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2017 was an important year for the construction industry. Consultancy firm McKinsey estimates the sector to now be worth around $10 trillion, potentially growing up to $14 trillion by 2025. While the numbers are impressive, what made 2017 so important for the construction industry was realizing its inefficiencies. The early introduction of advanced technologies have highlighted the vast gains to be found from modernizing construction processes.
An article in the Economist last year entitled ‘Efficiency eludes the construction industry’ suggests that American builders’ productivity has plunged by half since the late 1960s. Whilst a McKinsey report concluded that while some construction companies are adopting new digital tools to enhance their productivity, including 5D modeling and data capture from drones, they say that tends to be the exception to the rule. “Most companies, however, have legacy systems and unique requirements for budgets, planning, and operations, so change is difficult,” the report suggested.
The McKinsey report highlighted shortfalls in accountability, leading to unclear organizational structures and financial incentives that are not aligned with project goals.
It spoke about the highly publicised shortfall of talent, party due to an adversity to hiring engineers from outside of construction. Without the flow of new talent and ideas, the construction industry has found itself lacking in the efficiency and collaboration that we have seen digitization bring to other industries.
2017 saw the beginning of a new chapter for construction however. In November, for example, Nashville-based Built Technologies raised $21 million to “bring construction lending into the digital age.” It was one of many deals that made it clear that the construction industry was undergoing a massive modernization.
Later the same month, Palo Alto-based Buildup raised $7 million for its cross-platform software aimed at helping contractors, developers, and property managers identify and fix tasks and issues related to a job. “The construction industry lags behind other markets in the overall productivity of its workers,” explained Buildup investor TLV Partners’ managing partner Eitan Bek. “Buildup addresses the longest phase of a construction project: building.”
Then in mid-December, database technology giant Oracle announced its intention to buy Aconex, an Australian team collaboration software company focused on the construction industry. “Delivering projects on time and on budget are the highest strategic imperatives for any construction and engineering organization,” noted Mike Sicilia, SVP and GM for Oracle’s construction and engineering global business unit. “With the addition of Aconex, we significantly advance our vision of offering the most comprehensive cloud-based project management solution for this $14 trillion industry.”
Earlier in 2017, EquipmentShare, the startup dubbed “Airbnb for construction,” raised $20 million to grow its marketplace for selling and lending equipment, while BuildingConnected raised $22 million on the back of its bid procurement platform for building contractors. Emagispace raised $4.2 million to grow its modular building block technology, while Belgian startup Aproplan gathered in the region of $6 million for its “Salesforce for construction” platform.
During 2017 Building Information Modelling (BIM) evolved and gained traction in many markets, not least the UK. Other technologies such as drones have also proven themselves to be important elements of the future construction industry. Drones can automate, capture, and process a variety of imagery from construction sites; doing it quickly and safely using unmanned aerial vehicles (UAVs). California-based industrial drone company Kespry raised $33 million late last year from investors such as Cisco, Shell Technology Ventures, and Lightspeed Venture Partners.
In post-construction phases we have also seen rapid digitization in real estate. The online real estate firm Zillow Group, for example, acquired New Home Feed to help builders market newly constructed properties. While many firms are now adapting 3D BIM to give buyers a chance for a virtual walk-through their home before construction, enabling a new level of consumer engagement and customization.
The construction industry reached a tipping point by the end of 2017, which will no doubt define 2018 and the years ahead. Modern technology has presented the opportunity, it is now down to the industry itself to shake off its resistance to change and embrace these game-changing tools. Those who do will find themselves in new efficient era of reduced costs, quicker turn-arounds and better safety; those who don’t will likely be left behind.