In the wake By COVID-19 this spring, construction sites nationwide emptied alongside nearby restaurants, retail stores, offices, and other commercial establishments. Debates ensued over whether the seven million employees in the construction industry should be considered "essential" as regulations continued to change on the operation of construction sites. Meanwhile, the demand for projects has steadily decreased.
Amid the chaos, construction companies faced an existential question: How will they survive? This question is as relevant today as it was in April. As one of the least digitized sectors of our economy, construction is poised for the technological revolution.
Construction is a huge $ 1.3 trillion industry in the United States, a complex ecosystem of lenders, owners, developers, architects, general contractors, subcontractors, and more. Although each construction project has a combination of these key roles, the construction process itself is highly variable depending on the type of asset. About 41% of the value of home construction is in residential real estate, 25% in commercial real estate and 34% in industrial projects. Since each type of asset, and even sub-assets within these classes, tends to involve a different set of stakeholders and processes, most construction firms specialize in one or a few groups of assets.
Regardless of the type of asset, there are four key challenges in construction projects:
High fragmentation: In addition to the developer, architect, engineer and general contractor, the projects could involve hundreds of subcontractors with specialist skills. As the scope of the project grows, coordination between parties becomes increasingly difficult and decision making slows down.
Poor communication: With so many different parties both in the field and in the office, it is often difficult to convey information from one party to the other. Poor communication and poor availability of project data account for 48% of all rework on US construction sites, costing the industry more than $ 31 billion annually according to FMI research.
Lack of data transparency: Manual data collection and data entry are still common on construction sites. In addition to being time-consuming and error-prone, the lack of real-time data is extremely limited, so decision making is often based on outdated information.
Shortage of skilled labor: The construction workforce is aging faster than the younger population joining it, leading to a labor shortage especially for skilled trades that can require years of training and certification. The shortage drives up labor costs across the industry, particularly in the residential sector, which traditionally sees greater attrition due to its more variable project demand.
A boom in construction technology
Too many of the key processes involved in managing multimillion-dollar construction projects are done in Excel or even with pen and paper. The lack of technological sophistication on construction sites contributes materially to construction delays, budget shortfalls and increased risk to site safety. Tech startups are emerging to help solve these problems.
Here are the main categories in which we are seeing the emergence of tech startups for construction.
1. Design of the project
- How it works today: While designing a project, asset owners and / or developers develop site proposals and can work with funders to manage project funding.
- Key challenges: Today's construction loan management processes are laborious and time-consuming given the complexity of the loan extraction process.
- How technology can meet the challenges: Design software like Spacemaker AI can help developers create site proposals, while construction loan financing software like Built Technologies and Rabbet are helping lenders and developers manage the raffle process more efficiently.
2. Design and engineering
- How it works today: Developers work with design teams, architects and engineers to turn ideas into projects.
- Key challenges: Because design and engineering teams are often isolated from contractors, it is difficult for designers and engineers to know the real-time impact of their decisions on final cost or project timing. Lack of coordination with construction teams can lead to time-consuming changes.
- How technology can meet the challenges: Of all the elements of the construction process, the design and engineering process itself is the most technologically sophisticated today, with relatively high adoption of software such as Autodesk to help with design documentation, specification development, quality assurance and more. Autodesk is moving downstream to offer a suite of solutions that includes construction management, providing greater connectivity between teams.