2021 construction demand forecast to recover
However, the shadow of the manpower crunch will continue to hang over it, say those in the industry
Singapore
TOTAL construction demand is projected to recover to between S$23 billion and S$28 billion this year, but industry players are mixed on whether they have the capacity to cope with the rising demand, given manpower issues.
Allan Tan, managing director of United Tec Construction, said while the forecasts are an encouraging sign for the industry, there are still many risks and uncertainties.
"The labour crunch is still very bad, (and) imported cases are still high," he said, adding that with the Covid-19 cases in China and Malaysia - two main sources in the supply chain - rising in number, this will affect the capabilities of companies.
He added: "Vaccine outcomes are (also) yet to be certain. With all these factors, I am not optimistic that we can meet the demand."
Francis Koh, managing director and group chief executive of Koh Brothers Group, is more sanguine about it, but said the industry will probably need another three to four months before getting more clarity on how companies can cope with the demand, due to the current labour situation.
Meanwhile, Hooi Yu Koh, executive chairman and chief executive of Kori Holdings, said that while the manpower shortage may lead to some delays for existing projects, he is "quite optimistic" that for upcoming projects which may commence only in the second half of the year, the manpower issue "should be better" by then.
On Monday, National Development Minister Desmond Lee acknowledged that the industry is still facing significant headwinds, especially due to the tight manpower situation. He said that the government will continue to monitor the situation and adjust measures as necessary to support the sector.
The projected demand of S$23-28 billion this year is up from 2020's demand of S$21.3 billion, based on preliminary estimates by the Building and Construction Authority (BCA). Last year's projected demand was trimmed by some S$10 billion in September, after activity in the construction industry was curtailed by the ongoing Covid-19 pandemic, which disrupted manpower and raw material supplies.
Public-sector projects are also expected to drive this year's demand to between S$15 billion and S$18 billion, or some 65 per cent, with an anticipated stronger demand for public housing and infrastructure projects, said BCA in a statement.
Some upcoming major public-sector projects scheduled to be awarded this year include contracts under the Jurong Region MRT line, the Cross Island MRT line Phase 1, and the Deep Tunnel Sewerage System Phase 2.
Meanwhile, private-sector construction demand is projected to be between S$8 billion and S$10 billion in 2021.
BCA said it projects the bulk of the demand in the private sector to comprise development of the remaining en-bloc residential sites, major retrofitting of commercial developments and construction of high-specification industrial buildings for business needs.
In 2020, public-sector construction demand dropped to S$13.2 billion from 2019's S$19 billion, due to the postponement of some major infrastructure projects, for which more time was needed to assess the pandemic's impact on resource management and project schedules, BCA said.
Private-sector demand also fell from S$14.5 billion in 2019 to S$8.1 billion last year, due to market uncertainties amid the pandemic-induced economic recession.
Despite the fall in demand, costs have risen for firms in the past year. Speaking at the BCA-Redas Built Environment and Property Prospects seminar on Monday, Silas Loh, joint managing partner of Rider Levett Bucknall (Singapore and Regional Practices), noted that increasing material costs, uncertainty in the market and technology adoption will continue to remain as cost drivers in the industry.
On the labour market, Mr Loh said: "This volatility of labour market will continue until the labour crunch can ease. And probably after it eases, it will take about three months before it settles down and all the volatilities can be resolved."
As for technology adoption, he noted that there are always capital costs that come along with picking up new processes, given that "there's still a lot of changes, a lot of rework to your work processes before you can see the real result".
Concern over the labour crunch is especially pertinent among industry players on the ground.
Said United Tec's Mr Tan: "The worry is (that) the supply cannot meet the demand, pushing labour and materials costs higher. This will further eat up the margins of existing and newly secured projects."
Similarly, John Mo, managing director of BBR Construction Systems, said that "workers have been in great demand recently", given how the reduction in the number of construction companies as a result of the pandemic is "not significant", as a result of the stimulus provided by the government.
"These companies will now need jobs moving forward," he said, adding that he sincerely hopes the current tendering prices will go up to "reflect the real cost increase"; otherwise more firms may end up in the red.
BCA said it expects a steady improvement in construction demand, projecting it to reach between S$25 billion and S$32 billion per year from 2022 to 2025.
The public sector is again expected to lead demand and contribute some S$14-18 billion per year from 2022 to 2025. This will be supported by public-sector developments such as public housing, transport and healthcare infrastructure.
However, the forecast has not factored in potential new contracts for Changi Airport Terminal 5 and the expansion of the two Integrated Resorts. These project timelines are still under review due to disruptions from Covid-19.
Meanwhile, private-sector construction demand is also expected to improve steadily in the same period, to reach between S$11 billion and S$14 billion per year.
This is in anticipation of a gradual recovery of the global economy, contingent on the successful deployment and effectiveness of Covid-19 treatment and vaccines, as well as easing of lockdown restrictions, said BCA.
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