There is a triumvirate of challenges that affect construction projects: project cost escalation, labor shortage and the development approval process. Finding a way past these barriers will take technological innovation and acceptance.
Altus Group recently unveiled a report that investigated how the property development industry is responding to disruption and rapidly-changing market pressures. Based largely on survey responses, the report highlights the market forces, challenges, risks and opportunities that are determining the trajectory of change currently underway in real estate development.
Construction and wage prices are the biggest challenges that executive respondents said they will face over the next five years in the survey; 68 percent pointed to cost escalation as the biggest challenge they are facing, followed by 65 percent concerned by trade and labor shortages. Nearly two-thirds, 60 percent, also pointed to the approval process as another challenge impediment.
Where there is pressure, soon will come innovation. For example, rising costs associated with development—nonresidential construction costs have risen between 4 and 5 percent annually this cycle—will accelerate the uptake of disruptors like automated or modular construction.
“In times of crisis—and I think we are getting awfully close to that in terms of construction costs and some of the other factors that are impacting real estate development—I think we are going to see a more rapid shift to automation,” said Ross Litkenhous, global head of business development at Altus Group.
Almost half of the respondents in the survey felt that smart building technologies such as pre-fabrication and building information modeling were going to create transformative changes to the construction industry. They were less impressed with the disruptive prospects for other emerging technologies, however, with only 16 percent foreseeing 3D printing having an impact. Augmented reality/virtual reality (20 percent) and process automation (22 percent) didn’t rate much higher.
“I see robotics, artificial intelligence, VR and to some extent data analytics being able to solve some of these issues that we’re facing right now,” said Litkenhous. “These are the areas where I see the most immediate upside for innovation.”
Most of the advancement through technology that has impacted the construction industry is happening at the planning stages, with data modeling, analytics and other business intelligence techniques that help CRE professionals visualize how a project can come to fruition—sometimes literally via augmented or virtual reality. There are disruptors on construction sites such as automated brick laying or robotic street paving, but most of these applications are happening overseas, especially in Asia.
The next frontier for construction trends will be desegregation: taking the new technologies that the industry is using, often in disparate ways, and finding a way to better integrate them. Those who successfully combine data, AI, robotics, 3D printing and/or other cutting-edge techniques could get us to a point where a design/construction team is essentially fabricating the necessary building components on site.
But innovation doesn’t always come out of a lab. The most seismic shifts in any industry are those that make the process much more efficient, and efficiency can just as easily spring from workflow as from robotic manipulation or digital visualization.
“Just as much as we have labor shortages out in the field for construction, it’s also very tight job market for professional services,” Litkenhous said. “If you think it’s bad in the private sector, it’s just as bad on the public side.”
Big or small, the choke point for just about any construction project is at city hall. Local governments are tasked to review drawings, issue permits and inspect the job site. This process is only taking longer, partly because of deal volume and partly because municipalities are losing staff to the private sector.
“One area of the construction lifecycle where I see the most opportunity is helping … automate some of the things that are happening at the local levels to get through that permitting process,” Litkenhous said.
A familiar site at the building department of just about any local jurisdiction is boxes of documents and drawings in need of review, often with hand-written notes and weeks of lead time. Any solution that can speed up approvals will ultimately lead to greater deal flow and lower costs as projects can move from inception to occupancy faster, better and cheaper.
“If somebody can figure out a cost-effective, singular solution that allows the construction industry and developers to more efficiently work their project through the system, they are going to be wildly successful,” Litkenhous said.
Those who succeed at the end of this development cycle or as the next one begins are those keeping tabs now on fringe or emerging technologies. What may seem distant today could be mainstream in no time at all.