- Renovation & restoration industry to boom while new builds drop by 40%
Renovation & restoration industry to boom while new builds drop by 40%
The news is in and it’s not looking good. New building construction is in freefall.
Statistics released by UK Trade Skills Index 2023 reveal that UK housing starts, (the commencement of construction of new residential buildings) are expected to drop by a stunning 40% in 2023, the biggest market downturn since the 2008 financial crisis.
The decline, however, is not only limited to the UK, but is in fact a European-wide phenomenon. Sweden, which traditionally has produced a strong and steady stream of new builds is also feeling the pinch. Construction of new houses in the country’s capital, Stockholm fell by as much as 70% in early 2023 and the decline is expected to continue in 2024.
Renovation and restoration – an area of growth
Whilst new building construction is in crisis, renovation and restoration is experiencing a sudden lift.
Interest rate hikes, increased cost and availability of construction material and expected housing market volatility have dramatically reduced the demand for new builds, however renovation and restoration is experiencing an increase in demand from risk-averse homeowners looking to increase the value of their properties.
Renovation and restoration is often overlooked by analysts and trade media as the overall project sizes dwarf those of large new build developments.
However, in terms of absolute project value, renovation and restoration represents a significant portion of the construction industry and represents approximately 40% of the total value of all construction taking place.
With industry priorities shifting, many industry observers are estimating that renovation and restoration will exceed 50% of total industry project value by the end of 2023.
No wonder many traditional construction companies are eyeing up this industry sector as an area of potential growth and a safe haven from volatility.
A very different kind of business
For an untrained observer, the difference between building a new house and renovating an existing one may appear to be minimal. But nothing could be farther from the truth.
Building a house from the ground up comes with its own set of unique challenges, mostly revolving around less-than-ideal build quality and poor productivity.
Success in new house construction is largely determined by how productive a business can be.
In plain English; how cheaply you can purchase building material, how low you can go on paying your builders before quality starts taking a hit, how far you can standardize on parts, and take advantage of economies of scale. This approach is understandable given the fact that the vast majority of all costs when building a new house is building materials and parts.
Renovation and restoration is a different kind of beast. In this industry category, productivity (as a result of driving down cost) is not the defining factor of success but rather efficiency. Efficiency in renovation and restoration is defined by how effectively a construction company can invoice for the hours completed. Labour and workforce related expenses represents the lionshare of all costs. The more work your skilled labour can deliver and the higher the invoice rate, the better your business performs.
The single biggest indicator for whether a project is a success or failure is customer satisfaction. This in turn is defined by a multitude of factors, chief among them being able to manage customer expectations on build-quality, time and cost.
Construction companies trying to pivot from building new houses to renovating and restoring existing ones, struggle unless they are able to shift their mode of operation from focusing on productivity (low-cost material and labor and standardization of parts).
Unless they are able to onboard a new way of working, it’s very likely they will experience poor customer satisfaction, a lack of repeat business and poor profitability.
Success in renovation and restoration in contrast is determined by how efficiently you collaborate with your builders and customers, and how well you can maximize the share of invoiceable work hours in the project.
A digital solution
Buildbite was born out of necessity by professional builders struggling to build a profitable and scalable construction business.
With its unique Field Management app, Buildbite helps renovation and restoration companies improve their efficiency, project collaboration, communication and customer satisfaction.
Designed for the next generation of construction companies that recognize that the adoption of digital solutions on-site Buildbite is a game changer. We are revolutionizing the construction industry, one project at a time. Start your free trial today.