Construction and built environment companies need to digitize and embrace Artificial Intelligence (AI) because they are at the nexus of the world's greatest challenges - the need for security, clean energy, housing, and modern infrastructure. Yet the sector is struggling to meet these demands, as well as the world's other major challenge, a shortage of skilled workers. A trio of construction sector tech firms is embracing AI and spoke about the challenges of their customers.
The global economy faces poor productivity, inflation, and a skills shortage. The construction sector has these same challenges and is vital to the global economy. A recent European Union (EU) paper on the sector found it employed 18 million people across the trading union and is responsible for 9% of gross domestic product (GDP). Europe is also trying to wean itself off Russian natural gas for energy, yet Laurent Bataille, Vice President (VP) for European Operations at Schneider Electric, recently told attendees at their Innovation Summit in Copenhagen:
Europe's rate of electrification has stagnated at 21%. Electrifying more use cases is going to be key for economic competitiveness, security, and growth.
Electrification is not the only stagnation in Europe; the continent's economy was struggling to grow before a global trade war was sparked by US President Donald Trump. Tariffs and the rise of China as a leader in manufacturing and retail have impacted Europe's top firms in automotive, engineering, commerce, and luxury goods. On stage, Bataille adds:
Europe stands at a pivotal crossroads: business as usual or face up to the opportunity for economic growth and leadership.
Europe is not alone in these challenges; all of the world's economies face the same difficulties to a higher or lesser extent. Olivier Blum, Chief Executive Officer (CEO) of Schneider Electric, didn't say "excited" once in his frank keynote at the firm's Innovation Summit; he does, though, cite the potential of AI:
Digital and AI is the answer. We can bring rich insights so that our front-line people have more impact. Energy prices and climate instability are here to stay.
Within the sector, the skills shortage and slow uptake of the latest technologies are particular problems. Yves Padrines, CEO of Nemetschek Group, which provides software to architecture and construction firms, says:
90% of projects are late, 40% of CO2 emissions come from the construction industry, there is a huge shortage of manpower, so being more efficient is key. We need a big productivity gain as there are seven million employees missing in construction, and in North America, the average age of construction workers is 55.
Andy Berry, CEO of VertiGIS, a Geographic Information System (GIS) software development company, adds:
GIS has been around for a long time, but there is not the next wave of GIS employees coming out of universities.
He says that the slow market conditions mean major consultancies with GIS practices are reluctant to invest in a bench of talent at present.
Technology has not ignored the sector. Building Information Modelling (BIM) is established and central to many procurements, digital twin technology is also established, and there has been some growth in 3D scanning and printing, as well as the use of drones, Internet of Things (IoT) sensors, virtual reality, and of course AI.
A study of AI in construction by the Royal Institute of Chartered Surveyors (RICS) finds that 45% of respondents have no AI implementation in the business, and 34% are in the pilot stage. RICS states:
This tentative approach suggests the industry recognizes AI's potential benefits but remains uncertain about scalability, integration or business value.
But digitization and new technology are growing in the sector. Earlier this year Mark Cotton, Chief Information Officer (CIO) with major UK construction firm Galliford Try, told diginomica:
I often see construction being quoted as backward at digital; I take exception to that. We are engineers and problem solvers with some extraordinarily bright people in our business who know how to utilize technology to its maximum.
Padrines at Nemetschek Group agrees with the CIO:
Digitization is growing, and one of the reasons is that business as usual for construction companies is not an option any longer.
That digitization is building from some low foundations. Padrines says they still see a great deal of pen, paper, and Excel in use across the sector. He explains some of this is due to the large number of small and medium-sized businesses. He believes digitization of the design and engineering industry is below 50%, with the global economy and its problems having held back digitization. Padrines says:
It depends on the geography. In the residential market, the last couple of years have been difficult, especially in Germany. But when you look at enterprise construction for manufacturers and data centers, there has been growth.
Padrines believes growth in India, the third-largest construction market in the world, and the Middle East will boost digitization in the sector. Berry in the GIS sector agrees and says firms in the Nordics, Germany, and the US are dealing with their legacy technology estates.
As the sector digitizes, it will become more interconnected, with systems and companies using technology for the design, construction, and operations of a building throughout its lifespan.
Again, this is in response to the macro-economic demands for greater economic, energy, and environmental requirements. Manish Kumar, Executive Vice President (EVP) for Digital Energy at Schneider Electric, explains:
Buildings are evolving. Hospitals need to modernize their aging infrastructure for 24/7 care, retail has pressures to measure their energy usage, offices need to become people-centric, and we need data centers to scale sustainably.
Buildings can be strategic assets and be part of a broader and more resilient grid.
Kumar says buildings consume 30% of the world's energy, and there is a significant level of waste. As the construction sector digitizes and works in closer partnership with technology companies, infrastructure leaders, utilities, and communities, then a building will become part of an ecosystem. This isn't science fiction. Kumar presented at the Schneider Innovation Summit a use case with professional services firm Sidara whose London office has a digital architecture that enables all the systems required for the building to work together. That means it has an occupancy-based energy system that uses workers' calendars, all of which is integrated into the Building Management System (BMS).
For vendors supplying the tech industry, they are, of course, pushing down the AI route, and like their brethren in other vertical markets they face challenges with data protection as a result of AI. Padrines says:
It is very important that the data is owned by our users and not us. That way, the customer can see what is in it for them, and it can help them be more efficient.
My take
Construction is a sector that is often the first to feel the impact of macro-economic issues such as tariffs, recession, and skills shortages. Technology suppliers to the sector are clearly seeing the same obstacles to house building, infrastructure modernization, and more, but both parties are laying the foundations for technology to build a solution.
