Construction demand here expected to stay strong: BCA

While construction demand is forecast to grow over the next four years, industry players warn that smaller local firms will have to prepare to face a more competitive market.
While construction demand is forecast to grow over the next four years, industry players warn that smaller local firms will have to prepare to face a more competitive market.ST FILE PHOTO

Public sector contracts continue to prop up sector, but year will be challenging for small firms

Construction demand is expected to remain strong this year due to sustained public sector contracts, as the industry continues to recover from a challenging three-year spell.

Total construction demand, which is the value of construction contracts to be awarded, is expected to be between $27 billion and $32 billion this year despite additional cooling measures in the private property market and the delay in construction of the Kuala Lumpur-Singapore high-speed rail project last year.

Public construction demand, expected to be between $16.5 billion and $19.5 billion this year, is set to make up about 60 per cent of projected demand for the year.

An estimated total of $30.5 billion in contracts was awarded last year, according to the Building and Construction Authority (BCA).

It represents a 23 per cent increase in construction demand compared with the year before, said Mr Zaqy Mohamad, Minister of State for National Development and Manpower, at the BCA-Redas Built Environment and Property Prospects Seminar held yesterday at the Grand Copthorne Waterfront.

"Many firms have felt the pressure. Construction demand declined for three consecutive years from 2015 to 2017," Mr Zaqy said in his speech, adding that the Government's move to bring forward $1.4 billion in public projects to start between 2017 and early this year has helped firms ride out the downturn.

Public sector demand contributed $18.4 billion last year with projects such as civil engineering works.

  • $27b-$32b

  • Expected construction demand this year.

  • $27b-$34b 

  • Expected construction demand a year for 2020, 2021.

  • $28b-$35b 

  • Expected construction demand a year for 2022, 2023.

Private sector demand was $12.1 billion, supported by projects such as the redevelopment of collective-sale sites, the sales of which were concluded in 2017 and the first half of last year.

Construction demand is forecast to be between $27 billion and $34 billion per year for 2020 and 2021, and between $28 billion and $35 billion per year for 2022 and 2023.

BCA chief executive officer Hugh Lim said in his welcome address that last year's upturn "suggests that the built environment may have turned a corner in terms of construction demand".

Mr Johnny Lim, executive director of construction firm Teambuild, said his company was awarded more projects last year than in 2017.

Teambuild is helping to build some residential developments as well as a nursing home.

However, he added: "Some other local firms may still find it quite challenging, and there was some consolidation in the industry last year."

He said that many of the projects that make up the construction demand are infrastructural ones that usually go to bigger local players or overseas companies, and not to smaller local ones.

He revealed that he secured last year's projects through a more competitive tendering process, and expects the profit margins for Teambuild's latest projects to be lower.

"Looking ahead, the global climate is challenging and expectations still need to be moderated," said Mr Lim.

MORE CHALLENGES LIE AHEAD

Looking ahead, the global climate is challenging and expectations still need to be moderated.

MR JOHNNY LIM, executive director of construction firm Teambuild, on the need for smaller local firms to temper their expectations for the coming years.

Mr Kenneth Loo, president of the Singapore Contractors Association, which represents about 3,000 companies, agreed that smaller local firms will have a "smaller bite of the cherry". He said: "The sentiment on the ground is still not rosy."

The BCA also announced an enhancement of the Building Innovation Panel, an inter-agency panel that helps with the regulatory clearance of technologies.

Firms use it as a single platform to work with relevant agencies instead of approaching different agencies.

From next month, the panel's scope will be expanded to include areas such as advanced and sustainable building materials, and green building technology. Previously, it was limited to technology that raised construction productivity.

A version of this article appeared in the print edition of The Straits Times on January 15, 2019, with the headline 'Construction demand here expected to stay strong: BCA'. Print Edition | Subscribe