In June, the level of residential construction work fell for six months in a row at its fastest rate since May 2020. High mortgage rates, which hit their highest peak in 15 years this July, have put more pressure on the housing market.
But there’s a second, more promising edge to this coin for the construction industry. While residential demand is falling, commercial opportunities are burgeoning. It is the best-performing segment in UK construction. This year it is expected to recover by 2.8% to an estimated market size of over £19bn. Demand for commercial work in London recently reached a 20-year high.
As the industry cashes in on this commercial development, construction firms should consider how they can adjust their operations to increase profit margins. Planning and procurement present one of the best areas to do so.
Construction contractors have traditionally relied on historic relationships to hire equipment and supplies. That made the most sense from the perspective of efficiency. They didn’t need to worry about building new relationships – they could just return to the same contacts who they already worked with before, even if the supplier’s site was far from the project.
Recent technological progress has, however, introduced the opportunity to find more local suppliers that can provide just as good of a service. Digital platforms can help contractors find, review and choose the right suppliers for the right jobs. As such, these advancements can help firms reduce costs particularly now, amid a thriving commercial construction market.
A localised supply chain would tackle long-distance transport and the logistical complexities that often accompany sourcing equipment and materials from far away. Instead, contractors could have access to resources much closer to their projects. That means arrival times are likely to be more accurate, the cost of transport decreases and the level of carbon emissions emitted falls.
Construction sites can be chaotic. Nowhere is this truer than at commercial construction sites, as these tend to be more varied and complex than residential builds.
When firms are working on large-scale commercial projects, liaising with different stakeholders, that’s when timelines start to be pushed and keeping track of orders becomes complicated. It’s also where inefficiencies begin to creep in.
Contractors have, typically, used very basic technology to manage projects and procurement – simple spreadsheets or pen and paper. That doesn’t only demand more time and organisational tedium, but also raises the risk of misplacing and forgetting about equipment.
Anyone who has worked in construction will have heard at least one story about a piece of equipment that unexpectedly turns up in some obscure corner of a site, days or even weeks after its supposed return date. That’s because methods used to keep track of items are imperfect.
These methods are made even more complex by live hire reports. Suppliers tend to offer basic platforms where contractors can track their orders. The problem is that contractors often use multiple suppliers per project, which entails tracing orders and checking numerous hire reports across different platforms. Naturally, contractors spend hours trying to understand what equipment is and isn’t available.
None of these problems really need to happen to those working in commercial construction. Digital platforms exist that can keep track of equipment from multiple suppliers, and over multiple sites, so that project managers can know where everything is at any given moment, within a few clicks.
Yet, this requires a mindset shift away from relying on pen, paper and phone calls, and towards trusting digital platforms that can open new ways of working. When it comes to regulation, health and safety is the priority, not just in commercial construction but in any project. To ensure the safety of workers, customers and visitors, most contractors first need to adhere to more than 25 regulations.
For instance, any truck that travels into London for a commercial build must be backed by the Fleet Operator Recognition Scheme (FORS) certification. Then, other projects might need different certification levels, with suppliers requiring a FORS ‘Gold’ certification to enter sites. Separately, as net zero strategies become more scrutinised across the commercial sector, it is worth ensuring that any green credentials are also being met.
This might seem like a huge challenge. But it would be even more difficult to realise at the last minute that a project has been sourced by a supplier without the required accreditation in place. Accessing digital project management tools can streamline this process, quickly and simply showing which pieces of equipment need to meet which accreditations.
In short, as more contractors start to move into the commercial building sector, reliance on manual communication methods and outdated processes must decrease. Instead, the sector must start to embrace technological advancements capable of streamlining project management and increasing visibility.
Neeral Shah is chief executive and founder of YardLink