SINGAPORE (EDGEPROP) - The construction sector has been one of the worst hit by the Covid-19 outbreak. The pandemic has laid bare some vulnerabilities, including supply chain disruptions and the labour-intensive construction process. Work at construction sites has also been halted for four months due to high infection rates at foreign workers’ dormitories.
While it is too early to tell what impact this will have on construction costs, new government regulations and safe management measures are likely to lead to a drop in productivity and efficiency at construction sites as the number of workers allowed on site will be fewer than six months ago. A number of large construction sites are looking for on-site accommodation rather than off-site dormitories to house their foreign workers.
The combination of higher labour and material costs is likely to lead to higher overall construction cost and a longer construction period, says John Butler, managing director for Asia Pacific (APAC) & Middle East and North Africa (MENA) at Linesight, an international construction consultancy firm specialising in cost management and construction project management.
Covid-19 has also restricted delivery schedules and material supply has become an issue. “Everyone’s going to try and diversify their supply chain to mitigate the risks, and this is not confined to Singapore or the construction sector,” says Butler.
To improve efficiency and control costs, construction firms are constantly trying to find ways to optimise the supply chain. Compared to other industries like manufacturing, the construction sector in Singapore is still a very labour-intensive industry despite top-down efforts in recent years to cut back on the reliance on foreign labour, adds Butler.
Butler of Linesight “It needs [a catalyst] like the Covid pandemic to increase digitalisation of the whole construction industry.” (Picture: Albert Chua/The Edge Singapore)
Some property developers estimate an increase in construction costs of 20% to 25% in the future. “Developers may have to re-evaluate their return on investment and find ways to increase construction productivity,” adds Butler.
He sees the current market challenges as just the catalyst needed for a broader adoption of digitalisation within the construction industry. “Singapore’s construction market is extremely competitive,” observes Butler. “Despite its relatively large size in the overall economy, most contractors operate at relatively low, single-digit profit margins. Contractors also take on a large amount of risk for each project.”
Besides raising the foreign workers’ levy, the government has also mandated the use of Precast Prefabricated Volumetric (PPVC) construction in most of the land tenders in the government land sales programme. Under PPVC, most of the construction is carried out in a factory and assembled “lego-style” on site.
With PPVC, the finished product is of higher quality. Construction period is also shortened, and impact on the local environment in terms of noise and dust pollution, is also reduced.
Offsite manufacturing of PPVC also helps reduce the number of construction workers on site. “All this will improve the cost, schedule, and quality of the industrial process,” says Butler. Hence, the Building and Construction Authority (BCA) has been encouraging the wide adoption of PPVC.
Indeed, most of the construction firms around the world have turned to technology to boost productivity in terms of construction costs and completion time, in order to gain an edge over their competitors, he adds.
Compared to other industries like manufacturing, the construction sector in Singapore is still a very labour-intensive industry. (Picture:The Edge Singapore)
“Your greatest ability to save costs or add value is in the first 30% of your building design, because at that stage, you’ve already set what the building will look like,” says Butler. “The idea is to try and put in as much effort in the early stage of the design or construction phase, which will allow you more opportunities to add value and save money going forward.”
Building Information Models (BIM) are now extensively used in construction digitalisation. The 3D model-based process combines architecture, engineering, and construction plans into one versatile tool that improves the planning, design, construction, and eventually management of a building.
“This is what we mean by digitalisation in construction,” says Butler. “It’s to try to do as much as we can before we hit the site, and we come up with all the eventualities that might impact the construction schedule.”
An increasing number of Linesight’s clients are requesting for the 3D modelling tool. “Our clients in Singapore and around the world have become much more sophisticated in terms of understanding the benefits the model brings to the table at different design and construction stages,” he notes. “As a result, demand for 3D modelling has increased dramatically.”
One of the sectors that has seen widespread use of modelling during the construction process are data centres, says Butler. Linesight works with most global data centre providers and has delivered 215 data centre projects so far.
Two recent data centre projects it delivered utilised BIM modelling from the initial budgeting phase to post-delivery maintenance phase. This has helped Linesight to achieve accurate and quick budget estimates for its client, to provide up-to-date project costs, as well as track changes made to the project, and report cost and time implications to accurately advise its clients.
The company says it is assessing the use of drone technology and AR/VR technologies for future projects in Asia. “These technologies will be used for on-site surveillance and to streamline workflow,” says Butler. “They provide visualisation for valuation works and for progressive reviews of on-going works on site.”
Looking ahead, Butler expects a relatively tough road to recovery for the Singapore construction industry as corporate real estate demands shift and office development plans are shelved in light of a weaker economic outlook.
As a result of the Covid-19 pandemic, factors such as higher labour and material costs will likely translate into higher overall construction costs, and some construction projects in Singapore may end up costing more and taking longer to complete. (Picture: The Edge Singapore)
All of these could translate into fewer office developments in the pipeline over the coming years. Coupled with successful work from home (WFH) arrangements, some corporate real estate senior executives have indicated that they could be looking to reduce their office space requirements in the future, says Butler.
“Office space use had already been evolving over the past 10 years as corporate real estate heads sought to introduce more agile spaces in their office layouts, especially with hot desking and flexible spaces within the function of the office,” he adds.
With WFH becoming more prevalent, and lower demand for office space, there could be an emptying out of prime office buildings in the CBD and Marina Bay. “There are successful alternative areas for office space [in Singapore] such as Changi Business Park and Mapletree Business City,” says Butler. “So again, you might see a shift [in prime office demand] from the CBD into more regional or suburban areas where space is relatively more affordable.”
This could take some time to materialise as companies are stuck in a “holding pattern”, he notes. “They are still unsure about what the new office environment in a post-Covid world will look like.”
Meanwhile, Butler expects demand in the Singapore construction industry to contract by between 14% and 20%, with the decline coming predominantly from the private sector. “Recovery is likely to be slow,” he reckons. “There will definitely be some pain along the way for some players.”
One of the flashpoints is likely to be construction contractual claims and disputes, which have yet to be manifested due to government’s temporary relief bills. That has prevented firms from using the pandemic to their advantage and imposing obligations on a contractor to finish a construction project.
“The issue of who pays for the fixed costs during the pause in construction timeline will likely come to the fore,” says Butler. “Will it be the responsibility of the contractor and subcontractors to bear the burden? To be honest, that still hasn’t been worked out yet.”
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