As we approach the end of what has been an uncertain year, it’s good to take stock and see what trends and forecasts may affect the construction industry in 2021. Within the construction industry, “change” has been the word of the year, either through modified operations or new, innovative practices in response to the 2020 coronavirus pandemic.
Looking ahead to 2021, we’ve gathered some thoughts from our own team and various industry experts on construction industry trends to look out for in 2021.
1. Pausing of commercial construction projects
Several projects that were due to start in 2020 have been pushed back and we see this continuing within some sectors into 2021. Most notably in the UK construction industry, this included the Harlow Public Health England £60m campus, due to be the public health science campus and headquarters which was originally due to be operational by 2025, providing more than 2500 jobs. It is yet unclear when, or even if, this project will be rebooted.
The Battersea Power Station, which was due to become Apple’s new headquarters before the covid pandemic, was seen to take $208 million impairment at the end of 2020 showing just how quickly the status quo has changed. While other projects, such as Google/Aphabet’s new proposed offices in London, dubbed “the “landscraper”, have now resumed, but with some changes implemented in order to create a “socail distancing friendly” fit out.
As the UK entered into a second wave that coincided with the winter period, construction has been given government permission to continue but there still remains a subset of projects paused or on hold where covid-specific health and safety measures couldn’t be met.
Deloitte Real Estate’s crane survey has found that new office construction has fallen by half this year, suggesting that a reduction in commercial construction projects may be more than just a temporary pause. The study also suggests that there will be fewer new construction projects over the next six months due to the fact that many continue to work from home.
However one bright spot in the private, non-residential construction sector is warehousing and logistics. These areas are forecasted to continue a steady growth rate, especially bolstered by online shopping which has increased demand for space. Of course, the flipside is that traditional retailers are finding it tough to compete, which is likely to compress demand for “bricks and mortar” retail premises.
2. Widespread work from home adoption increasing residential scope
While commercial and office space requests have largely gone cold, we have heard talk within the industry about increased demand from apartment developments that advertise “work from home” space as part of their appeal. We expect that many MEP contractors will make a shift from commercial projects to the cut-throat market of residential work in order to meet this demand.
Within the UK at least, Prime Minister Boris Johnson’s “Build Build Build” agenda is set to push a radical reform of building and land, so that it can change use without requiring planning. This will help to give more construction projects the green light.
The outlook for public sector construction is also looking more promising. The public sector is expected to be a major growth driver for construction. In particular, construction of social housing and schools rate high on the agenda for public spending. There is also the promise of increases in NHS capital funding and more construction projects in that area.
This image from Glenigan’s construction industry forecast shows predicted percentage growth in different sectors of construction:
3. Change to construction contracts and Brexit impact on materials
Another notable trend has been construction contractors diverting from traditional construction contracts and taking on work at 0% or sometimes even negative profits. This is to retain a workflow and keep teams employed. Is this sustainable? It’s unlikely, but at least it will keep the wheels of the industry turning and in the meantime, many construction companies are looking to obtain profit through better buying of materials.
However contracts for materials may soon be impacted by Brexit, which will be another strong influence on construction in 2021 within the UK and European markets.
The UK officially entered Brexit on 31 January 2020, however aspects such as trade remained as-is for a period. As it currently stands, if a trade deal is not struck with the EU by 31 December 2020, the UK will trade with the EU on World Trade Organisation rules.
One thing this may immediately effect is supply chains for materials. There is considerable cross-border supply chain integration, and the UK construction sector will be vulnerable to tariff and non-tariff barriers that could significantly impact costs. The general consensus we’ve found in the industry is that for right now, it’s imperative to place orders as far in advance as possible once contracts have been entered into. UK firms will want to fix costs with EU manufacturers to safeguard their contract prices.
Yet there have already been reports of a slow-down in construction due to supply issues. While we hope that this may be reversed soon, businesses within the industry should take note. Be very certain of your supply chain heading into 2021 and plan as early as possible to mitigate the effects.
4. Adoption of cloud-based tools and remote working practices
As well as the changes to the workload and contract type, many construction companies are also having to adapt to a new way of working. From being in the office, or onsite, every single day to now working remotely from home.
At Countfire we’ve noticed an uptick in construction companies looking for cloud-based software for roles such as completing takeoff within construction estimating projects. The need for this software is two fold; many construction contractors are tendering for more work to try and keep their books filled. Without software to help automate some of the manual tasks (that also usually require a drawing board setup usually only found in the office) they just can’t complete the number of tenders required to guarantee a minimum amount of work won.
Secondly, cloud-based software allows users to access it remotely, without requiring a heavy on-premise system. Teams will need to be able to work collaboratively, even when they can’t physically be together, and be able to step in where a team mate has left off without hours of back and forth.
Adopting the right type of software will help to improve construction estimates as well as seeing peripheral benefits such as increased sustainability through removing paper-heavy processes and methods of estimating.
As we sign off for 2020, we acknowledge that it has been a difficult year and tip our hats to everyone out there in the industry, working hard to keep it going.
2021 shows promise for the construction industry and while we may have to adopt new working practices and in some cases, even new areas of expertise, we hope individual companies will band together to plan well and help the industry to remain a strong one.