COVID-19 - No Blueprint for Built World to follow
Updated: Aug 6, 2020
The COVID-19 pandemic has significantly disrupted the real estate and construction industries, as part of the global economy. We spoke with Shenaz Bilkis, Global Industry Director, Construction & Real Estate, SAP ASIA who believes while there is no blueprint for real estate and construction companies to follow, there are various mitigation paths to make things work.
Tell us a bit more about yourself and your role at SAP?
I am part of the Global Engineering, Construction and Operations Industry Business Unit – in short the EC&O IBU. We are responsible for setting the industry strategy for both the Real Estate and Construction industries. We do this by working with customers to understand the future needs of the industry and marrying that with our knowledge of SAP solutions to determine where to focus our industry development. We then work with SAP internal development teams and partners to deliver solutions that drive value for our customers.
Are construction companies making big strides in unlocking the value of digital transformation?
In general, the construction industry is lagging behind on innovations and technology adoption. Innovators who have applied technology on projects are reporting increased productivity which will further drive greater adoption. The youth movement on construction projects is fuelling innovation but it mostly remains in silos, robbing companies of the true potential of digital transformation. The leading companies will soon to realize that siloed and unscalable innovation is a dead end.
How is AI, IoT and BIM currently reshaping things?
The ubiquitous application of artificial intelligence, the Internet of Things (IoT), and building information modeling (BIM) will create intelligent processes, enabling new levels of process automation in the industry. These intelligent processes and connected supply chains will deliver improved project schedule performance.
Together, these innovations will consolidate the massive amounts of structured data and unstructured data generated in design and construction and make them seamlessly available for use in operations and maintenance. This will enable vertical integration within the industry and drive completely new business models.
The widespread use of augmented reality, cobots, and 3D printing will create an "augmented worker" and reskill to a tech-enabled labor force. This will reduce labor costs, improve quality for prefabrication, efficiency on the project sites and increase productivity.
How has Covid-19 impacted the construction and real estate industries? How is the industry responding?
The impact on construction both in the long and short term is intertwined with how authorities continue to react. Given the social distancing measures requiring smaller teams on site, if work on site continues at all, make it harder to keep to planned project schedules. Projects are facing 30 to 90 day delays, rather than full cancellation. Limitations due to restrictions are reducing skilled labour on site by up to 25%. Adding to that potential nationwide suspension of construction works poses deep financial and legal risks for construction companies.
Despite these short term challenges construction companies are optimistic and will need to assess how best to mitigate the project execution and resulting financial risks and address supply chain disruptions and workforce constraints in the short, mid, and longer term.
The impact on real estate companies is varied depending on the degree of exposure across the different sub-sectors. Despite the short term slow down in leasing activities and reduction in rental income, the negative impact to real estate is overall expected to be short lived, albeit sharp. Specifically, adjusting plans and strategies for the next few weeks, and possibly to the end of year, will prove to be a major challenge. There is no blueprint for a crisis of this global scale so companies can be expected to various mitigation paths to make things work.
What do you see as the biggest challenges going forward?
Once things get back to normal, I foresee the biggest challenge will be to be able to ramp up operations: be it remobilizing resources at job sites and the additional costs associated with acceleration measures once work restarts, to make up for the lost time or be it having to work out how to minimize congestion in the office by for example bringing back half the workforce and rotating them etc. Planning for how to ramp up operations and when to order equipment and material will be critical during this process. We may also see a potential rise in acquisitions of distressed firms and with that further layoffs.
On the bright side however, I think we will see a seismic shift in mindset around work culture and balance between your professional and personal lives as more and more companies realise work-from-home can be as effective as going into the office.
SAP has made available several of its solutions for free to customers to help them during these unprecedented times. Visit here to learn more about these offerings.
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