Reinventing the construction industry

Boosting productivity and building capacity in booming markets are the two biggest challenges facing the global construction sector in 2018, says Turner & Townsend’s global chief executive officer Vincent Clancy.

Clancy (pictured), who was named CEO of the Year at the UK’s Building Awards earlier this month, has set the strategic direction of the global program management and professional services firm since 2008.

During his time at the helm, Clancy has overseen a period of strong growth and global diversification, doubling turnover and growing headcount to almost 5,0 people, including more than 4 in Australia.

Among the current projects underway in Australia are Canberra’s Light Rail, the new Perth Children’s Hospital, Jewel, Sydney One, Sydney Metro, Snowy Hydro and 29 new schools in New South Wales.

It’s been a “positive year” for the company, Clancy says, with revenues through its real estate business increasing by 21 per cent in the last financial year alone.

“We are seeing demand around the world,” he adds.

But where that money is coming from has shifted away from banking, finance and professional services, and towards the high-tech sector, he says.

A significant proportion of Turner & Townsend’s work with big corporates is in “consolidation” mode, as agile working and smaller office footprints cut costs.

In comparison, the rise of the world’s Amazons, Googles, Facebooks and Ubers is driving “massive demand” for data and distribution centres.

For example, Turner & Townsend is working with Uber in Latin America to support an ambitious real estate program including 2 new Uber ‘Greenlight’ hubs, six corporate offices and two centres of excellence.

“This shift towards high-tech companies is quite marked and we expect it to continue,” he says.

Projects are also getting “bigger and bolder” as “cities try to reinvent themselves”.

“We are seeing a lot of demand around the world for large-scale, mixed-use urban regeneration projects.”

For example, Turner & Townsend is currently providing project management on the $14 billion Battersea Power Station urban regeneration three-phase project positioned along the South Bank of London’s Thames. Read more about Europe’s largest urban revitalisation project in our back issue of Property Australia.

“Building capacity where we need it – whether that’s London, Shanghai, Sydney or Johannesburg – is a big challenge for us and for the industry as a whole,” he adds.

Turner & Townsend currently operates 105 offices in 44 countries. This market diversity does have its downside, he admits.

“We are exposed to markets on the way up and on the way down – we always face that challenge.”

Asia is “pretty tough” at the moment as it “rebalances its approach to investment”. And Africa is in slowdown “on the back of a natural resources decline which has spread to business confidence”. But overall, global property markets are “pretty strong”.

Clancy says the biggest issues his company faces – and one being tackled by construction companies around the world – is to enhance productivity and build skills capacity.

According to McKinsey, construction sector labour-productivity growth has averaged one per cent per year for the last two decades, compared with 2.8 per cent for the total world economy, and 3.6 per cent for manufacturing.

McKinsey estimates that $1.6 trillion in additional value could be created through higher productivity in the construction industry.

Just last week, the UK Government allocated almost $300 million in funding for a Construction Sector Deal. This aims to tackle low productivity levels in the construction sector through innovation and R&D.

Clancy says the funding is a good start, and other nations like Australia should follow suit.

“The construction industry has been one of the slowest to adopt digital technology, but the industry as a whole is now getting on with it. But it demands a major rethink in the way we do business,” he says.

He suspects technological investment is recalibrating the industry in favour of big firms.

“Companies are getting bigger because it’s the only way they can fund the technological investment required to increase their productivity,” he says.

Also announced last week, the UK Government has promised to make offsite construction the delivery mechanism of choice for a wide range of projects, which it hopes will enable the UK’s construction industry to expand its offsite manufacturing capabilities.

Australia should watch this space closely, Clancy advises.

“The high labour costs and scarcity of labour in Australia are challenging for the whole industry. We need to innovate to improve productivity. And that means investing in skills, adopting digital technology and embracing off-site manufacturing.”