Increased competition, the advent of new technology, and an ongoing drive for improved air quality are creating new challenges for city developers and construction firms. What’s the outlook for the coming decade and how can businesses find a crucial competitive edge?
After a year of social restrictions that has seen many previously bustling cities fall empty, the evolution of urban life has come under increased debate. Despite this enforced transition, the majority of the global population continues to choose city life. With more than 55 percent of people living in urban areas, and the top 780 cities accounting for 60 percent of the world’s economic activity1, the trend for urbanisation shows no sign of decline.
In fact, according to a study by Oxford Economics2, urban construction is expected to grow 35 percent – or by $8 trillion – by 2030. The boom will be largely fuelled by relentless development in developing nations across Asia and Africa. And that’s good news for a construction sector that sometimes has the odds stacked against it.
The challenges facing the construction industry have been building for some time; including poor productivity and profitability, rising costs, and the need to prepare for a digital future. But among the biggest obstacles is the need to cut emissions on construction sites, particularly from construction machines. With building and construction responsible for 39 percent of the world’s carbon emissions, according to the World Green Building Council – combined with a push to reach net zero across many continents by 2050 – construction sites need to dramatically evolve.
Emission requirements for construction machinery depend on where in the world they are operated. Businesses delivering projects in the UK and Europe must meet the most highly regulated standards of EU Stage V, while the U.S. EPA has Tier 4 Final emission standards.
In the rest of the world, Japan and South Korea are committed to similarly high standards, followed by China, India and Brazil. Several other countries enforce equivalent standards. And while unregulated territories still exist, many are working to introduce standards in the near future.
Emissions initiatives like these provide extra impetus for the construction industry to reduce its environmental impact as demand grows for making cities ever greener.
“There is a clear green agenda imbuing the operations of most enterprises, and none more so than in construction – and the sector is making strides forward,” says Rob Oliver, chief executive of the Construction Equipment Association (CEA), a British trade association representing the construction equipment sector.
“For example, while cement production has long been identified as a source of CO2 – estimated at some four percent of the total – technology is developing to address this. With construction equipment, too, there is likely to be a continuation of the good work already started.”
Against this backdrop, urban construction sites and construction building work will look very different in the next 10 years.
According to a recent study by McKinsey3, construction projects will need to change due to a combination of “sustainability requirements, cost pressures, skills scarcity, new materials, new industrial approaches, digitization, and new breeds of players look to transform the value chain”.
Clearly, the construction business will need to find ways to stay on pace with all these changes, and improve its competitiveness, productivity and profitability.
Possible measures to achieve this include expanding into new industry segments, engaging staff in revenue generation, investing in technologies such as telematics to automate the management and modelling of projects, and boosting emissions performance and efficiency with a new breed of electric off-highway machines.
With relentless urbanisation set to continue, opportunities will exist for businesses willing to adapt to today’s and tomorrow’s challenges. According to Oxford Economics2: “a pessimistic short-term outlook will be replaced by a wealth of opportunities in the next decade.”
Alongside conventional projects to build homes, business premises, infrastructure, utilities and services for an increasing number of city dwellers, new construction projects in the form of larger $1bn+ megaprojects will also explode. Think industrial complexes and megacity developments, such as Al Maktoum International Airport in Dubai or Jubail II in Saudi Arabia, which offer big rewards for firms ambitious enough to go after them.
Taking advantage of these opportunities will require companies to be agile and innovative. Luckily, many global governments do offer grants and tax reliefs to provide construction firms with the incentive to meet future construction needs, with less risk. Depending on your territory, incentives may be available for using modern construction methods and technologies that bring safety benefits or support the green agenda.
In many cases, benefits are also available for making machinery fleets greener. In Malta, for example, firms can access grants of up to 40 percent of the total cost of any low-emission site equipment they purchase4.
But, of course, current market conditions and future prospects aren’t set in stone.
“It is projected that two-thirds of the world’s population of 10 billion in 2050 will be city dwellers and they will all need somewhere to live within a secure and healthy environment,” says Rob.
“However, there is debate about how the pandemic will affect future plans. Will today’s office blocks be tomorrow’s apartments? Will today’s retail outlets be tomorrow’s workshops as more people choose to work at home in non-urban locations in the more developed world?”
In countries that have both the resources and motivation to transform urban construction, major change is already under way.
“Certainly there is a clear drive to nurture sustainable cities – and initiatives in Stockholm and Copenhagen show this,” says Rob. “Countries with the policy and funding to ‘go green’ will demand high standards in construction. These should be the breeding grounds of innovation and early adoption of budding technology.”
Rob believes the advent of new technologies and global drive for urban expansion means a bright future for construction and the off-highway industry. “There is a clear policy echo around the world, which is Build Back Better,” he says. “In the UK, U.S. and beyond there are twin drivers that will influence future policy after the virus emergency. First, construction produces jobs and national wealth and, second, that climate change dictates we have to adopt the best technology and practices to reverse the change. Off-highway machines can play an important part in this future.”
For construction companies, it seems vital to adjust to the changing environment, and reinvent themselves to take advantage of changes in the industry. By doing so they can meet the demands of their shareholders and planet – and protect their futures.
1 Source: Study: Global cities: the future of the world’s leading urban economies to 2035
2 Source: Oxford Economics: Global Cities 2030
3 Source: McKinsey: the next normal in construction
4 Source: Times of Malta
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