INDUSTRY INSIGHTS

Construction and real estate

How would you describe the impact of COVID-19 on your business?

Survey highlights

Seventy-four percent of respondents in this industry were from North America or EMEA, and over 28% of respondents disclosed revenue between USD 75 million and USD 249 million. Overall, this industry had a smaller proportion of respondents in the reshape phase, 16%, with most respondents, 58%, in the recovery phase. Prior to the pandemic, 80% of respondents did not include a pandemic or major health crisis in the top 10 risks on their risk register, and 66% did not have a plan in place. Over 43% of respondents agreed that their businesses were impacted by COVID-19 but resilient. This is in line with the average from all industries. However, a higher number of respondents in the construction and real estate industry said their businesses had remained steady during COVID-19 with little impact (24% vs. the average 19%). Still, as with other industries, most respondents (56%) expect COVID-19 to affect their businesses for at least six more months, with 32% expecting the impact to extend to over a year. More respondents in this industry than in others reported a supply-led impact on their supply chain at 28% (16%), which is consistent with limitations to source materials during the pandemic. Even so, 41% of respondents reported that their supply chain was not impacted by the COVID-19. Ninety-eight percent of respondents stated that their company’s risk management response efforts to COVID-19 were sufficient, but still, 38% agreed that more planning would have been beneficial.

Industry insights

For the construction and real estate industries, wellbeing and employee retention are new priorities. Finding and retaining key talent with the correct skill sets has always been a challenge in the construction industry, and it has become more acute in recent years as the workforce has aged and the industry has struggled to attract younger talent. It is thus not surprising that respondents in this industry ranked retaining key employees higher than the overall survey sample. Employee wellbeing has not traditionally been a focus in the construction space, given the industry’s more transient workforce and traditional workplace culture. However, the pandemic has driven many organizations to give top priority to protecting their people, and the survey results indicate this is the case for construction and real estate firms as well. The construction industry has traditionally been slower than other industries to pilot and implement new technologies and digitize operations. Technology has been a hot topic in the wake of COVID-19, with many organizations accelerating their innovation efforts in this space. However, it is disappointing to see it remain slightly behind the general survey sample in terms of importance. Asset investment/management and liquidity planning are reshaping priorities for the sector. Contractors in many geographies have begun the challenging work of shifting business strategies to reflect new economic realities in the wake of the global pandemic. Large construction organizations are reviewing their business models in response to reduced demand in commercial, hospitality and urban multifamily construction, hoping to capture growth in segments like civil infrastructure (where project volume has remained steady) or industrial and logistics, where projects have accelerated as large retailers expand their e-commerce and delivery capabilities. Other contractors are taking the opportunity to invest in adjacent areas such as asset ownership and commercialization, given the higher margins traditionally associated with these classes of business.

Proportion of organizations facing supply chain issues

Respondents in the construction and real estate industries ranked climate change higher than most other respondents, which is unsurprising given the impact of climate-related extreme weather on the industry. All stakeholders in the built world — project developers, governments, contractors, architects and engineers — are increasingly interested in ways to build more climate-resilient and sustainable infrastructure, and in building assets to better manage the expected volatility if climate change becomes more difficult to control in the near and distant future. Additionally, the industry is facing increasing pressure from investors and other stakeholders to uphold higher ESG standards, which adds a reputational element to this challenge. Firms in the construction space are aware of this pressure, as the industry is traditionally perceived to be less responsive than the general population to climate change and other ESG elements.

Future shocks

  1. Economic disruption
  2. Another health crisis/pandemic
  3. Climate change
  4. Business model disruption
  5. Technological disruption