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The future of construction in 2023 and beyond

Wiebke Arendt
26 April, 2023

Owning a home is the eternal dream most consumers around the world have. It’s still seen as a hallmark for success. And owning a home is just part of it, designing and building a dream home is the icing on the cake. 

However, getting there can often be tedious, if not stressful, and that’s for everyone involved, from the project managers to the builders to homeowners.

And of course this is just for residential property. The market for commercial building construction in the US amounts to over 230 billion USD. And the construction industry in the US alone is valued at 1.3 trillion USD.

The global construction market has grown rapidly since 2014 at 8.3% CAGR, reaching €11.5 trillion in 2018. But has been brought to a slow down by the Covid-pandemic. 

This makes the industry focus on improving what it is already doing. This includes increasing work productivity and improving resource use using digital solutions. 

Deloitte estimates that 1.5% of construction revenue is spent on IT solutions annually.  This makes construction the second-lowest industry in terms of digitalization, only outperforming agriculture. 

 

Trends in the construction industry

Based on a study by McKinsey, construction is the largest industry on a global scale and it amounts to 13% of the global GDP. Unfortunately, it’s not growing as fast when it comes to the adoption of new technologies. We are used to technology shaping our way of living and working. But for the construction industry this development has been slow.

However, there have been trends pointing toward a more tech-driven approach to construction projects such as Building Information Modeling (BIM) and Construction Management Software.

Another strong trend is around the topic of virtual design and construction. This trend is about the growing use of virtual modeling tools to plan and visualize the structures to be built before they are actually started in the real world. 

From here it’s only a short way to construction robotics and Internet of Things (IoT) technologies that are implemented as part of the structures to create more desirable residential or commercial properties. 

And then there was of course the global pandemic which has kept an iron grip on the world since 2020. And we still don’t know how it will resolve. While the Covid-19 pandemic racked havoc with many parts of our daily lives – it has also accelerated the technical development in almost all parts of daily life. But certainly also in the construction industry as it needed to find new ways to adhere to health and safety protocols and even more so increase their efficiency through digital transformation.

In fact, the construction industry has the lowest digital penetration index, as the industry spends just 1.5% on IT systems, while the average industry globally spends 3%5. 

It comes to no surprise that construction companies struggle with fragmentation when it comes to their digital journey. Digital tools exist but each with their own very specific use case. 

On top of the pandemic, there is the environmental impact of the construction industry which cannot be neglected. A growing consciousness on this matter has led to innovation around more sustainable building materials and green building solutions.

Digital tools that have been tested out have already been shown to increase productivity by 20% on the construction site and saved 5-10% on CAPEX – simply by making it easier to understand how to use existing personnel and resources effectively. 

When talking about sustainable ways of developing and building, we need to also talk about approaching the matter from a life cycle thinking. This means planning the object, and the construction phase but goes further to maintenance and an end-of-life plan for all buildings. True sustainability goes way beyond mere energy certifications.

 

Three key technologies that are shaping the construction industry at the moment

Technological innovation has also reached the construction business. In the following, we will review three key technologies that are having the biggest impact at the moment. These technologies are: building information modeling (BIM), punch list and construction management software.

 

Building Information Modeling (BIM)

BIM software is part of the virtual design and construction technology family and arguably one of the most popular parts. They make it possible for all stakeholders such as architects, engineers, general contractors, field teams, and whoever else is involved in creating a virtual model of a planned building or structure.

As of 2020, the BIM market was estimated to be worth somewhere between 4.5 - 5.2 billion USD. That of course was before the pandemic hit and somewhat slowed down the construction industry as a whole. Initially, it was expected to rebound and grow at a compound annual growth rate (CAGR) of 12.7% and was then further expected to grow to 11475.81 billion USD in 2026 with a CAGR of 11.7%

That said, these figures are from February 2022, and just when we thought the global pandemic was finally over and the world would return to normal, another new normal was introduced. A new normal that saw war break out in Europe and has led the world to the bringing of a global recession.

Money is becoming more expensive, inflation has been rising and the construction market is slowing once again down. On top of that, there are also supply chain issues that make the procurement of material more difficult – and that’s all without any ships blocking important canals.

At the moment nobody seems to be too sure where the global economy is heading – but one thing that’s sure is that construction as an industry will always be needed. Structures need to be maintained, renewed and built.

In this climate, it will be more important than ever to run construction projects as efficiently as possible. And here we don’t even talk about energy efficiency, but mainly about time and cost efficiency. This is likely a factor why BIM technology has achieved an adoption rate of 60-70% according to McKinsey.

The NBS found in their 2020 BIM report that 73% of its respondents were using BIM systems during construction projects in 2020. This is already doubling the numbers from 2011 when half of all respondents hadn’t even heard about BIM solutions. It’s sufficient to say that BIM solutions have been taking the construction industry by storm – albeit a slow and steady storm, not quite like an orkan. 

But what is BIM in construction? BIM systems are used by construction companies to maximize their return of investment and maintain budgets and schedules. Some may even ask: is BIM the future of construction? What’s sure is that BIM software can help in construction projects but it surely isn’t the only way to bring in more efficiency. BIM software can help especially in the planning phase and with expectation management but when it comes to task management there are other tools more suitable.

 

Construction Management Apps

Construction management apps are essentially part of the property technology (proptech) software category. And when we look at proptech today, one cannot help but think about the unified communications business from the early 2000s as there are strong parallels.

Back in 2003 technologies such as Voice over IP, video conferencing, instant messaging and email existed – but they were by no means actively used in a holistic sense. The technology was spread across multiple, disconnected providers.

And this is exactly where we are in proptech today. 

Construction project management software is developing all the time and is slowly becoming more advanced as a whole. And many solutions on the market are bundling scheduling, project and document management and timekeeping to serve construction companies better. This has also led to the emergence of punch list solutions. 

The line between punch list tools and construction management software is thin. Punch lists are part of the software category construction management software.

 

Construction Punch list Tools

Another technology group that goes in the same direction is punch list tools. Key players that provide punch list solutions and especially construction punch list solutions are:

But what is a punch list? In the UK it’s commonly referred to as a snag list. 

Whatever term you use, it’s a document that shows work on a building or structure that still needs to be finalized. In other words, it’s the to do list of the construction industry. And the term comes from the earlier practice that saw wholes being punched into a list to mark which items needed to still be done. 

The Business Dictionary defines a punch list as:

“Listing of items requiring immediate attention” and as a “Document listing work that does not conform to contract specifications, usually attached to the certificate of substantial completion. The contractor must correct the punch list work before receiving payment.”

A punch list contains problems or unfinished or unapproved items. But it can also include specifications on damages that occurred during the construction process and that need to be fixed.

So for example, if builders damaged the wooden floor while carrying and shuffling around heavy material.

That said, a punch list typically includes only small issues. Because the majority of larger issues has already been handled through a so-called change order.

Let’s pause for a moment and reflect, while the construction industry is slow to adapt new tools, it in fact uses a myriad of fragmented tools.

We have BIMs, we have punch lists and then change orders. This doesn’t even factor in the various places where daily communication is handled. Of course always in a retrievable way. Not.

punch lists are not mandatory in the construction industry however widespread and the punch list process typically occurs toward the end of a construction process.

Again, this provides a good moment to reflect, as this may be actually a crucial part of any construction project that adds this component of nasty surprises. While it may only list small issues – these issues can quickly sum up, delay the finalization of a project and inadvertently increase costs for everyone involved. True innovation in construction will happen with technologies that monitor the entire building process from start to finish.

 

 

Challenges in the construction industry today

According to estimates, reworks of incorrect or falsely implemented projects account for almost one third of all construction industry costs. One thing’s for sure: a construction project, no matter residential or commercial, is full of challenges.

The construction industry needs their own version of Skype, a tool that will completely change the standards for transparency and efficiency in construction and renovation projects. An industry-wide ecosystem of commercial partners such as construction companies, construction wholesalers, lenders and vertical channels like property management companies.

There’s an old saying within the construction industry that goes like this: ‘A completed construction project is the end result of a thousand compromises’. While compromises are an essential part of life in general, this is especially true when it comes to construction projects. 

There is simply never all the money, all the resources and/or all the space available.  

Buildings and structures aren’t just made of concrete, bricks, wood, and drywall. They are on one side envisioned and designed and on the other side bought by customers with their own expectations of what the end result may look like.

Construction projects are thereby the materialization of someone’s vision – but the someone, in this case, is plural. 

There are several people involved who all have their own vision they aim to realize and naturally, those visions may not always be the same. This less tangible aspect is one of the underlying factors that create challenges in construction projects, even in commercial ones.

Another big challenge in construction is communication. Project management is one side of the coin but communication is the other side. It’s easy to forget but one becomes painfully aware of it as soon as it breaks: communication is essential for projects to run smoothly.

The numbers are sobering when it comes to communication challenges in construction and renovation projects.

 

  • A study in 2019 found that 80% of the US workforce are feeling stressed out due to poor communication at work.
  • 68% of people working in construction declared that they face problems because of poor communication.
  • Other studies find that communication, or rather a lack thereof, is the main reason why projects fail.

 

The construction business – not like any other industry

Two main factors within the construction business are efficiency and cost. Projects need to be completed as efficiently as possible and that also includes cost-efficient. 

What makes the construction business unique is the multitude of stakeholders that play a role at each step of the project. And on top of that, the interdependencies to things like the global supply chain, which as we have seen as of late, may be rather fragile.

Construction projects are typically completed in stages with specialized craftsmen who work on their respective tasks individually. Which already points to a challenge as the work may happen too independent of other tasks. 

 

Efficiency in the construction business

According to statistics, the efficiency and productivity in the construction industry is lower than in other industries. 

‘Global labor-productivity growth in construction has averaged only 1 percent a year over the past two decades, compared with growth of 2.8 percent for the total world economy and 3.6 percent in manufacturing’.

Source McKinsey

Also according to McKinsey, the construction industry suffers from a €1.38 trillion productivity gap every year, when comparing productivity in an average industry with the construction industry. 

This productivity gap is also significant in the EU. Here, work productivity in the construction industry has stagnated since the 1990s leading to a productivity gap of 22% between the global average industry output & construction industry.

Stagnant productivity costs the European construction industry €228 billion per year and cuts across many areas leading to excessive use of resources, rising costs, and poor profitability. 

There are three key factors to poor productivity

  • Poor field productivity – 35% of construction professional’s time (>14h/week) is spent on nonproductive activities including looking for project information, dealing with mistakes & rework.
  • Resource management – 60% of general contractors see problems with coordination and communication between project team members as the key contributors to low productivity. 
  • Low digital maturity – fragmented digital solutions implemented and accepted in the industry. Construction is a highly collaborative but fragmented process. Poor data and disconnected information is leading to costly delays, rework, and waste. 

One of the main drivers for inefficiencies in construction projects are supply characteristics, which in this context refer to the immobile nature of construction projects. 

Just in recent years, we saw how many industries switched to remote working, but that is something that is simply not possible in the construction industry. 

Construction business happens exactly where the structure or property is being built. On top of that, the working conditions are not always the best. Construction work is labor intensive but what is even more crucial here – there is a true labor shortage coming our way in the construction industry. 

And we are not just talking about the actual builders, this labor shortage is impacting all levels within the construction industry.

The low efficiency in the construction industry makes it almost imperative to create more efficiency with the help of modern technologies. 

Technology is needed to:

  • Facilitate site investigations
  • Enable real-time communication and collaboration across all stakeholders – also end customers
  • Bidding processes
  • Control of personnel, material and equipment
  • Monitoring progress
  • Controlling time, cost and progress of the construction project
  • Maintaining an impactful project management system that starts already in the conceptualization phase and is run through 

 

Costs and construction estimates

Another factor that decreases the construction industry is the costs and the cost estimates associated with it. For once costs fluctuate with the market, the construction industry needs, for example, material and energy for their building projects, unlike in the software industry. These things can drive costs up significantly.

But then there’s also another component, the end customer. Sometimes there are changes needed, and the person, often a future homeowner, doesn’t fully realize that the changes they are asking for will significantly impact the costs and sometimes even the project timeline.

It’s important to note that costs can and do impact multiple stakeholders in construction projects. Especially non-budgeted costs can impact the ROI of construction projects for contractors as well as result in higher costs for the end customers.

 

 

What is project management for construction?

When it comes to construction projects, project management is a key factor for success. With solid project management, construction projects can become more efficient and less costly.

When it comes to project management in construction projects, there are several challenges at play:

  • Balancing time estimates with actual time spent
  • Unclarity on what was agreed
  • End customers not understanding the implications their decisions may have.
  • Signs of progress are invisible to the end customer and result in impatience and losing trust in contractors.
  • Lack of instructions to complete a task which can lead to the construction worker making decisions on how to complete a given task on the fly.
  • Communication is a key issue in the construction industry, especially when it comes to the lack of two-way communication. All stakeholders involved in a construction project should be engaged in an active two-way communication – yet they rarely ever are.

 

Regulations in the construction industry

The construction industry is highly regulated. It’s understandable as the output of this industry makes up more or less the world we live in. Imagine a city where all buildings and structures would be built in a way that doesn't follow any regulations and guidelines, probably not the most desirable place to live, and probably not too safe either.

This is why the construction industry is highly regulated. Anyone looking to start a renovation or construction project must adhere to local building codes, health and safety regulations as well as regulations pertaining to other work practices such as for example maintaining proper documentation.

Construction workers often need to acquire and maintain qualifications and certificates issued by local authorities in order to complete specific tasks, such as electricians for example. And construction projects also need to pass an inspection by authorized surveyors.

These regulations serve an important purpose. They are in place to ensure that construction quality is maintained throughout the project and in place to protect both customers and contracted workers. Responsible construction companies and other key trades, including builders, understand the importance of these regulations and follow these rigorously.

Different countries have different regulations when it comes to the construction industry.

 

Construction industry regulations in the UK

The UK is currently unifying their construction industry regulations and has formed a body that will be tasked with the regulation of construction projects (‘National Regulator for Construction Products’). It will be established within the Office for Product and Safety Standards (OPSS). 

This development is an outcome of what happened with the Grenfell Tower fire – a disaster that claimed the lives of more than 80 people. Reports later found that the disaster could have been at least avoided with a more effective review of building regulations and fire safety standards. And one reason for the fire spreading so quickly was the aluminum cladding, a type of structure that in this form is not allowed in many other countries.

 

Construction industry regulations in the US

In the US the construction industry is considered a high-hazard industry. After all, construction workers engage in a variety of activities that can cause serious risks to their life.

The main governing standards in the US are these listed below, but there are other regulations and initiatives as well.

 

Construction industry regulations in Finland

In Finland, the ‘Land Use and Building Act’ offers specifications on general conditions concerning the construction industry. These regulations have been traditionally applied to new building projects only unless there have been substantial renovations on older structures. 

The regulations concern these areas:

  • Planning and supervision. It needs to be ensured that a building is designed in accordance with the regulations and this needs to be taken into the planning phase but also checked upon during the actual construction process.
  • Strength and stability of structures – the party undertaking a building project needs to ensure the stability and strength of the structure.
  • Fire safety – building projects need to be designed with fire safety in mind. This means, for example, that the load-bearing structures of the building must be such that if there is a fire, they will endure for as long as possible. In other words, buildings should try to remain and not collapse during a fire.
  • Health – buildings need to be constructed in such a way that the air can circulate for example to prevent mold which would pose significant health risks.
  • Safe to use and maintain as required by its intended use. 
  • Accessibility – to ensure that buildings are designed to accommodate everyone living in them, regardless of ability.
  • Noise – buildings need to be constructed in such a way that noise exposure is limited.
  • Energy efficiency – new buildings need to follow standards to decrease their energy consumption.

 

What is ISO in construction?

ISO standards are updated on a regular basis to account for any changes. ISO standards for the construction industry are developed with all stakeholders involved. This ranges from architects and designers all the way to end customers.

ISO standards for the construction industry are designed to make the industry more efficient by establishing internationally agreed-upon design and manufacturing principles. 

ISO has standards for several parts of the construction industry:

  • Structures
  • Building materials and products
  • Energy and sustainability
  • Fire safety
  • Concrete and cement
  • Timber
  • Masonry
  • Information management in construction
  • Heating, cooling and lighting
  • Lifts and escalators
  • Design life and durability

These standards were developed by groups of experts in separate working groups.

 

Reporting as a standard in the construction industry

Reporting and documentation are important parts of a construction project. And different stakeholders from local tax authorities who want to ensure all taxes are declared properly to safety inspectors have an interest in the documentation and reporting that goes along with a construction project. 

Reporting also extends to the time worked on a task. This is important information for end-customers and contractors alike because it’s basically what they are paying for. And it’s also important information for construction managers who need to understand how aligned their time estimates are with actuals.

Managing a construction project can be complex and sometimes even confusing. In an effort to maximize productivity, many construction companies have resorted to managing multiple, parallel activities on the same building site. These “just-in-time” models are vulnerable to unforeseen events.

The nature of the construction business, however, is such that accurate time estimations are notoriously difficult to make. To make matters worse, many construction workers are reluctant to complete any kind of complex time reporting as it can be both time-consuming and difficult.

This lax approach to reporting has a devastating effect on productivity and puts the business at risk. Additionally, a lack of accurate reporting can result in potential future legal and financial liabilities.

 

Documentation as a standard in the construction industry

The sheer amount of communication, paperwork and financial documentation during a construction project is overwhelming. This documentation includes everything from planning permissions, drawings, bids, details on what material was used, sending invoices, and project plans.

Often, many different stakeholders create this documentation and they share it across different parties in the project in different formats. These formats can range from printed documents to PDF, or PNG files. But also the channels these documents are shared via are different and can include email, phone, actual mail and the like.

Having easy access to all project-specific documentation is essential for the homeowner, both during the construction project as well as after the completion of the construction project. Any future construction and maintenance project relies on this documentation being available and correct.

Homeowners are particularly vulnerable as a lack of reliable documentation can have serious negative consequences if and when the house is up for sale.

Of primary importance is the seller's liability to provide information that may affect the buyer's decision to purchase. Detailed documentation on all construction done becomes important if a dispute arises after completion of the transaction.

 

Construction apps

The construction industry is picking up when it comes to technological development. Several apps are appearing that are designed to let the construction industry take advantage of new technological possibilities.

Several project management tools such as monday.com and Trello are highlighting their use case for the construction world, after all, project management in all its nuances is one of the main challenges in the construction industry. And when we look at tools currently used there are of course also WhatsApp and Slack.

Then there is Fieldwire, a project management tool for larger construction projects.

Apart from project management tools, there are also applications such as Joist which allows contractors to estimate invoices and collect payments – with a project management component.

GoCanvas eliminates the paperwork and digitalizes data collection in construction projects.

Another big challenge in construction is communication. Project management is one side of the coin. But the other side is communication within the project management.

There is a myriad of tools, however, most tools don’t cover the entire construction lifecycle from design to building to approvals and documentation. And often, the final stakeholder – the one buying the house is forgotten in the equation. 

This is the reason why Buildbite unites all construction stakeholders, and their processes in one app, powering the full lifecycle from communication, documentation, managing and completing tasks, time tracking and approval workflows – in real-time. 

Start your free trial with Buildbite today.