Figures show that construction companies innovate little. This can be inferred, for example, from the annual investments in R&D. Compared to the industry sector, this differs by a factor of 20 on average! (Source: CBS).This is not because the sector is averse to innovation, but because the construction market structure hinders innovation. In the recently presented ING report 'Technology in construction' , it is noted that construction in the Netherlands is fully digitising but is still much less industrialising. However, to realise new-build houses faster, for example, both are needed. In this article, I elaborate on this development and outline the short- and long-term challenges facing the construction industry.
The short term:
With production development, construction is doing well but growth is levelling off next year due to declines in residential building permits and persistent labour shortages. This is causing the sector to reach its capacity ceiling. Below are our most up-to-date forecasts:
The long(er) term:
For the next few years, the construction industry sees itself particularly challenged by 3 key trends:
1. Technology and Industrialisation: With the rise of technological innovation and digitalisation in construction design and production, construction and maintenance processes are becoming less complex and it is possible to offer a standardised customised product. The construction site becomes assembly place as more is manufactured under conditioned conditions. This significantly changes the construction process and role distribution of the chain parties.
2. Making buildings more sustainable: The climate challenge facing the Netherlands will also affect the construction sector. Buildings in the Netherlands are responsible for a substantial part of total CO2 emissions. This will be reduced substantially. The impact on the Dutch building sector is very large because the investments involved in this sustainability drive amount to more than four times the entire annual building production in the Netherlands. This task requires renewal of the construction sector through digitisation and industrialisation.
3. Circular Construction: Increased reuse of materials and reduced energy and water consumption will help reduce the environmental burden of the construction sector. After all, the Netherlands' ambition is to be fully circular by 2050. But circular construction requires a different way of designing, developing, building and maintaining. This will drastically change the production chain and this way of building also requires innovation through digitalisation and industrialisation.
Thus, to adequately meet short AND long-term challenges, innovation in construction is more urgent than ever. The fact that industrialisation in construction has hardly taken off yet is mainly due to the fact that construction companies have to be extremely flexible. They have to build something different in a different location every time. And this in a highly volatile market where they have to be able to scale up and down quickly. Unlike previous decades, robotics (such as a masonry robot) and 3D printing combined with prefabrication now offer that "mass customisation" and that necessary flexibility. Without further innovation, the construction sector is also pricing itself out of the market because tech developments create the risk of industry-facing innovative newcomers pushing construction companies out of the chain. Parties like Ikea, Google and Amazon are developing applications that can be used within the construction industry. So the risk of disruption is greater now than five or 10 years ago.
See here for the entire report 'Construction is digitising in abundance but hardly industrialising'
Jan van der Doelen
Sr. Sector Banker ING
Building & Construction and Real Estate
