Industrialized Construction – The Next Trillion Dollar Opportunity?
“The Grid. A digital frontier. I tried to picture clusters of information as they traveled through the computer. Ships, motorcycles. With the circuits like freeways. I kept dreaming of a world I thought I'd never see. And then, one day... i got in.”
The opening lines of Tron Legacy are not as much science fiction anymore as they are science in the modern construction world. Buildings and infrastructure equal data, and the clusters of information are pictured in the format of building information models and digital twins. Instead of dreaming about seeing smart environments, we are living in them and experiencing them in digital formats.
To put things in perspective, the construction industry is growing and expected to spend $14 trillion (US) in 2025. Construction spending is an economic indicator that measures the amount of spending toward new construction. The data includes the cost of architectural and engineering work, construction labor and materials, and taxes. The numbers create a lot of clarity on the capital expenditure of construction projects. To put things into a bigger perspective, 85 % of the of total cost of ownership accumulates as operational expenditure post-construction. We call that business real estate.
The United States has one of the largest construction markets in the world. It has been able to grow the total value of new construction since the previous global recession in 2008. However, in 2020, Asia as a region is expected to hold almost half of the global construction spending. The Asia Pacific regional market is growing due to the rapid urbanization of China. It is also expected to have the highest construction industry output in the world, including the off-shore fabrication of building components and manufacturing of pre-assemblies.
The digital transformation of the AECO industry started nearly 60 years ago when the theory of building information modeling was developed, and it was 40 years ago when the industry transformed from drawing by hand into drafting with CAD. BIM already became a commercially feasible tool two decades ago, improving productivity of teams and leading the way for increased profitability of projects. Digital technologies have transformed whole other industries – generating new jobs, skills and competences that have led to more innovations, success, and wealth for people. The traditional AECO industry has been able to resist the inevitable leaps of technological revolutions.
The construction industry sets itself apart from others in many ways. The most significant difference is that it is not a process-based industry but a project-based industry with very long project lead-times and lifecycles. Trying to replicate success stories from the other industries operating at much faster paces, has built up technology fatigue and frustration among the most traditional industry in the world. It requires a completely different type of approach to turn the course of an industry that is proud of its hand-made traditions. Continuing to operate with the same old processes and deliverables, with a heavy reliance on people as labor, mechanical tools and business models established 50 years ago, productivity and profitability will remain stagnated. The old industry has soon retired itself, literally.
Digital construction tools are rapidly entering the industry now, and completely changing how infrastructure, real estate and other built assets are designed, constructed, operated, and maintained. Building information models are in the center of data management for industrialized construction processes. Drawings and documents are no longer necessary, or the requirement, as generative design tools are enabling optioneering alternatives based on weighted priorities. The automation driven pre-fabrication, pre-manufacturing and pre-assembly processes are feeding off data from wireless sensors, robotic equipment, and additive-manufacturing machines. The role of humans is focused on creative thinking, defining parameters and fine-tuning settings to deliver the expected outcomes.
Industrialized construction impact on the environmental, economic, and social sustainability of the industry could be transformational. According to studies, construction industry accounts for 6% of global GDP and employs more than 100 million people worldwide. In the next decade, full adoption of digital construction is estimated to save 12-20% in construction spending, equal to between $1 trillion and $1.7 trillion USD annually. It has a huge potential for new economic stimulus invested into the built environment. ##