Construction engineering encompasses various aspects of infrastructure development, right form design and construction to planning and maintenance. Global construction engineering market size was over US$ 8 trillion in 2016, and is expected to surpass US$ 10 trillion by 2024. Industry growth can largely be attributed to the global economic recovery and increasing infrastructure development activities to support rapid economic development, especially in emerging economies of Asia Pacific. Industry can be broadly classified into commercial, industrial, public non-housing, infrastructure, private housing, and public housing. Revenue contribution of the construction engineering industry is pegged at 5% to 25% of GDP for most major economies worldwide.
Industry participants can be broadly categorized into building construction companies, civil engineering companies, and specialty trade contractors that are responsible for specific assignments such as electrical, heating & roofing, and plumbing tasks. Infrastructure development related to of any authorized aviation, healthcare, sports, corporate & commercial, education, government, hospitality & leisure, mixed-use & retail, multi-unit living, parking & garage, and science & technology in turn fuels growth of the construction engineering industry.
Post the global depression in 2011, the global construction engineering industry has been gaining rapid traction. This trend is especially prevalent in emerging economies, which have witnessed multi-billion dollar infrastructural projects introduced by the government to strengthen the economic development in their respective regions. For instance, China’s South North Water Transfer project, Beijing International Airport, and Three Gorges Dam are among the world’s largest construction projects. According to Construction Intelligence Center’s Global 50—covering 50 of the globe’s most influential construction markets—since 2012, emerging economies accounted for over 50% of the global construction output, which is expected to further increase in the near future. The construction engineering industry is expected to register Y-o-Y growth of over 5% in emerging countries, as compared to 3% in developed regions through over the forecast timeframe of 2017 to 2024.
Middle East & Africa region has witnessed rampant growth in infrastructure and building construction industries, especially in Qatar, Libya, UAE, and Saudi Arabia. Some of the major construction projects underway are Great Man Made River (Libya), Dubailand (UAE), Jubail II (Saudi Arabia), and Al Maktoum International Airport (UAE). This in turn, has led to major traction for the industry in the region, surpassing that of the Asia Pacific region during 2011-2015, and is projected to showcase highest growth through 2020. Slowdown of the industrial and commercial sector in China is a major factor that has stalled growth of the construction engineering industry in Asia Pacific.
Increasing costs associated with raw materials and labor, along with growing competition is expected to lead to steep decline in profit margins of industry participants in the near future. Inflation and flat price trends prevalent over the past several years is expected to further add to the woes of players in the industry. During 2006-2011, the global construction sector witnessed the laying off of over 40% of the workforce. Inadvertently, this has led to an acute shortage of skilled workforce and upsurge in payout for laborers. This further dampens the profit margins of construction and contracting companies.
Owing to these factors, methodologies to reduce workforce, project timelines and find alternative solutions will influence industry players to innovative technologies, IoT and offsite/ modular construction to improve efficiency and increase profitability.
Though, offsite construction has been in use for the past several years, it has not received wide-scale adoption, especially in price-sensitive emerging economies. In the recent past, countries such as India have witnessed rampant economic growth, characterized by extensive infrastructure development activities. The various beneficial properties of modular construction such as low time and labor requirement and superior quality, far outweigh its costs. Thus, the segment is expected to gain rapid traction from 2017. It finds wide application in HVAC assemblies that are made offsite. Since it is created in factories, it is easy to monitor the quality, optimize onsite time requirement and increase productivity through additional assemblies and sub-assemblies.
Industry is expected to witness increased adoption of various technologies such as employee tracking equipment, wearable devices, and drone surveying in order to reduce capital costs, improve productivity, and enhance personnel safety. IoT is expected to play a very important role in ensuring operational efficiency. Moreover, advent of VR/AR would allow for detection of flaws and defects and implement effective countermeasures and ensure job safety before the project initiation. This would provide further growth impetus for the industry.
On the other hand, interoperability issues and lack of technical knowhow would hamper adoption rates during the initial stages of implementation of these technologies. However, adoption of these technologies by few progressive contractors, and the requirement to gain competitive edge over the competition will lead to increased inclination of leading players towards adoption of such novel technologies through the forecast period.
Green Construction Market
Increasing environmental awareness across the globe has influenced industry players to opt for eco-friendly solutions across sectors. Major players in the construction engineering industry are increasingly inclined towards adoption of green construction techniques, and the trend is expected to gain further traction in the near future. Research highlights have reported around 10% increase in the revenues after the adoption of these methodologies, wherein building design & construction and building operations & maintenance were the highly preferred areas. High initial capital investment is the biggest challenge for organizations. Thus, the developed economies of Western Europe and North America are expected to be key growth regions for this segment over the forecast period.
Design-build, integrated project delivery and public private partnerships (P3s) are expected to gain popularity for project delivery. Collaborative approaches are gaining popularity over the design-bid-build project method. P3s in the construction engineering industry have gained significant traction across various countries. For instance, in May 2015, P3 Kentucky along with local and state leaders of Kentucky, will assist in solving water supply & sewer improvements, public infrastructural investments and economic development projects.
Major construction engineering industry participants include ACS, Hochtief AG, China Communications Construction Group Ltd., Vinci, Bechtel, Technip, among many others. Moreover, industry is characterized by several local and regional players dominating the regional markets. Exploring international boundaries, acquisitions, achieving competitive costs through utilization of advanced technologies and collaborations are expected to be the part of inorganic growth strategies over the years to come. For instance, Deere initiated the plan of acquiring Wirtgen Group, a Germany-based road construction company, in June 2017. This deal is expected to reach its final closure in early 2018.
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