Introduction
The Sars-Covid-19 pandemic has undoubtedly changed the way we all live. As coronavirus swept the world in early 2020, governments imposed far-reaching restrictions on daily life. These restrictions have had major effects on world economies, with certain sectors feeling the effects more than others. The construction industry has been one of the worst affected as jobsites came to a standstill for months. In this post we’ll explore the long and short-term impacts of coronavirus on the construction industry, how the sector has adapted and the future.
The impacts of Covid-19 on the construction industry
The strict shutdowns imposed to limit the spread of covid-19 in 2020 has had serious impacts on construction industry:
- Schedules. Government restrictions meant construction works could no longer attend job sites to carry out their tasks. This has led to serious schedule delays across the industry. As the course of the pandemic has been unpredictable, and re-openings often sporadic, construction firms have had great difficulty in forward planning for a return to job site.
- Project suspensions. Restrictions were initially imposed for a period of a few weeks in March 2020. But, as it became apparent the pandemic would last much longer, many projects were left indefinitely suspended. With projects on hold, many workers and suppliers switched jobs which has led to bigger back logs as the world slowly returns to normal.
- Project terminations. As well as suspensions, many construction projects were terminated due recommendations by the Center for Disease Control and Prevention (CDC) recommended lockdowns. Real estate construction sites were left permanently empty.
- New workplace safety measures. To limit the spread of Covid-19, the Occupational Safety and Health Administration, the body responsible for public health, imposed new safety regulations. These new rules include social distancing, temperature checks, use of personal protective equipment (PPE) and staggered start times. Constructions companies have had to comply to these new measures in order to resume operations.
- Effects on supply. One of the major impacts of the covid-19 pandemic on the construction sector has been on global supply chains. With covid-19 outbreaks varying in speed across the world, supply has been sporadic. Construction projects resuming in one country that depend on supplies from another that’s still in lockdown have been most affected. Border closures and restrictions on international travel have also led to labor shortages across the world.
- Effects on demand. The covid-19 pandemic has changed the way wider society lives, and this new normal has had effects on demand in the construction industry. As remote working becomes the new normal, demand for office real estate in city centers has fallen. As covid-19 outbreaks are often sporadic, organizations are unable to plan construction projects which has also led to sharp drop in demand.
- New dynamics in the sector. In March 2020, almost overnight, the construction industry had to change its way of working. Construction workers have had to adapt to new practices, like social distancing and hand washing. And firms have had to undertake new risk assessments to ensure employee safety at worksites and well-being offsite. Capacity has been limited on site, with staggered start and finish times, this has led to slowdown in work and longer completion times.
New trends in the construction industry
The upheaval caused by the coronavirus pandemic on the construction sectors has led to the emergence of new trends within the industry.
Short-term trends
- Increased digitalization. Remote working has become the new normal across the world, and the construction industry is no different. Designers and engineers are now embracing technology, such as building information modeling (BIM). Some are even using 4D and 5D simulations to replan projects according to the new reality. End-to-end modular planning entirely through collaborative digital platforms has become the new normal. Additionally, contractors are using project management tools to track project progress, communicate with team members, order materials and manage supply.
- Rebalancing of the supply chain. Traditionally in the construction industry, the supply chain was based on efficiency. After all, efficient supply of materials and labor means faster completion. However, with supply severely affected, many construction firms are now re-focusing their chains on resilience, i.e which supplies are least likely to be affected by the covid-19 outbreaks and subsequent shutdowns.
Long-term effects
- Operational consolidation. In the wake of the covid-19 crisis, firms are looking to streamline their processes and consolidate their teams. This involves centralizing support teams, such as IT, talent and technology. This consolidation leads to more agile operations, which makes for healthier balance sheets. A stronger focus on financial planning and profitability resilience is particularly important for investors.
- Increased vertical integration. Vertical integration is whereby a business looks to own or control all parts of it’s supply chain. This allows firms to have greater control over projects, costs and delivery times. With supply chains severed across the world, many firms are diversifying their operations to integrate supplies. For example, building firms are now also working to assemble manufacturing parts, as well as integrated subcontractors and producing materials.
- Widespread investment and roll out of project software and digital innovation. With remote working becoming the new normal, construction companies are needing to move to digital platforms, such as BIM and project management software to manage their workflows. This new, long-term trend has led to increased investment in technology that tracks real-time project progress, channels communication and accurately forecasts schedules. It is widely accepted across the industry that the adoption of new technology and building systems will allow for strong efficiency gains in the industry.
- Increase in off-site operations. Social distancing has meant many tasks now need to be done remotely. As the covid-19 pandemic has dragged on, remote working has become the new normal and many firms are now making provisions for a permanent shift to off site working. This has led to a bigger demand for technological solutions to help manage subcontractors and project parts. Off-site working will mean more efficient operations for many firms, which has freed their resources to invest and grow.
- Move towards healthy living and sustainability. Governments across the world are providing stimulus packages to help aid economic recovery. With the construction industry counting for up to 14% of GDP, the recuperation of demand in this sector is key. Construction is expected to emerge from the pandemic with a renewed focus on sustainability and design for healthy living.
Digital Transformation in the Construction Industry
With Covid-19 impacts leading to sweeping changes to the way we work, the construction industry has seen a digital transformation since March 2020. Remote work is the new normal, and so to allow for operations to continue construction activities are increasingly conducted online.
For example, prior to the outbreak of Covid-19, just 29 countries had a virtual building permit system. One of these is Singapore, where the national Construction Real Estate Network has had a system in place as early as 2001. In this city-state, construction firms can submit plans digitally, which are then approved by the authorities online. This entirely paperless system meant the construction could continue operating during lockdowns. Since the start of the pandemic, more and more countries have been forced to adopt remote regulatory activities, with systems launched in countries like Morocco and Benin.
Authorities have also had the challenge of managing site inspections and approvals remotely. Traditionally, official inspectors would visit job sites to undertake quality controls and sign-offs, something the shutdowns made impossible. As with issuing of permits, authorities have had to adapt to more digital methods to carry out inspections and approvals. Readily available and inexpensive digital tools have facilitated this shift. For example, Kuwait was the first state to entirely digitize it’s inspection process which involved submission of photos. While in the US state of Miami, regulatory bodies began conducting visits using Zoom and Google Meets.
And it’s not just government bodies adopting new technology, but construction firms too. Digital transformation has provided companies with more efficient workflow and processes. For example, certain tools allow for greater visibility over the construction site. In some cases, workers are issued a tag which helps them stick to social distance and reminds them of measures like frequent hand washing. Online platforms also allow construction firms to manage supplies of personal protective equipment and ensure OSHA compliance. They also allow for tracking availability and location of materials.
But while big advances have been made in the adoption of digital solutions in the construction industry, further investment is still required. Tools that already existed at the start of the pandemic are needing to be adapted to meet the needs of the new reality. For example, both firms and local governments need to invest in cyber security to ensure digital records are kept safe from hackers. Platforms also need to be adjusted to integrate remote communication and video conferencing, and regulatory bodies need to be given access. Additionally, employees and subcontractors from across the industry need to be trained in how to use these new tools effectively. Cooperation between the private construction firms and local government is also necessary to agree on standards for remote 3D and 4D design renders.
Adoption of technology in some parts has been slow, with the US reporting that 40% of planning authorities still lack digital capability for online operations. Delays like this could lead to serious backlogs in administrative tasks which could further slow recovery. Both the public and private sector recognise the need for digital transformation in the construction industry as a way of ensuring speedy recovery and an efficient new way of working.
The Resilience era: Best practices
With new ways of working ushering in sweeping changes across the construction industry, firms are now focusing on resilience more than over. The covid-19 outbreak caught the world by surprise and, just like many sectors, the construction sector is shifting to a more resilient model to avoid future abrupt changes. Here are some tips to ensure resilience going forward.
Implementation of digital solutions
Digitization has helped parts of the construction industry to weather the storm, but work still needs to be done to ensure maximum output for new digital solutions. Project collaboration needs to be streamlined into one central platform to ensure efficiency of off-site working. Material producers and engineers need to adapt their BIMs for market accessibility and remote sales.
Invest in talent
New technology and new ways of working have led to an enormous change in work culture. Technology allows for nuance between work and healthcare. Going forward, and emerging from the pandemic, businesses need to train and upskill their teams in how to comply with new regulations and use new tools. It’s also important to manage morale in times of change, ensuring your teams are engaged and feel a sense of job security. By training employees and contractors in new ways of working, construction firms will see improvements in efficiency and productivity.
Centralize project control and monitoring
As the pandemic wreaks havoc on economies across the world, construction firms are seeing their profits being squeezed. Therefore, businesses should focus on improving process efficiency internally to be able to correctly price and manage future construction projects. To do this, firms should set up a ‘control tower’ which centralizes the monitoring of resource allocation across their portfolio. This will allow for a more agile and transparent view of resources and possible covid-19 impacts.
Strengthen supply chain resilience
Many firms have already adapted their supply chains, but more can be done to ensure resilience in the years ahead. For example, firms can look to directly hire labor as opposed to working with subcontractors. They should also source backup distribution models as well as improving building inventories. The pre-pandemic, multi levels ways of sourcing and contracting goods often slowed down projects. So centralizing and strengthening not only allows for risk mitigation, but also efficiency gains.
Re-allocation of capital and resources
The seismic shift in working caused by the pandemic will have long-lasting changes to architecture and construction in general. With greater emphasis placed on climate change and sustainability, the construction industry can expect to see demand in areas adapting to these new trends. For example, government relief packages could lead to a boom in demand for sustainable building, so firms need to re-allocate their capital and resources to meet new demands.
Identify remote working opportunities
To minimize risks from future lockdowns or natural disasters, construction firms should identify which parts of the operation should go entirely remote. By breaking down a project into modular parts, firms can easily spot which tasks can be conducted off-site. This could lead to manufacturers collaborating with designers to implement new building features to improve on-site operations. With more remote tasks, construction sites will become less crowded and therefore safer and more environmentally friendly.
Adapt to new consumer trends
New consumer trends are emerging as a result of the coronavirus pandemic. People are increasingly working from home and buying online, and climate change and sustainability have become key concerns in society. Therefore, firms need to adapt to these new consumer trends. For example, customers prefer to source and purchase building materials remotely, so distributors should adapt to these trends and invest in e-commerce solutions to ensure a quick recovery.
Conclusion
The construction industry has been one of the most affected by the covid-19 pandemic. Local government-imposed lockdowns have led to major shifts in the way we live and work, and this has directly impacted construction. Short-term trends have led to long-term changes and the adoption of new technologies to facilitate remote working. The digital transformation across the sector will lead to greater resilience and more efficient and profitable operations going forward.
