Construction demand for 2023 set to be stable, driven by public-sector works like BTO flats

Contracts worth between $27 billion and $32 billion will likely be awarded in 2023. ST PHOTO: NG SOR LUAN

SINGAPORE - Demand for construction across Singapore in 2023 is expected to be stable and driven by the public sector, with Build-To-Order (BTO) flats, MRT lines and water treatment plants in the pipeline.

The Building and Construction Authority (BCA) estimated on Thursday that contracts worth $27 billion to $32 billion will likely be awarded in 2023.

This is similar to contract sizes recorded in 2022 and 2021.

National Development Minister Desmond Lee told a BCA-Redas (Real Estate Developers’ Association of Singapore) seminar at Grand Copthorne Waterfront hotel on Thursday that even though construction demand appears to be steady, firms must keep in mind the challenges that lie ahead, such as the growing risk of recession in major economies, supply chain pressures and climate change.

“It is important that we take in the lessons learnt over the past few years to enhance the built environment sector’s resilience. This includes reducing our reliance on foreign manpower for labour-intensive tasks, and doing more to fulfil our net-zero climate goals,” he said.

The public sector is expected to contribute about 60 per cent of the total construction demand this year, or between $16 billion and $19 billion.

Private-sector construction demand is anticipated to reach $11 billion to $13 billion, comparable with 2022, with the planned development of new condominiums and high-specification industrial buildings.

The BCA said: “Due to the rescheduling of some major projects from 2022 to 2023, as well as the redevelopment of old commercial premises to enhance asset values, commercial building demand is anticipated to increase.”

In 2022, construction demand in the public sector rose slightly to $17.9 billion, from $17.8 billion in 2021.

This was underpinned by projects such as the first phase of the Cross Island Line, Jurong Region Line and healthcare facilities for the Ministry of Health.

Meanwhile, demand in the private sector dipped from $12.1 billion in 2021 to $11.9 billion in 2022, due to economic downsides.

BCA figures showed that progress payments for work being done are projected to hit $30 billion to $33 billion this year, on a par with the preliminary estimate of about $30.2 billion for 2022.

This is due to a steady level of construction demand and some backlog of remaining workloads impacted by the Covid-19 pandemic, said the authority.

Mr Lee said that projected demand from 2024 to 2027 will be between $25 billion and $32 billion a year, and the public sector will be the main driver, with upcoming projects such as the Cross Island Line and several hospital developments.

On Thursday, several companies also signed agreements to explore collaborative efforts and develop capabilities. For instance, property group UOL will work with United Tec Construction to adopt advanced prefab mechanical, electrical and plumbing technologies.

Singapore Contractors Association Limited (Scal) president Ng Yek Meng said that despite the stable outlook for 2023, firms are expected to face higher construction costs. Material and manpower costs have gone up by 30 per cent to 40 per cent compared with pre-pandemic levels, he added.

“We need to reduce our dependency on foreign workers. On our end, Scal is trying to streamline the construction process and educate members to use more productive methods in construction,” he said.

Kimly Construction director Roy Khoo said the company’s suppliers are anticipating costs of raw materials such as steel to further increase in the coming months, as China opens up its economy.

To counter rising costs, the firm is looking to improve its productivity through Design for Manufacturing and Assembly, which is a way of prefabricating structures in an off-site facility before assembling them on site, saving time and manpower.

“With digitalisation and collaboration with our stakeholders, we are able to plan more accurately, so this cuts down on wastage of labour and materials. This has helped to mitigate most of our losses,” Mr Khoo said.

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