For many years now, USP Marketing Consultancy (a dedicated market research agency for the construction and installation sectors) have been following the key trends in the construction industry.
Today, I would like to share the top 5 trends we think will change the industry. By “change,” we mean a gradual and slow evolution. In the quite conservative construction industry, changes don’t occur overnight.
Labour shortage: an underestimated problem that is here to stay
There is a reason why I would like to start with the labour shortage. Labour shortage, both qualitative and quantitative, is a major problem (or opportunity) for the construction industry in Europe. I sometimes feel that the severity of the problem, and its implications for the broader industry, are often underestimated. Granted, the intensity of the problem is very country depended. A labour shortage is already hampering markets in countries like the Netherlands and Germany, but in Italy and Spain, the problems are far less severe.
For example, in the Netherlands, 64% of all architects state that a labour shortage is hindering the execution of projects. In Italy, this is only 24%. The same can be said when looking at general builders; 64% in the Netherlands state that labour shortage is a serious issue, compares to 18% of Italian general builders
Generally speaking, the hourly productivity levels in the construction industry didn’t increase as strongly as they did in other industries. Furthermore, the construction industry has a low appeal to the younger generation and is faced with a high outflow of highly experienced older workers.
With this high outflow of experienced older workers and a limited inflow of younger, inexperienced workers, the industry is faced with both quantitative and qualitative labour shortages, which, in my opinion, will not be resolved any time soon.
Labour shortage will impact the industry as the demand is still relatively high, we are facing enormous challenges with making the existing building stock more sustainable (and thus creating even more work), and buildings and installations are getting more complicated, and direct solutions (increasing the overall number of people working in the construction industry) are hard to achieve in the short term.
Not everything is negatively tough, as labour shortage will also create opportunities for those who are able to provide prefab solutions, knowledge, and products/services that increase productivity levels.
Prefab: prefab will still grow in importance, but the full potential is still not unlocked
As a natural consequence of the labour shortages (but that’s not the only driver), the construction process needs to become more efficient, and prefabrication is one way of doing this. In the European construction market, prefabrication solutions have been used for many years. If we look at the current usage of prefab solutions (panelized systems, panelized systems with finishing, and 3D prefab/volumetrics), it’s already at a high level. There are, however, significant country differences. For example, Dutch architects report that 60% of all of their projects contain some form of prefab. In all other countries, the percentage of projects containing some form of prefab is significantly lower (on average around 30%).
Also from a contractor’s perspective, prefab is most often applied in the Netherlands. In 71% of all projects, some form of prefab was applied, according to Dutch contractors (mid to large size). It’s
also on a high level in Belgium, Germany, Poland and Italy (close to 50%).
So why is prefab not already solving the labour shortage problem? Well, most of the prefab applied is ‘simpler forms’ like panelized systems. On a European level, prefabricated plain unfinished elements (24%) and prefabricated plain finished elements (16%) are applied far more than volumetrics (3%). Furthermore, in many cases, its off-site production still relies on qualified construction workers. Also, the on-site usage of prefab still is relying too much on qualified staff. If we look at prefab production in a production line way (just like Henry Ford used to revolutionize the automotive industry) the volumes are very low. This segment is growing, but slowly.
Looking at the future, both architects and contractors alike foresee strong growth for prefab. However, it will mostly be the simpler forms of prefab. In order for prefab to really solve the labour shortage issues and increase productivity levels, the prefab industry will need to make use of lower-skilled workers in an assembly line way of working. Until this happens, prefab will still grow in importance, but its full potential will not be unlocked.
Digitalization and BIM: The adoption rate is increasing, but mostly only amongst architects
For many decades, the design process in the construction industry remained heavily reliant on paper. New digital ways of designing increased the quality of the designs and opened up the way for more complicated designs. CAT software changed the industry, but this change was relatively slow and didn’t tap into the huge potential digitalization of the construction industry could offer.
With the development of BIM (building information modelling), much more is possible. Even in more complicated designs, more parties can be involved, and the design process can be coupled with costs, planning, and many other elements. And last but not least, failure costs (which are relatively high in the construction industry) can be significantly reduced.
So where do we stand at the moment in terms of BIM adoption? Well, like with all things in the construction industry, the development was slow at first. In 2019, only 10% of all European architects were BIM users. This grew slowly over time to 15% in 2011 and 19% in 2013. The adoption rate has been increasing, as in 2021 the percentage of European architects using BIM increased to 44%. In the future, European architects think that the percentage of BIM users will increase to 61% in 2025.
There are, however, significant country differences. In the Netherlands, almost 80% of all architects are BIM users. It’s the lowest in Italy, with only 22% of all Italian architects using BIM.
When it comes to BIM adoption among target groups further down the business value chain, it’s significantly lower. For example, amongst European contractors, the BIM adoption rate is only 42% in the Netherlands, 21% in the UK and below 6% in all other countries (2021 data).
Amongst HVAC installers the percentage of BIM users is even lower, only 9% of all European HVAC installers are BIM users.
So it’s clear that architects are driving BIM adoption, and we can already say that BIM usage is fairly common. Contractors follow this trend, as they are forced to work with BIM more often, but the adoption is still slow. Further down the business value chain, BIM usage is still in its infancy.
Looking towards the future, we expect BIM usage to continue to grow, especially as the software gets more intuitive, the cost of working in BIM drops, and the pressure to work in BIM continues to grow.
Sustainability: The main focus is still on energy reduction
We cannot have a “top 5 trends” list in construction without looking at sustainability. The building industry as a whole is a major polluter. both in terms of new construction and the operation of the existing building stock. Over time, the attention and willingness to invest in sustainability increased steadily. However, the adoption rate does some setbacks, mainly during crises (Financial crisis, Corona pandemic).
On a European level, 50% of the clients of architects are asking for sustainability but are not willing to invest more in it, 27% are asking for more sustainability and are willing to invest, and 23% of the clients of architects are not asking for sustainability at all. In terms of willingness to pay for sustainability, we see a slow and gradual increase over time. The main focus is still on energy reduction.
One area where we do see more significant growth is in the installation sector. The demand for and willingness to invest in sustainability (mostly around CO2 reduction and lower energy consumption) has increased strongly. When asked, European installers say the demand for heat pumps has skyrocketed. The impact of the war in Ukraine and the higher energy costs/political pressure is clearly visible here.
But there are some serious bottlenecks blocking a faster adoption of sustainability and the green transition. The most important one is that the labour required to transform the existing building stock is simply not there. Installers, contractors, and other stakeholders are extremely busy, and their order books are filled. Furthermore, there are still supply chain issues (especially in the installation sector), although this has improved in the last couple of months. Also, the newfound political will and the investments made available could drop in intensity depending on the developments in Ukraine, a possible recession, and the overall developments in the fossil fuel markets.
Changes in decision-making: architects are slowly losing decision-making power
For many years, the architects were at the center of the construction process. Their influence on the design, process, material usage, and brands was significant. So significant that one could call them the “master builders”
But, as we already established, the construction industry in general and the buildings that are built are getting increasingly more complex (BIM, more complex installations, new materials, prefab, and so on). As the complexity increases, more and more roles are delegated to other professionals, especially on large projects.
Furthermore, design-build construction methods could have a negative influence on the influence of architects because most of these design-build projects were and are led by the contractor. All in all, the concept of the architect as the “master builder” has been declining.
So the decision-making process is getting more complex in a sector where it is already more complex than, for example, fast-moving consumer goods. We clearly see that engineering companies, contractors, and building owners/principals are gaining influence at the expense of the architects.
When asking European architects, they clearly see themselves as the key decision makers when it comes to aesthetics (although there are country differences, for example, in southern Europe, architects state that even for aesthetics, it’s more of a co-decision role than an end-decision role).
Involvement in terms of building materials stays strong (although it’s also moving more towards co-decision-making in some countries) in areas like the façade, wall building materials, roof building materials, etc. But for the installation side of things, the role of the architects is shifting more and more towards co-decision-making.
When it comes to choosing which brands to use, the decision-making power of architects varies per country, but overall, we can state that the direction is clearly towards more co-decision-making.
Next to architects, building owners and main contractors are mostly involved in decision-making. On a European level, architects state that building owners and main contractors are very important parties in the decision-making process for both materials and brands. This is especially visible in the Netherlands and Belgium, where main contractors have a high level of engagement in making brand choices (78% and 67%, respectively). On the other hand, building owners have an important role to play when choosing brands in Germany (76%) and the UK (76%).
Environmentally friendly construction is expected to have the most influence on the increment of the architects’ role Given the ever-emerging importance of sustainability and circularity, environmentally friendly construction is not a preference anymore but a “must”. Consequently, architects expect their role will increase due to this trend.
Looking into the future, it’s clear that decision-making will continue to become more complex, with more parties playing an important role besides the architects. Having the right strategy and focusing on each stakeholder will be vital for all parties supplying t0 the construction and installation industry.
No, obviously, there are many more trends in the construction industry, but I wanted to focus on my top 5. I would be very interested to know what you think about these trends and to what degree you feel that they are indeed the top 5 trends. What other trends do you see? Leave a comment below and let’s have a discussion!