Hello, my name is Eoin O’Murchu and welcome to the Deloitte’s podcast series Futureproofed. This podcast explores and challenges how technology and innovation is disrupting the delivery and management of complex programmes, across the wider real assets sectors, including infrastructure, major capital projects and real estate. In today’s episode, we will consider the last 12 months of the UK construction sector and in particular the London market and how it’s responding to the current and future challenges. We’ll also talk about some of the really, really interesting innovations that are happening in this space. Thankfully, I am joined by two experts in this topic, Gareth Lewis, the CEO of Mace Construction, who has been responsible for the delivery of some of Mace’s most complex and iconic projects, including the Shard and Battersea Power Station and Dan Gregory, a director in Deloitte’s Real Asset Advisory team who has worked alongside Mace on several large London development projects.
Gareth, Dan, brilliant to have you. Thanks for joining.
Dan Gregory: Thanks Eoin, great to see you and great to see you again Gareth.
Gareth Lewis: Thanks Dan. Thanks Eoin.
Kicking off Gareth, reflecting on the last 12 months, how has the London construction sector responded to the turbulent market conditions that we’re all facing
Gareth Lewis: Really, really good question. One thing that is fantastic about London, it’s an amazing market and a very resilient market. I mean, we’ve been in the London market for over 30 years and it always bounces back and it’s always a different challenge every year. So yeah, quite excited really. You know, investor changes, clients, contractors and consult all operating in quite a diverse market. Yeah, very exciting.
Brilliant. Dan you kind of got a wider view. You work internationally quite a bit. How is London compared to other international markets?
Dan Gregory: Yeah, it’s really interesting actually. I think so we published the London Crane Survey which focuses on the London market, which you know, Gareth is a big fan of, and I think that world resilient is the right word actually and interestingly before talking internationally the rest of the UK, I think it shows a similar level of resilience actually. And our regional Crane Surveys, you know, aren’t too different from the London Crane Survey and whilst levels of construction are not back to pre-pandemic levels yet, they are going in the right direction. Interesting theme though, is all crane surveys talk about investor need for good, modern, quality, green buildings and I think, you know, that is a consistent message that comes through. Internationally, I think a lot of the challenges we face in the UK are echoed internationally, high inflation, pressure on labour. I think the Turner and Turner and Townsend International report says that 75% of countries globally are reporting chronic shortages of labour.
Interesting you pick up on the Crane Survey there. How was this year’s Crane Survey or the most recent one compared to previous trends?
Dan Gregory: Good question. I mean I think if the Crane Survey shows us anything, I think as Gareth alluded to, it’s the London tends to just be on an upwards trajectory. And I think, you know, if you look at certainty if you look at like the tender price trend, even when we have major recessions, you know, they are just a small blip on the general curve and I think in terms of the you know, the output of London generally speaking, that graph is just always going upwards.
Gareth Lewis: So yeah, I would echo exactly what you’re saying. I mean, if you look at Mace’s pipeline, our pipeline is stood around 10 billion. I mean, there’s a huge pipeline of work and that gives us confidence as a group. We’re virtually 100% secured for this year. We’re number one contractor in London for the last eight years. So, you know it’s a really, really strong market. Also, our diversification has really helped us moving away from just being too office centric. Probably about 15 years ago, we’ve moved into the public sector, we’ve moved into you know, aviation is a core discipline of ours. You know, data centers were really strong, and you know, our new largest growing sector is life sciences. It is tremendously exciting and that London backdrop just gives us that strength of pipeline that we need as London’s largest main contractor.
Dan Gregory: Yeah, I think the interesting thing I was going to just jump in there is obviously whilst we do the Crane Survey, which is obviously very development specific, interestingly, some of the other Deloitte surveys, we do also sort of translate back to real estate and the one that jumped out to me is the lastest CFO survey, which is not necessarily just real estate or construction people, it’s general CFO’s across the industry. One of the things they’ve all said is, you know, the return to the office now is increasing and whilst it’s not at levels yet that CFO’s would probably prefer, you know, I think 50% say that in the next two years levels of workers back in the office will increase and obviously I think, you know, that will have a positive impact on real estate.
Gareth Lewis: Yeah, I think you’re absolutely right. We’re seeing it in our business as well more people keen to be in the office and also as we’ve seen new build office drop off the pipeline, we’ve seen a resurgence of the retrofit market, which is again has been fantastic for us in that agility to move into a different market and respond to what London needs.
That’s all really interesting and picking up on the wider resilience of the market, particularly London. Gareth, I’m interested to understand from your perspective, what role innovation plays particularly across the real asset sector.
Gareth Lewis: That’s again a very, very good question. Innovation is core to what we do, we’ve got to keep moving, innovating all the time. We used to have a phrase called pursue of a better way, and that’s still part of the culture and DNA of Mace so really, really important. We’ve now moved that on since the Farmer review, Modernize or Die, we’ve got this new phrase in Mace called construction to production. So, every single job has got to go through a construction to production review of how much we can prefabricate, how much we can keep offsite. We know the labour challenges going forward are going to be huge, are huge now and they’re only going to get more and more challenging. So, we have to respond in a positive way. Just one example. We’re using Dave the Dog which is an innovation with Boston Dynamics that we can survey a building overnight that can replicate the as built surveys back to the 3D model in the design phase. So, it’s actually quite good how we can use digital to improve what we do.
It's really, really embracing the kind of the leading cutting edge tech to kind of drive real time innovation on site. That’s really fascinating.
Gareth Lewis: Absolutely. Absolutely and use those skills to move us to a more positive place.
And creating opportunities in the sector for different types of people to come in and work for organizations such as yourselves, yeah. Brilliant. And Dan, from your perspective, what are some of the blockers to kind of unlocking this adoption of innovation tech?
Dan Gregory: For me, a large part of innovation is creating the right environment to allow people to innovate. I don’t think we’ve got a skills or a knowledge issue. I think it’s creating the right environment and by that, I mean promoting sort of making sure your, you know, clients are outcome focused rather than focused on cheapest price and then creating that environment where they’re truly allowing the supply chain to collaborate and innovate as best they can. So, you know, I helped, I was part of the Deloitte team that helped with the Cabinet office drafting of the construction playbook and the big theme there is about early contractor involvement and you know, from my own personal experiences, I over time, you know, I can’t speak enough about, you know, the earlier you get the supply chain in the better. And that generally for me is how you innovate. Innovator to lots of people can just mean technology and, you know, nice technology solutions and what have you, which is obviously at part. But, I think it’s creating that right environment is, is really critical. In terms of one of the barriers I think at the moment it’s fair to say if you look at the media, I’m not sure innovation, modern methods of construction, whatever you want to call it, I’m not sure it gets a truly brilliant press at the moment and I think for me, one of my concerns is that, you know, brilliant success stories on projects might get featured in the media but if a modular construction factory shuts down and goes into administration, that’s all over the front pages and I think for me at the moment that I’m not sure that’s a great news story. So, for me, that feels like that could be a bit of a barrier to people at the moment and that just that assumption that huge levels of investment are required and where’s that going to come from? So, for me, they’re the issues.
It almost sometimes requires a different wat of thinking. You know, construction sector is very traditional, very fragmented in its supply chain and I obviously Mace is quite a leading organization in this space. Have you got any examples where you’ve cracked that and been able to kind of drive that on a project? You mentioned Dave’s dog, but is there any case studies you can bring it to?
Gareth Lewis: Yeah, absolutely. I’ll try and pick out a few and I totally agree with Dan in his synopsis there. Our best projects are where we’re involved early and we have a great collaboration with the client, the consultant team and supply chain. It’s no more complicated than that. Unfortunately, contracts kind of get in the way and people’s behaviour gets in the way of that sort of over performance. So, I’d just like to pick out some recent projects. Obviously, The Shard is the one that really put Mace on the map as a serious main contractor, and the innovation on that project was fantastic. It was embraced by the client, the full consultant team and us as a main contractor. A 38-acre building on a one-acre site will never be done again.
Over a railway station?
Gareth Lewis: Over a railway station and delivered in 38 months. It’s one of the fastest jobs production wise ever delivered in the UK and one we’re extremely proud of. Innovation was at the heart, highly technical job, fantastic team, major success because everybody pulled together from client through right through the supply chain and we were front and center of that and you know, very, very proud. And then we switched to Battersea Power Station, 2.5 million square feet, and probably the most challenging refurb project London has ever seen and probably will do for some time to come. I mean, a major, major success as you see it now. You went there with the family didn’t you Dan?
Dan Gregory: I did.
Gareth Lewis: So, again, another one we’re very proud of, fantastic collaboration with the team. Client team, consultant team and a major success and extremely high quality. So, anybody that’s looking to go there, please go.
Oh, two iconic London buildings to be involved in. Like what, like really fantastic projects and anyone who hasn’t been there definitely worth a visit there. Dan keen to pick up on some of those points we talked about. But are there any other considerations outside of tech and innovation that we need to be aware of that can really hamper the delivery of, you know, major programmes in the UK, particularly in the climate or at the present?
Dan Gregory: Well, I think the one I would raise, which actually Gareth and I have talked about recently, but it does come back to how innovation can help solve it is, is obviously the labour shortage. You know, I made a point at the beginning, you know, it’s not just a UK problem, it’s a global problem. But, I think the reality is the what do they say? Necessity is the mother of all invention. Never truer in this in this instance. And, I think in terms of that labour shortage, Gareth, it’s fair to say that is forcing you to probably innovate at a pretty rapid pace.
Gareth Lewis: Yeah, no you’re absolutely right. So just some stats because we all love stats, don’t we?
Dan Gregory: Yeah.
Gareth Lewis: Pre-pandemic we had 50,000 operatives per week through our gates, today 38,000.
Wow.
Gareth Lewis: And we’re delivering more volume. So, our revenues have gone up in that period and yet, you know, the stats don’t lie. We’re delivering it with a lot less labour.
Dan Gregory: And do you have a ??? So, we’ve got several clients, UK and overseas based, who are sort of coming to us saying, you know, they want to industrialize they want to become a manufacturer rather than a construction business. You know, do you see that as fundamental to Mace’s growth moving forward in terms of that, you know, fundamental change?
Gareth Lewis: Yeah, absolutely. And certainly, the markets we’re looking to, we’re in and we’re looking to do more in life sciences, data centers it actually plays to our strengths and major complex UK office construction, and that is where we’re looking to take the business. So, absolutely suits us with those clients saying those sorts of things.
Yeah. And how are you innovating and managing requirements around ESG and sustainability? Is that been at the forefront of what you do from an innovation perspective?
Gareth Lewis: Yeah, absolutely. Carbon is very much on the agenda now. We call it the fourth pillar. The three pillars were always cost, quality and programme. Now you’ve got to have carbon in there and carbon is a major focus for most clients and something quite rightly, the retrofit market will benefit from it. You know, there’s a lot of assets in London. We looked at one this morning, didn’t we, Dan cross the road in Hillhouse, which was one of your old buildings, and these retrofit projects, Peterborough Court just round the corner, a major refurbishment. I think you’ll see that market double again. We’ve seen it over the last three years. It used to be 10% of our revenue in our office division. It’s now 50% and I can see that growing to 70% in the future. So, yeah, absolutely we have to embrace that.
And looking to the future and we’ve talked about innovation and we mentioned people and roles and resources and staffing. But skill sets that people require, how is that going to shift over time? Dan, keen to get your view on that and then obviously Gareth as well, but what trends are we seeing in industry about what the future demands of the type of people we need to deliver these major programmes?
Dan Gregory: Yeah, great question and actually I think that’s as almost as fundamental as saying, you know, what sort of technology is going to be out there. I think we all know technology is moving, you know, at an unbelievable pace, but actually, what skills do we need to compliment those and you know, where are they coming from and fundamentally, are we going to have enough of them, which is something we’ve highlighted to a recent client. You know, their objectives for their program are all about innovation and technology and all that kind of stuff and what we’ve played back to them is, is this is great, your aspirations are exactly on the right line, but have you actually looked at where you’re going to get the people to actually deliver this? Where are those skills going to come from and are you going to get them in the right sort of time? I think for us, actually, I think our business is probably quite similar to Gareth’s in the sense that, you know, we have a lot of younger new people coming into industry, coming out of schools or universities. I think actually they’re looking for something different now in their careers than perhaps Gareth and I did when we came into industry and perhaps rightly, rightly so, you know and so I think we’re going to have to be aware of that. But likewise, if we’re having to deliver projects in a very different way, we’re going to need people to have different skills. We’re going to need them to think about things in a different way. So, I think it’s going to finding the right sort of blend there. But, definitely it’s as much about skills as it is technology.
Totally. And I guess, Gareth, traditionally your organization probably would hire a project manager as surveryors, engineers I imagine the view of the future is quite different?
Gareth Lewis: Absolutely. The view of the future is very different. People want different things as Dan says. You know, there’s going to be more and more challenges around tech. That creates opportunity for new staff. I think the diversity piece is a huge piece for construction. You know, that’s a huge challenge for us that, you know, getting a more diverse management team is one thing that’s very, very high on our board agenda. How do we do that? And I see that’s a massive opportunity for us and the industry to kind of appeal to younger people to come into this fantastic industry. It’s very, very exciting.
I agree. And I think the diversity points are really interesting because in many ways the construction sector is very traditional and even with all this innovation, it’s a design build operate is there and that may bring new opportunities, new ways of working and new ways of thinking, which I’m sure you’re looking for at all times.
Gareth Lewis: Yeah, absolutely. I think this collaboration model, I think we underplay it. I think that creates an opportunity for the future for us all to get a better construction client model in place that you refer to Dan. You know, our best experiences are where we’ve got that situation. I think if we could do more of that, then that gives more opportunity for younger people and a diverse workforce to come into our industry.
And just picking up on that, before we close, what is the biggest opportunity out there? You’ve touched upon people, is it an opportunity for people? Is it diversity? Is it a new way of thinking?
Gareth Lewis: I think it’s all of that. I think we’ve got a fantastic industry that we sometimes downplay. I don’t think we’re positive enough about our industry. How do we create certainty of delivery? Customers are looking for certainty of programmes, certainty of cost, certainty of quality outcomes. How do we embrace that outcome driven situation rather than, I think, our biggest barrier are contracts and how do we work through that collaboratively together to create a win win situation for everybody? And how do we get that diverse mix of people to deliver certainty and value? And I think if we all concentrated on that, we’d have a different model.
Dan Gregory: Yeah, I mean, we came to the end, but I mean, I think that diversity point is massive. And I think, you know, working in an organization like Deloitte, you know, which is probably more diverse than you would say, your average construction business, I think that’s fair to say. You know, the difference that makes in terms of the way issues and challenges are approached is, you know, is massive and I think that’s beneficial. And I think, you know, the more diverse construction gets, the better. I think absolutely, as Gareth says, that environment that you’re creating. Absolutely no doubt we have the skills to deliver big, major, complex programmes in this country. But as ever, it’s about how you set those teams up and I think this is the last point for me is I just wonder how good construction is at learning from other industries. And we’re certainly working with clients overseas at the moment who are all overlooking in, you know, innovation in aviation and the automobile industries, because I think if we are going to start talking about becoming industrialized what better place to start than, than industries who have been there for a decades.
Exactly. I mean, my last question to you Gareth, is why do you think that biggest disruptor is when we look back in ten years time?
Gareth Lewis: I think something that we’re we’ve got to embrace as big opportunity and there’s a lot of worry around it is the Building Safety Act. I think the Building Safety Act, not only is it a risk for this industry because it’s something a little bit new, but I think it’s a big opportunity to create fantastic assets for the long term. So, I think that’s something that we should be embracing heading forwards on collectively to embrace the Building Safety Act and how do we manage that through our businesses and our clients. So, I see that as a big, big opportunity. But going back to the core of your question, I think disruption, the biggest disruptor is going to be how we engage our pool and skill of labour force that we’ve talked about from the bottom to the top and how do we engage that full integration form top to bottom. I think that’s the biggest piece we can make a different of.
Brilliant. I think we’ll leave it there. That’s a great place to conclude the discussion. My thanks to both Gareth and Dan for their insights and perspectives. If you’ve enjoyed this episode, please do take a moment to like share and subscribe. Keep an eye out for future episodes on topics such as digital transformation, delivery excellence, and other exciting and interesting teams across the Capital project and real asset space
If you want to know more about Deloitte, please do search Deloitte Real Estate Advisory online where we have a host of blogs, articles and career roles available for you to explore. So, until next time, thank you all for listening.
Gareth Lewis: Thank you
Dan Gregory: Thank you
