Darragh Jones, Jan 2022
2022 is here. With the pandemic looking more likely to run out of breath and its after effects coming to the forefront, construction won’t be the only industry to undergo radical change in the coming year. In this article, we pick out eight trends which might have an impact on the sector in ‘22.
1. Inflation is not going away
The ECB and the US Fed have advised that rampant inflation is here to stay in 2022. Soaring food, energy and rent prices will continue to have trickle down effects, increasing the costs of everything from a loaf of bread to a gallon of fuel to the latest iPhone. The ECB recently confirmed a level of 5% annual inflation at the end of last year, a record within the single currency. Construction is by no means an exception to this macro trend, with labour, material, fuel and transport costs all forecast to continue skyrocketing in the year ahead, above what were already untenable highs for some companies.
2. Sharper shortages of skilled labour
Shortages of skilled workers have been a growing problem in many markets for years now. The yo-yo lockdowns of the past two years have contributed to a sharp shortage of skilled workers across the sector. Retirements, slower recruitment of replacements, and difficulties sourcing international workers will hit companies hard. Coupled with general inflation, this will increase the risk of significant cost increases for developers in a short space of time.
3. Technology picks up the pace
Increasing costs, and year on year inflation will exacerbate the slow but steady shift toward technological disruption in the industry. As developers see their bottom lines shrinking, and uncertainty increasing, getting projects in on-time. On the other hand start-ups, including us at OMRT, are getting increasingly effective at adapting deep-tech to the industry. Technologies that were once conceptual are rapidly becoming not only practicable, but necessary for big real-estate firms.
4. Lockdowns likely to subside
It’s not all doom and gloom! The kind of lockdowns which caused construction sectors to shut down entirely in some markets are less likely to be repeated. As the pandemic subsides and issues such as housing crises become increasingly acute, restrictions on the sector will be few and far between in 2022.
On the whole, society is beginning the emergence from the “pandemic” phase of the coronavirus, however the virus is not going to vanish, instead likely settling into the new “endemic” status, meaning the undercurrent of corona will remain with us for the foreseeable future.
5. A bigger push towards sustainability
This trend has been ongoing for years and shows no signs of slowing down. Larry Fink, the CEO of Blackrock, the world’s biggest asset management fund, affirms the reality that many of us already suspected:
“It is my belief that the next 1,000 unicorns — companies that have a market valuation over a billion dollars — won’t be a search engine, won’t be a media company, they’ll be businesses developing green hydrogen, green agriculture, green steel and green cement.”
With climate awareness having its moment in the 2010’s, the 2020’s should see an ongoing re-alignment of industry (and investment) focusing on sustainable solutions. In construction, alternatives to concrete will become increasingly attractive, while green materials and sustainable build methods could see a boom in popularity.
6. Modularization reaps rewards
Ever-rising costs only heighten the argument for off-site building and full modularization. These strategies could become increasingly rewarding in 2022 for developers. Start-ups like Blokable, Respace and Apex Airspace are bringing their own unique ideas to the world of full modular design.
Even beyond modular specialists, off-site builds will become an increasingly important cost-control strategy for traditional developers, with modular components trickling into the mainstream world of construction. 2022 could be a breakthrough year in this area.
7. Specialists find their niche
The effects of the pandemic coupled with exorbitant cost increases are likely to speed up the overall industry trend toward specialism. Those who choose their directions early are more likely to develop unique strengths that will help them survive in the era of uncertainty to come.
Disruption not only creates opportunities for build specialists, ie. purpose-built student accommodation, or medical facilities, but for tech specialists, whether they be parametric building modellers, BIM management or drone inspections.
8. Residential takes hold
2021 saw residential investments outstrip offices as the most popular asset class among global investors for the first time. It’s likely that 2022 will see further resources steered to residential developments. It could also be a big year for retail, with the high-street expected to bounce back strongly from its pandemic closures. It remains to be seen whether this trend will continue, but the apparent success of the global work-from-home experiment of the past two years would suggest office developments could see a continued slump.
A time for change
Change within the construction industry has been slow and steady for decades. However the past two years have provided the catalyst for rapid transformation in the sector. A “modernize or die” scenario for big construction companies is not yet a reality, but with many industry analysts emphasizing the coming importance of tech, it may come soon.
Obviously, from within the tech/start-up scene we may be a little biased, but as the evidence stacks up it becomes increasingly hard to deny the scale of the impact that sustainability, technology and modularization will have on the industry. As the banking sector, now fully in the midst of a crypto, FinTech, and fast-transfer fuelled transformation can attest, change can sneak up on you.
Early adopters will always be rewarded. At OMRT, we’ve always felt that this transition to a tech-dominated industry was a question of “when, not if”, hence the mission to provide our part of the puzzle in this sea of change. However as the dust settles on the pandemic sized jolt the global economy has received in the past 2 years, the future might just have been thrust forward a few years.
OMRT is a deep-tech focused start-up based in Amsterdam, working to provide disruptive parametric design technology, modular build planning tech and more to the build and design phase of real-estate development.
