Predictions are always notoriously difficult. This year they are trickier than ever. The UK is getting to grips with what Brexit will mean. Uncertainty persists and that’s likely continue in 2017 and beyond as the results of our recent Referendum Survey prove.
When we put out a call for predictions for the year ahead from the construction sector we might have expected a fair amount of pessimism and, even, doom and gloom. However, while there are clear challenges ahead, there are significant opportunities too. For those organisations able to be fleet of foot, and willing to embrace new ways of working, there’s cause for cautious optimism and a new wave of tech innovations stand set to change the way we work, rest and play.
Here we present a mix of responses from across the industry. We’d love to know what you think the year ahead will hold for construction. You can tweet @theNBS using #nbs2017 and we’ll round up your comments in a follow-up feature early in the new year…
Our panel of pundits
Martin Vella,
Managing Director, Pexhurst
Pexhurst work with many of the major institutional investors in commercial property, such as M&G Investments, Clearbell and Aberdeen Asset Management.
Personally I wouldn’t trust anyone who can tell you they can predict what will happen in 2017. What we can be sure of is that there is going to be continued uncertainty as we carry on trying to manage the turmoil inflicted by 2016.
I think the key word for businesses in the construction industry is going to be flexibility, with contractors needing to adjust to market demands as and when they arise.
We have already seen US investors increase their interests in the UK and I can’t see that changing, in fact there is a strong chance that they will fuel a large amount of construction at the lower to mid end, especially when it comes to commercial property refurbishment. As contractors we will need to demonstrate the ability to engineer value out of projects, especially on contracts which are already out to tender.
Flexibility is also going to be the key for property owners and I can see more looking to refurbish and re-fit spaces to fit with current occupier trends, such as opening out floors in office blocks to suit shared workspace, or carving up larger units to make them more suitable to small businesses.
I can also see the challenge of plugging the skills gap continuing. It is no secret that there is a shortage of skilled workers and contractors are going to have to work harder to keep their best people, whilst providing differentiation to attract the best talent.
The commercial property sector felt like the poor relation to its residential cousin after the chancellor’s autumn statement and I think we would all like to see the spring Budget do more to help drive commercial development by relaxing investment tax laws.
I think the key word for businesses in the construction industry is going to be flexibility, with contractors needing to adjust to market demands as and when they arise.
Martin Vella
Brian Ham,
Executive Director of Development, Home Group
Brian has more than 25 years of experience working across the public, private and not for profit sectors in the fields of urban and regional regeneration, property development, planning and housing. He currently works for Home Group – a housing association, providing homes for affordable rent. The association also build homes, using surplus to provide more homes for rent.
There has been a lot said about the need to “build more homes”. This is true, and at Home Group we are committed to delivering at least 10,000 over the next five years. It is also important that we do not forget to consider how and where these homes will be built, how we will innovate during the building process and how we will give customers the best experience when buying and living in them. Here, I’ve reflected on what I am most excited to see in 2017.
Bespoke design: This is more of a personal wish on behalf of consumers than a prediction. I would like to see an increase in bespoke design in 2017 – at all price points. Our philosophy is to be responsive to the surroundings in which we build our homes and this will see us build schemes that respond to this for example those inspired by barns in Essex and farm houses in Yorkshire next year.
Consumer personalisation: Consumers are used to mass personalisation and customisation in retail, from the targeted advertising they receive, to the ability to buy anything with their name on. When you buy a new car, you can customise it to your exact requirements, we don’t see why this should be any different when buying a home.
Internet of things: The internet of things shows no signs of slowing down and will become more and more accessible and exciting from a consumer’s point of view when it comes to its use in the home. This year Hive announced its partnership with If This, Then That – making homes smarter, more eco-friendly and convenient for the ways people live today. I predict many more announcements of this nature in 2017 as the smart home becomes a reality for more and more of us in the UK.
Regenerating to improve rather than maintain: We are at a point in housing history where regeneration is not about maintaining houses in ‘sink estates’, it is about creating places, improving homes and helping communities to thrive. In 2017 we will be working with some of the UK’s leading architects on regeneration projects in both urban and rural locations.
Innovative use of space: Whilst Hygge (the pursuit of cosiness) has been a trend in 2016 – 2017 is all about space and light. We know that, in many places, space is at a premium, and even when it isn’t, footprint is expensive. As an industry we need to continue to find different and innovative ways of giving people the space they want, without the cost. We are looking at many ways to do this including raising ceilings a foot above standard in some houses. It’s not a massive cost – just an extra four courses of bricks can make all the difference for only a small cost us. It’s about looking at the space you have differently – and always thinking, ‘how can we bring more space and light into this home?
Modern methods of construction: 2017 will see new methods of construction exploding as home builders look to new and different ways to build quickly. We are exploring these new methods for some of our sites.
Subscription economy: From films to flowers, we buy much of what we consume on subscription today – a trend that will continue into 2017. We will experiment with different ways of helping people to get onto the property ladder in 2017 – and whilst it isn’t ‘subscription’, our ‘graduated home ownership’ proposition will allow people to buy as they live in a property, rather than saving before they get a chance to move in.
All in all, 2017 seems to shaping as an exciting year for us, the industry and consumers. Can we build it? Yes we can!
2017 will see new methods of construction exploding as home builders look to new and different ways to build quickly.
Brian Ham
Paul Connolly
Managing Director of Cost Management,
Turner & Townsend
Turner & Townsend is a leading global programme management and construction consultancy that supports organisations that invest in, own and operate assets.
As the US comes to terms with the surprise result of its presidential election, the UK’s construction sector is returning to an uneasy calm after a rollercoaster few months.
Official data from the ONS shows that construction industry output fell by 1.4% in Q3 – the first three calendar months following the Brexit referendum. Yet in October the Purchasing Managers’ Index recorded resilient levels of confidence and a steady increase in new orders for construction firms.
It is becoming clear that Brexit will be a process, not an event. For now, the immediate impact of the referendum result is being felt in four key areas and this will continue to be felt in 2017 and beyond:
Supply chain: Contractor balance sheets have not fully recovered since the recession, leaving them weak and susceptible to further shocks, and the current market uncertainty may prompt some suppliers to bid at lower margins to secure work. With clients also more likely to make late changes in their investment decisions, this uncertainty could increase the threat of contractor insolvency. Clients must therefore watch their contractors closely in coming months for any evidence of distress. But there is a delicate balancing act to be achieved – the intelligent client will monitor, support and collaborate with their suppliers in equal measure.
Contract commitments and liabilities: In normal times, contracts offer protection for both clients and suppliers – a bulwark against unpleasant or unexpected change. However an event as game-changing as Brexit and its as yet unknown consequences may test existing contracts, and their interpretation, to the limit. Clearly the prospect of a contract dispute represents a major liability for clients, so it’s essential they review thoroughly all existing contracts for any such exposure.
Cost base: Sterling’s abrupt fall in the wake of the Brexit vote quickly translated into input cost inflation. Overall construction cost inflation could now rise further if contractors seek to cushion the impact of falling demand and exchange rate volatility by increasing risk and contingency pricing on two-stage tenders. With inflationary pressures looming for construction’s two primary inputs – materials and labour – it’s essential that clients take proactive steps to review their project scope and identify potential risks to both cost and schedule.
Project controls: Robust project controls serve a twin purpose – as both guarantor of efficiency and an early warning system. They are never more important than in the current uncertain climate, and clients should dial up the levels of scrutiny on all aspects of their projects. Where problems are identified, corrective action can be taken. Where no problems are found, the client will enjoy the reassurance that their project is well managed and delivering business objectives.
Cool heads and considered responses: For all the speculation about the long-term effects of Brexit, the immediate impact is easier to quantify – continuing uncertainty, rising costs, deferred investment and pressure on the supply chain. One factor that will mitigate Brexit uncertainty is the Government’s decision to proceed with the “three H” infrastructure projects. This long-term commitment to the industry should allow us to invest, and help us ride out any downturn in the real estate market. As the UK embarks on the formal process of Brexit, new challenges will emerge. Individual tactics will need to evolve in response, but an agile strategy that includes robust project controls and a commitment to a collaborative supply chain will enable clients to continually anticipate, adapt and achieve the best project outcomes.
Brexit and its as yet unknown consequences may test existing contracts, and their interpretation, to the limit.
Paul Connolly
Dr Stephen Hamil
Director of Design and Innovation, Research and Development, NBS
Dr Stephen Hamil first started working on NBS products in 1999 and has played a big part in the developments of products such as NBS Building, NBS Create and the NBS National BIM Library. Stephen tweets as @stephenhamilnbs and his blog can be found at http://constructioncode.blogspot.co.uk.
2017 will continue to see Building Information Modelling mature. The majority of design organisations are now generating drawings and schedules using the latest modelling tools. Many project teams are federating models together to assess ‘build-ability’ digitally prior to planning the construction. The next steps are to focus on using digital technologies to improve collaboration and to improve co-ordination of information wider than just between design models. With respect to collaboration, more teams will communicate with the aid of a digital plan of work that is updated to capture requirements and responsibilities at the start of each stage. In terms of coordination of information, having drawings and specifications that are fully co-ordinated will receive greater focus. In addition, clients will start demanding the use of standardised objects and property sets so that information can flow through the project stages and not have to be manually re-keyed.
It’s also important to look at the emerging external drivers and where the future will take us. The biggest external factor, in my opinion, will continue to be the digital revolution. ‘Future Cities’ is probably the tag-line that encompasses what this means to the construction industry. This is the combination of the Cloud, Big Data, the Internet of Things and the well-structured digital asset information that is already growing. The future physical world we will live in will have a parallel digital world. A feedback loop of how the physical environment around us is performing will put information at our fingertips. This will be true for buildings, landscape, transport, water, waste, power and the wider infrastructure. This is a journey that is just starting, but we will see more and more change here in 2017, and the skills we develop here in the UK will help us be global leaders in digital supporting the world’s future infrastructure needs.
The future physical world we will live in will have a parallel digital world. A feedback loop of how the physical environment around us is performing will put information at our fingertips.
Dr Stephen Hamil
