There may be less work in 2012, but that doesn’t mean less opportunity for smart construction firms

There may be less work in 2012, but that doesn’t mean less opportunity for smart construction firms

Expect 2012 to start with industry forecasters shading down their estimates for construction growth.

But while workload is likely to decrease in 2012, that does not mean that the opportunities for smart thinking and resourceful construction firms need also shrink.

I would argue that the very decline in the economy and the stresses caused open up scope for entrepreneurial thinkers with ideas for improving the built environment.

Before getting too gloomy over the prospects of a worse than expected 2012 in construction, it’s worth seeing why forecaster might downgrade growth.

Ironically part of the reason is that the official construction output figures so far for 2011 were stronger than expected. So the base is higher.

Broadly speaking the output data suggest that it’s taking longer for the public sector cuts to filter through than first thought. And the infrastructure sector has been holding up quite well.

Sadly construction firms don’t employ people or buy building materials on past good fortune, so any drop even from a higher base will be real.

But not all of the downgrade, I suspect, will be down to base effects.

Increasing uncertainty in the broader economy will take its toll, with prospective building projects being cancelled, shelved or not even considered.

I sense we shall see the forecasters downgrading their expectations for the commercial sector.

Now this is a bother.

Much hope has been pinned on a bounce back in the giant commercial property sector. Next year was not really expected to see a full-blown upswing in construction of shops and offices, but there were expectation that plans would be making their way through the system heralding a brighter 2013.

These hopes have waned.

The latest survey into commercial development activity results from property consultant Savills points to worsening prospects. It shows activity declining for the fifth consecutive month in November.

It found commercial developers less confident about the future than at any time since February 2009.

To add further gloom the British Property Federation recently put out a release revealing its concerns over the debt refinancing challenge facing the property industry as the Eurozone crisis puts the squeeze on available funds.

Prospects in retail look exceptionally bleak, outside the investment in new stores being made by the mega-retailers. And the recently released Portas Review into the state of Britain’s high streets highlighted the plight of the retail sector.

A stark and real example was provided recently by Sir Philip Green, who runs the Topshop to BHS business Arcadia. He announced that more than half of the 450 shops he has coming up for lease renewals over the next three years will be closed.

He might open a few new stores, but the implication is that Arcadia’s retail strategy is looking increasingly at internet sales.

Internet sales now represent more than 10% of all shopping and the volume is growing rapidly, eating into the struggling in-store marketplace.

But it is not just shops that are lying empty. In secondary locations there are increasing numbers of offices vacant.

Mat Oakley, Savills director of commercial research, says that vacancy rates are not as scary as in the 1990s downturn, but the pattern of vacancies is uneven. Many towns and cities just have too much of the wrong kind of offices, with vacancy rates in some are at or above an uncomfortable 20%.

Add to this the huge number of empty homes on the nation’s asset register and it is clear that a whole swathe of the UK built environment is not fit, ready and available for purpose.

The issue of vacant buildings is not just the waste of an opportunity. Buildings standing empty have a negative impact on both business and residential districts. They signal decay. That is unattractive. And they dilute the potential vibrancy of the urban centre, which impacts on the businesses and community that remain.

So we should expect to see hard-pressed councils in league with local business folk and their communities working hard to bring life back into fading urban centres.

And the very depths of this economic slump will mean that everyone will be more receptive to fresh and radical thinking. There is no room for complacency.

So as retailers retreat from the high street, as more offices become vacant within Britain’s towns and cities, as more homes lie empty and as public buildings are vacated as the cuts bite a major opportunity for construction is opening.

The built environment is not consumed as such. It has purpose. So the question for construction firms eager and willing to find a new source of work is how to repurpose redundant buildings and infrastructure to meet the needs and aspirations of tomorrow.

Encouragingly there appears to be a growing political will to address the problems of decay on the high street and this will no doubt extend to embrace more widely the need to repurpose the built environment.

Yes, it is an unfortunate trend that seems to be leading to TV “gurus” such as Mary Portas being engaged to undertake Governmental reviews. There is significant danger this will lead to considered thought, research and dispassionate analysis being replaced by cliché, prejudice and sound bites.

But there’s an upside. Important but unsexy topics do get broader media coverage. And, despite any reservations over the output, the topic covered by the Portas Review is extremely important for the construction industry.

It should be studied hard because within it (for all its faults and there are many) and within the more serious research that accompanies Portas’s 28-recommendations I suspect there are germs of opportunities. Furthermore the Government appears to be taking the issue seriously with the appointment of a minister to oversee progress. Grant Shapps has that task.

The solutions, however, will not come simply from those with smart building skills. The answers more likely will develop from bringing together local businesses, active members of the community, local government officials and politicians together to create a shared vision that matches what is desired with what is possible.

Then the important bit will be to develop smart and innovative ways to fund that vision.

This isn’t anything new. But it is often in crisis that radical solutions come to the fore.

The scale of redundancy in Britain’s built environment may not be that huge proportionately, but it is likely to grow and as a sum it potentially represents £100s billions of lost value.

Here’s a quick sum to get the scale. The nation’s buildings and infrastructure sit on the national accounts as assets worth about £6 trillion. If we consider that more than 5% of that is standing idle that’s about £300 billion of potential.

Looked at as opportunities for work here’s another set of numbers. The British Retail Consortium estimates that 11% of the nations almost 290,000 shops lying empty. That’s 30,000 shops.

Despite, or perhaps because, councils will be under increasing financial stress they will be eager to revitalise their business infrastructure. They will be up for listening to ideas.

Here construction firms, particularly those with local knowledge who can tap into councils, local businesses and communities, have the potential to play a huge role in prompting debate and working up plans that may be radical but are doable technically and financially.

The need to repurpose buildings as a precursor to economic revival is now rising up the political agenda. What the buildings become is not the point, so long as they gain a purpose and breathe life back into exhausted urban centres.

This represents an opportunity for construction firms with vision to prompt and foster work that might not otherwise take place.

One thought on “There may be less work in 2012, but that doesn’t mean less opportunity for smart construction firms

  1. Great article, I found the information refreshing instead of the usual negative review or forecast highlighting ‘things are bad’ and that’s it. This article was inspiring, giving food for thought on how we can all as a business adapt to this ever changing industry.

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