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Construction, Engineering Trends Are Worth Watching

Sky scrapers located in China
Megaprojects costing $1 billion or more—such as the Shanghai Tower in China, currently under construction—are on the rise, according to a new summary of trends in the architecture, engineering, and construction professions. A resulting trend is one that involves companies merging or forming partnerships to win these new, larger project contracts. Wikimedia Commons/Ferox Seneca

Research conducted throughout 2012 has identified the top 10 trends that have influenced the architecture, engineering, and construction markets—and that will continue to do so in 2013 and beyond.

January 15, 2013—The management consulting firm FMI, headquartered in Raleigh, North Carolina, has issued a summary of the top 10 trends in the architecture, engineering and construction (AEC) industry—which it has identified and reported on in white papers throughout 2012—that will continue to influence the nature of the professions throughout 2013 and thereafter. The trends are wide in scope but indicate that AEC professionals who are planning for the near-term future must learn to maximize efficiency and productivity in order to protect their already tight profit margins. And as new leaders emerge within companies—as they increasingly are—they must remain agile and responsive to new trends, embracing global influences and the principles of sustainability.

Strategic thinking among leaders is of greatest importance for structural and civil engineering firms, according to Ron Magnus, the managing director and a principal of the Center for Strategic Leadership at FMI. Magnus wrote in response to written questions posed by Civil Engineering online. This is particularly the case in today’s world of volatility, uncertainty, complexity, and ambiguity, the report states.

Making sure that firms choose their next generation of leaders thoughtfully so that continuity remains while new strategic plans for the future are implemented is also crucial, according to the report. Every day for the next 16 years, an average of 10,000 baby boomers—the generation born between 1946 and 1964—will reach the age of 65, a fact that will dramatically alter the composition of the AEC industry, the report notes.

Magnus pointed out that the profession operates within a fast-moving world that is experiencing a great deal of volatility and unknowns, particularly in commodity and market pricing, which will affect and be affected by the globalization of the AEC industry. “What happens in China, Israel, Iran, Italy, et cetera, affects us directly,” Magnus said. For example, China is currently the primary world buyer, and if it experiences an economic downturn and stops buying U.S. products, a global recession would return quickly, he said. The Middle East also affects commodity and market pricing: If Iran chose to close the Hormuz Strait, for example, oil supplies would decrease by about 35 percent, according to Magnus. The recession that the European Union is currently experiencing could also impact its member countries’ ability to purchase from the United States.

“The uncertainty [of economic issues in these countries] has the U.S. economy going slowly, and any of these types of events will spark more concern,” Magnus said. “[The] flip side is if they get it right, so will the U.S. The interdependence is unlike any time in history.”

Along with the growing importance of a global economy in the design and construction market, there has been a “breathtaking bifurcation” in project and program sizes over the last six years, according to Magnus. Owners’ expectations have shifted: There were virtually no billion-dollar projects or programs in 2005, he said, but there were more than 125 projects or programs at the billion-dollar mark in 2011, and twice that number exceeding $500 million. “This has broad implications, [because] only a few can play,” Magnus said. “If you are not in it now, you are behind in terms of competence in managing projects or programs of this size and being able to compete with those who have been doing it for five years already.” A firm’s ability to find its “market size niche” is becoming more of a strategic imperative, he said.

The shift toward ever-larger projects during the recent recession was an unexpected finding, Magnus said. The report states that the development has led to a continuing trend in mergers, acquisitions, partnerships, and consortia formed to create actual or de facto super-sized A/E/C firms to handle the megaprojects. And Magnus said the growth in project size has also created “brutal” pressure on the profit margins of those projects of what used to be considered typically sized projects.

Firms need to innovate as a result of declining profit margins, the FMI report notes, becoming specialists in their own strategic niches. This means that firms will need to make productivity and efficiency a strategic priority, and this can include a shift toward modularization and prefabrication in their projects, even as they build closer relationships with customers to meet clients’ specific needs.

The report also notes that as they look toward the new year, A/E/C firms will need to thoroughly understand the transforming federal construction sector as budgets become smaller and national security priorities shift. There is also a move toward convincing a “lost generation” of workers who have graduated from college but have been unable to find full-time work to move into the construction sector, the report notes. Another trend listed in the report reflects the changing roles and levels of influence of trade unions.

While the trends enumerated in the summary report were extrapolated from papers published at various times over the course of the last year, Magnus said the effects they will have on the AEC industry are likely to continue to be felt for years to come. “I don’t think we feel that any of these are really short term,” he said.


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