By Joao Buzio ,
Head of Global Strategies, Construction & Infrastructure, Marsh Specialty
27/10/2023 · 6 minute read
The global construction industry is currently confronting several headwinds that are shaping its trajectory. These challenges stem from a complex interplay of economic uncertainties, geopolitical tensions, labor shortages, regulatory complexities, and environmental issues.
The industry is undergoing a profound transformation, propelled by technological advancements, changing demographics, and a growing emphasis on sustainability. As we look ahead, it is evident that construction is about to undergo a remarkable evolution, revolutionizing how we design and build for the future, and interact with our environment.
Here are the six key trends that we see shaping the future of the global construction industry.
Global economic growth has slowed in the past 12 months amid high inflation and tightening financial conditions, which are also constraining investment. Challenges to the global construction industry include the high costs of construction materials and labor shortages. Given these factors, analysts at GlobalData forecast global construction output growth of 1.8% in 2023, up only slightly from 1.7% in 2022.
On the upside, the industry expects to regain some growth momentum in 2024. Assuming there is an improvement in global economic stability, forecasts suggest output growth will expand by 3% and reach an annual average of 4.2% between 2025 and 2027.
Investment in the infrastructure and the energy and utilities sectors is a major driver of overall construction output growth. McKinsey predicts global expenditure in energy transition could amount to US$275 trillion between 2021 and 2050, with spending frontloaded.
The construction industry has often taken a cautious approach to technology adoption. However, companies are increasingly changing their mindset regarding the adoption of new technologies.
A GlobalData technology in construction survey showed there were a number of drivers behind this shift.
Improving productivity (61%) was the most commonly cited reason behind investment in technology, followed by achieving greater competitiveness and reducing costs (both 37%) and enabling faster construction times (35%).
More than a quarter of respondents gave the ability to win contracts as an investment driver. This is most notable with regards to being building information modeling (BIM) compliant in numerous countries in order to secure contracts on public projects. For example, in the UK, since 2016, all centrally-procured construction projects are required to be BIM Level 2 compliant, and there are similar standards in place in many other markets in Europe. There is also an increasing share of private projects that have project owners expecting BIM compliance.
Prefabrication and modular construction techniques are expected to gain widespread adoption in the coming years. The global prefabricated construction market is projected by Grand View Research to reach US$162.4 billion by 2030, growing by 7.5% per year.
The advantages of prefabrication — reducing construction time, improving quality control, and increasing cost-efficiency – are driving its increased implementation across various construction sectors.
This is not a solution for all of the challenges facing the industry. Prefabrication and modular construction often require standardized designs and module sizes. This can be limiting when dealing with complex architectural or structural designs that may not easily align with modular dimensions.
Also, transporting large modular components from the factory to the construction site can be logistically challenging. Oversized modules may require special permits, route planning, and coordination with local authorities. Transport-related risks, such as damage to modules during transit, delays, and increased costs, can arise if not managed properly.
However, prefabrication and modular construction can effectively address space constraints in urban areas and enhance worker safety. For instance, manufacturing modules in a controlled environment minimizes exposure to on-site hazards, promoting a safer construction environment for workers.
In an era of increasing environmental consciousness, sustainability will be at the forefront of the construction industry’s future. The green building market is projected by Mordor Intelligence to reach US$394.4 billion by 2028, growing by 9.73% annually.
The adoption of sustainable practices, such as energy-efficient materials and renewable energy systems, can lead to significant cost savings for the construction industry.
However, the transition to a more sustainable future will not be straightforward.
A Forbes survey found that while 59% of construction industry respondents regarded a sustainable supply chain as a competitive differentiator, 47% said increased process complexity was an obstacle to achieving their sustainability targets.
To help overcome this challenge, construction companies are increasingly improving their data monitoring, collation and assessment efforts, through which they can gain greater visibility of their own processes as well as those of their subcontractors and supply chains.
This insight can enable businesses to take steps to lower costs and minimize emissions.
The concept of smart cities will drive the development of intelligent and connected infrastructure. Fortune Business Insights predicts the global smart building market will reach US$328.62 billion by 2029, growing at a rate of 22.2% per year.
Integrating Internet of Things (IoT) technology, data analytics, and artificial intelligence (AI) is expected to enable efficient resource management, predictive maintenance, and enhanced occupant experience, improving sustainability and operational efficiency.
Embedded sensors in infrastructure components can collect real-time data on parameters such as temperature, humidity, stress, and structural integrity. This information facilitates continuous monitoring, early detection of potential issues, and proactive maintenance, helping to ensure safer and more reliable structures.
By analyzing historical and real-time construction data, AI algorithms forecast project performance, identify potential risks, and can optimize scheduling and resource allocation. This may lead to improved project management, cost control, and timely decision-making.
AI-powered algorithms can also analyze construction data to optimize energy usage, resource allocation, and logistics planning. These intelligent systems can help to reduce environmental impacts, enhance sustainability, and promote efficient construction practices.
In today’s hypercompetitive business landscape, attracting and retaining top talent has become a challenge across various industries. The construction sector continues to find itself in a fierce battle for talent.
As projects multiply and demands surge, industry players are grappling with the urgent need to secure skilled professionals who possess the expertise to shape skylines and build sustainable infrastructure.
Fostering a culture of continuous learning is paramount. Virtual reality (VR) and augmented reality (AR) are projected to grow in use, revolutionizing training, simulation, and on-site safety, enabling workers to acquire new skills in a safe and immersive environment.
In the Marsh McLennan 2022 Global Talent Trends Report, 71% of C-suite executives plan to spend on AI-based productivity tools, significantly higher than the 50% all-industry average. Establishing robust training programs, mentorship initiatives, and partnerships with educational institutions can help nurture a skilled and future-ready workforce.
The future construction industry also requires a flexible and adaptable workforce. Recognizing the evolving preferences of the modern workforce, construction companies can tap into the benefits of flexible work arrangements.
By offering opportunities for freelance or contract work, organizations can attract skilled professionals who value autonomy and diverse experiences. Additionally, promoting diversity and inclusion initiatives within the construction industry can attract a broader pool of talent and foster innovation and collaboration.
The global construction industry is on the cusp of revolutionary transformations as the world’s population continues to grow and societal demand shifts to smarter and sustainable infrastructure and buildings.
By embracing digital technologies, modern methods of construction and sustainability measures, the industry is poised to become more efficient, eco-friendly, and adaptable this changing demand.
Leveraging data and technological innovations is expected to allow construction professionals, policymakers, and stakeholders help shape a future where construction is a catalyst for development and economic growth on a global scale.