demand for new projects and shorter construction times. Over time, such new developments will spark the resurgence of the industry and drive greater economic growth.
The Outlook in 2022 and Beyond
Apart from technological adoption, several other trends are shifting the way construction companies do business. These trends will also influence how these firms create, capture, and deliver value to their clients and communities in the future.
One increasingly popular trend is modular construction. In early 2020, modular construction techniques were used to build two Coronavirus hospitals in less than two weeks. In a 2021 Deloitte survey, 26% of construction executives said they were using more modular products in their projects. In the coming years, more companies will adopt these techniques to improve designs, optimize quality, reduce labor costs, minimize budget overruns, and shorten project schedules.
The lack of useful, insightful data creates an information gap that accounts for 48% of rework on U.S. construction job sites. It also costs the industry over $31 billion annually. To close this gap and arrest the need for costly rework, more organizations will adopt data analytics solutions and Machine Learning models. These solutions will help them garner useful insights to increase their visibility across the building lifecycle, improve their operations, take more proactive decisions and boost their revenues and margins.
Finally, there will be more strategic sourcing deals in the industry. Between April 2020 and February 2021, contractors’ input costs increased by 13% due to rising material costs and extended schedules. To deal with these pressures, construction firms will shift from tactical procurement to strategic sourcing. This new model will reduce complexity and enable contractors to adjust to new market realities and respond to future disruptions.
Conclusion
In recent years, the construction industry has undergone massive upheaval. Fortunately, the coming years are expected to be brighter. Construction firms will embrace numerous new technologies and techniques to enhance their efficiency and productivity, reduce disruptions, and generate benefits for all their stakeholders. These developments will allow more of them to successfully leap into the fourth Industrial Revolution. And this can only be a good thing for the human race.
