Two metrics that are frequently used as a litmus test for the health of the industry are: New contract awards and new construction starts. Looking at these metrics in recent months and it paints a rather depressing picture as both are in decline. Added to that the construction industry saw 127 administrations in 2023.

But there are two sectors where contractors are experiencing the opposite. Will this cause a shift in focus for the construction industry?

Retrofits and modular building are both enjoying steady growth and given the sizeable contracts being awarded for improving buildings and infrastructure it could be the new area to focus on for contractors.

What’s driving the growth in modular building and retrofits?

Retrofitting is being driven in part by the need to decarbonize older buildings and in the process improve their value. There’s a huge need to improve energy efficiency to reduce the costs of heating and cooling. This can be achieved through better insulation and switching to heat pumps from conventional geysers.

While the initial costs are an outlay for landlords, over time the investment more than pays for itself. More importantly, it reduced the overall energy demand of the building and improves operational efficiency and costs.

The growth in modular building is also largely driven by costs. By reducing the time on site, construction companies can save costs. It also has the societal benefit of less disruption. Instead of diverting traffic for months while a bridge extension is completed, modular building can reduce the build time to a number of days in some cases.

This is achieved by placing and locking together modular components rather than constructing them from the ground up, which takes significantly longer, and often at a much higher cost. With construction companies struggling to maintain margins as material costs increase, finding ways to build more efficiently is a high priority.

Modular building may well also be a solution where aging and unsafe buildings need to be repaired. The recent RAAC problem has resulted in closure of multiple schools and public buildings. But these are much needed services that can’t wait for years for new buildings. As a fix, modular building offers faster construction times to completion.

Time and cost factors are having an impact in the direction construction companies are taking their business. It’ll be interesting to watch as this unfolds.