BACKDROP

Construction enters its ‘fail fast, learn, improve’ era

Author: Neil Bullen, Global managing director, real estate

In the years immediately after 2020, the construction industry talked about establishing a ‘new normal’, where long held assumptions over market stability, cost controls, risk and global trade were called into question.

The construction industry is entering a 'fail fast, learn, improve' era where resilience and adaptability are becoming its greatest strengths.

Even then, few could have predicted quite how unsettled that ‘normal’ would become. Yet, at a time of persistent economic and geopolitical turbulence, the construction industry has never been better equipped to weather the storm.

Across global markets, the industry has shown itself to be increasingly agile and resilient, keeping major capital programmes and portfolios in flight.

REALITY

High costs become embedded

Agility and resilience have come at a price. Having started to spiral upwards during the COVID-19 pandemic, it is now clear that structurally higher construction costs are here to stay. Although this year’s report shows average global construction cost escalation stabilising and slowing, it’s unlikely there will be a return to a lower cost environment. Risk is increasingly priced into contracts and deepening skills shortages will only serve to further amplify labour costs. Clients must embrace new approaches to ensure strong commercial performance.

MOMENTUM

Two-speed market

High-growth sectors like data centres, advanced manufacturing and logistics are reshaping market dynamics and supply chains. While rising costs require mitigation, for these areas the focus is primarily on speed-to-market. This is fostering openness to alternative delivery approaches to overcome strained capacity and accelerate schedules.

Meanwhile, core sectors, including residential, public sector and commercial, are feeling the brunt of the combined cost and capacity challenges, with growth more sluggish. They too will need to rethink delivery models to reflect these new market conditions.

INNOVATION

Learning from the innovators

In every region covered by our report, data centres are increasingly dominant. The sector is finding new ways to deliver at pace by pushing boundaries, particularly in the rapid adoption of artificial intelligence (AI) and automation and in forming strategic delivery partnerships.

Data centres may be further ahead on their innovation journey, but other high-value industries are also rapidly changing. Pharmaceuticals, life sciences and advanced manufacturing are all attracting increased capital investment, increasing the scale, complexity and volume of major programmes underway.

PARTNERSHIP

A new generation of collaborative models

The whole industry is set to benefit from the hurdles being cleared by the first movers in areas like AI, automation and modular construction. There are lessons to be taken from the agility and the ‘fail fast’ approach of the tech industry.

To drive these new ways of working, the partnerships between clients and suppliers are more important than ever. Making the move to ‘high-risk, high-reward’ cannot mean putting more risk onto your supply chain. Things won’t always work out as planned, but a strong and trusted partner offers options, solutions and a way forward. As a sector, we will achieve more by working together – forging a new generation of collaborative models.

If we get it right, the result will be seismic change not just in how we build, but the outcomes and performance we achieve.