Infrastructure drives new opportunities, risks for construction, report finds

Dive Brief:

• Coming infrastructure projects and an endemic labor shortage will present new opportunities and risks in global construction markets over the next decade, according to a new report from insurance giant Allianz.
• Infrastructure is forecast to be the fastest-growing sector for construction with an annual average growth rate of 5.1% globally during the period from 2020 to 2025, driven by unprecedented levels of government stimulus, including the $1.2 trillion infrastructure act in the U.S. and the European Union’s 723 billion euro Recovery and Resilience Facility, the report said.
• “This boom in global construction will, however, present challenges for the construction and engineering sector, and their insurers,” the report said. “In the medium term, sudden surges in growth could put supply chains under additional pressure and exacerbate the existing shortage of skilled labor.”

Dive Insight:

Michael Pignataro, regional head of energy and construction in North America at Allianz Global Corporate & Specialty, said those challenges have to be addressed for country-wide projects to get underway.

“The real focus is going to have to be a mindset shift and the return of the attractiveness of a trades [career],” Pignataro said. “You’ve seen sort of a generation of people who have become numb to the idea of taking out expensive student loans and looking at a job market that doesn’t necessarily provide the payback.”

On the positive side, the supply chain challenges experienced during COVID-19 have already spurred countries to search within their own borders to meet demand.

“You’re seeing it all around the world, I call it an ‘industrial renaissance,'” said Pignataro. “Countries are reinvesting in their domestic output. Concerns about logistics, concerns about the political environment on a global stage, [those] make domestic investment and these domestic alternatives more attractive.”

But at the same time, countries are struggling to create the initial infrastructure they need — such as manufacturing plants for materials and an available labor pool — to take on the larger infrastructure projects they have in their sights.

“It’s not as simple as, ‘I want to go build a bridge’ or, ‘I want to go repair a highway,'” Pignataro said. “It will require, especially when it’s done on a national level all at once, factories to be built, cement plants to be built, materials, all of the additional institutions that support labor.”

Modular’s advantages

One trend Pignataro said could help alleviate labor shortages is the increased use of modular construction, an area highlighted in the Allianz report, to address regional disparities.

“Tradespeople might not be in areas like Utah, but they are in places like Illinois, for instance,” said Pignataro. “If you have a factory in Illinois that can produce modular components and then ship these modular components to areas where they don’t have these tradespeople, you get yourself some sort of short-term relief.”

Renewable energy projects

The report also highlights the opportunities inherent in the global drive to reduce greenhouse emissions, which have created huge investments in renewable energy, particularly wind and solar. Offshore wind projects, for example, are becoming more common, growing in size and moving further out to sea.

But upscaling clean energy will also bring new risks for construction, such as exposing high value components to harsh offshore weather conditions.

Turbine blade damage or gearbox failure can cost double or triple the amount for an onshore turbine, while repairs to undersea cable, which weigh thousands of tons and require special ships to lay, can take more than a year, the report said.

“Offshore wind projects are something that has really emerged for the first time as a true opportunity. For the most part, they are in the Northeast and mid-Atlantic,” said Pignataro. “Offshore wind is something that I think is going to be big in the future.”