An insightful article by Kenny Ingram, Global Industry Director of Construction and Contracting at IFS, that discusses the growing momentum of modular construction in 2018. He examines this, among 3 keys trends that are shaping the future of the construction industry amidst a growing shortage of significant skills within the industry and increasing globalization. Here’s a rundown of the article.

Words by Kenny Ingram

Trend 1: Skills Shortages will force the industry to adopt new technology and business models

A shortage of one crucial resource threatens the rate of growth worldwide. Can you guess what it is? Energy? Water, maybe? Capital? Actually, it’s manpower. On every continent, skills and labor shortages are hitting hard. In 2018 it could force permanent, decisive changes in how construction does business and meets demands.

However, there is hope. The Farmer Review, details many innovative, high-quality cases where the merger of manufacturing and construction has opened up new markets and revenue streams with creative construction solutions.

In 2018, I believe we will see a perfect storm of factors (an aging global workforce, a lack of new entrants and growing restrictions on free movement of labor) begin to decisively accelerate the uptake of construction-integrated manufacturing such as this. Governments, regulatory bodies and the industry alike will start to realize that, while getting more people into the industry is important, as well as trying to increase the number of people onsite, the most strategic solution would be to fundamentally change the way we build in the first place.

Trend 2: With construction-integrated manufacturing, 10% of traditional contractors could disappear over the next 5 years.

construction_site-largeIt is beyond doubt that modular construction and construction-integrated manufacturing is playing an increasingly important role all over the world.

Modular is expected to rise 6 percent globally by 2022, with some countries already leading the pre-fab charge. Sweden is a model for modular home building. Around 84 percent of detached homes built in the Scandinavian nation use pre-fabricated timber elements. Compared with the US, Australia and the UK, where the figure is just 5 percent, Sweden is practically a modular world leader. Meanwhile, third world countries are also considering how pre-fab can meet their housing shortages and cost constraints. Nigeria is one example that is taking a long look at modular housing to meet its crippling housing shortage – close to 20 million units at the last count.

With growing skill shortages and a need to build faster and more cost-effectively, it will become a crucial competitive advantage to be able to invest in the right technologies and people and find the right business partners to leverage construction-integrated manufacturing.

Trend 3: Globalization will increase the foreign content of construction projects by 20% within 5 years

africa-short-skilled-construction-workersOffsite, logistics-centric construction will be a catalyst for increased globalization too. Currently, 95 percent of construction projects are carried out by local firms sourcing local materials. But we see that this is changing. Customized, large-scale components and elements will increasingly be sourced globally, meaning increased competition, and, potentially, margins. It’s a big shift for an industry that has traditionally been highly country-specific. But for operators agile and disciplined enough to start planning and handling logistics, and invest in new joint ventures, the gains could be huge.

Take Spain. With a significantly smaller GDP than, for example, the US or the UK, seven of the world’s top 100 construction companies are Spanish. Yet while the country’s recent economic difficulties took out many companies, Spain’s construction sector fared remarkably well. One of the main reasons is that Spanish construction companies often partner globally and thereby reduce the risks of exposing the business to domestic economic challenges. Here, the Spanish construction industry’s strong tradition of joint ventures and global partnerships was a powerful competitive advantage.

New technology is making it easier to work profitably on a global level as well. With 3D printing, for example, costs for both material and long transports are decreasing substantially. Using technologies such as these, the partnerships will focus more on global competence exchange rather than long-haul transports.

WHO WILL BE THE WINNERS OF 2018?

All three of these trends are woven tightly together. Contractors need to work hard to ensure that the right competencies are secured while considering how to implement new business models for modular buildings and construction-integrated manufacturing—all this in a construction industry that is becoming more global and offers new forms of partnerships. The players who master this balancing act will be the winners in 2018.

Read the full, unabridged article on the IFS World website.

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