CONSTRUCTION IN 2024 - BALANCING GLOBAL SITUATION, INTEREST RATES AND REFORMS
All of us in the construction industry are certainly pondering the state of the construction sector and the outlook for 2024. This prompted me to reflect and jot down some thoughts. The current geopolitical and economic situations and their impacts have not gone unnoticed in the construction industry.
But is everything purely negative and a threat? I believe that the changes the construction industry is now experiencing can foster new innovations. And perhaps shake up our rather rigid field a bit.
What can we possibly expect from this year in our industry?
The new construction law will also come into effect in 2025, and this is something we all should take into consideration and start working on, if not already.
Climate Change Mitigation
One of the biggest changes in the construction industry in 2024 is the new construction law recently passed by the parliament. The law places climate change mitigation at the forefront of construction legislation. The role of procurement professionals is emphasized here as we strive to build with low carbon emissions and sustainability.
The new law mandates considering the entire lifecycle climate impacts and benefits of buildings. It creates the need for future regulations, such as climate assessments, material disclosures, and carbon footprint limits. Procurement decisions can directly influence how environmental impacts are addressed in construction projects.
The Importance of Digitalization
In 2024, digitalization is no longer just a trend but a necessity. The digital transformation of the construction industry is progressing rapidly, and it is essential to be fully engaged in this change. The use of proper and efficient information systems streamlines communication and facilitates project planning. And we must highlight artificial intelligence. AI can enhance productivity and increase predictability. It can also be used in analysis or as a support for making analyses. Utilizing AI can also provide a competitive edge in the market.
Simplified Permit and Procurement Processes
Construction permit processes are also undergoing changes. One type of permit, the construction permit, replaces the previous building and action permits. It is crucial for procurement professionals to stay updated on new permit processes and their impacts on project schedules and costs.
Raising the permit threshold reduces administrative burdens for smaller projects, but it is also essential to ensure that all projects still meet increasingly stringent environmental requirements. Procurement plays a significant role in ensuring the smooth progress of projects.
Global Situation
As we have noticed over the past couple of years, the global situation directly affects the availability and prices of raw materials. The instability of construction material markets continues to create uncertainty for procurement, as price fluctuations require more precise budgeting and risk management. This further emphasizes the role of procurement professionals, who must balance uncertainty and seek stable supply chains. For instance, due to wars, not all cargo ships dare to pass through the Suez Canal and instead have to circumnavigate the entire African continent. This may have broader impacts on supply chains.
Interest Rates and Economic Movements
The impact of interest rates on the construction industry is almost immediate. So far, we have experienced rising interest rates, but is there a chance of rates declining? Lower interest rates would undoubtedly bring relief to the construction industry, and investors would be more likely to undertake projects. We have already seen several companies in our industry facing financial pressures, with increased negotiations and bankruptcies.
The construction industry stands at a crossroads where challenges and opportunities now go hand in hand. The role of procurement professionals is increasingly emphasized as new laws and sustainable development create pressure for change in the industry.
Procurement professionals play a crucial role in navigating between uncertainty and opportunity to ensure a sustainable and successful future for the construction industry.
Juha Koskinen
050 5309347
juha.koskinen@kospro.fi