Market environment
Trend 1 – Urbanisation/Population Growth: The United Nations (UN) estimates that 68 % of the world’s population will be living in cities by the year 2050 – this represents an increase of the urban population by 2.4 billion people. Accompanying this growth is a higher demand for infrastructure. An example: The Rail Transport Master Plan provides for a total of € 86 billion for the maintenance of the German federal railways and an additional € 11 billion for the modernisation and expansion of the rail infrastructure by 2030. The coalition agreement of the governing parties envisages a 25% increase in rail freight transport by 2030 and a doubling of passenger transport capacity. The agreement also speaks of building 400,000 new flats per year as well as launching a construction and investment offensive. In STRABAG’s five largest markets – besides the home markets of Germany and Austria, these are Poland, Hungary and the Czech Republic – Euroconstruct forecasts slight growth in construction output of 0.7% by 2025 despite the currently challenging market environment. The civil engineering segment, which accounts for more than 60% of STRABAG’s output, is expected to grow by 3.4% in the same period.Trend 2 – Climate Change/Energy Efficiency: As part of the Green Deal, the European Union wants to raise the original reduction target for greenhouse gas emissions by the year 2030 to at least 55 % below 1990 levels. In the EU, buildings are responsible for about 40 % of final energy consumption and 38 % of CO2 emissions. Not least for this reason, clients are increasingly demanding that even existing buildings be converted to higher energy efficiency and lower-emission operation. According to the United Nations Environment Programme, the sector has so far contributed little to the agreed reduction of greenhouse gas emissions. In addition to comprehensive political measures, digitalisation as well as new. environmentally friendly technologies will also be drivers for the energy efficiency of buildings in the future.
Trend 3 – Technology/Digitalisation: In contrast to sectors like the automotive industry or consumer goods industry, the degree of digitalisation in the construction sector remains relatively low. Experience has shown, however, that the digitalisation and networking of data during the life cycle of a building holds advantages for the various project participants – be it during the design, build or operate phases of the building. The increasing digitalisation of processes, therefore, allows us to expect significant productivity growth in the construction industry.
Trend 4 – Active Risk Management: The intensifying climate change and the recent impacts of the coronavirus pandemic have tested the effectiveness of the risk management systems of construction companies. At STRABAG, too, the monitoring and analysis of risks identified as a result (including property damage to structures, plants and equipment as well as health and safety conditions for employees) are part of the risk management system. STRABAG not only addresses these environmental and social challenges through a sustainability strategy that has been in place since 2021, it has also developed a new data and digitalisation strategy to further optimise the existing risk management. In view of the rising prices for materials and energy, a situation that has been exacerbated by the war in Ukraine, management also regularly assesses the financial impact and attempts to reduce this risk through decentralised supply chains, long-term procurement of raw materials, in-house production of building materials and a proactive pricing policy..
These four large trends are thus decisive for the attractiveness of the sector. But what is decisive in determining which company is awarded a contract? What do building clients look for in this regard?
Here it is important to make a distinction between the public and the private sector: While price is still mostly the decisive criterion for public-sector clients, private clients often look for the best offer – and this need not always be the lowest bid. The costs over the entire life cycle, including the operating costs, are also taken into consideration. Additional criteria play a role as well: As every building is unique, clients must be able to trust the abilities of the construction company. This trust is established through references, among other things. During tender processes, we are often asked about comparable projects that we have successfully completed in the past. Just as important are the experience and the know-how of the staff of the bidding construction company, the technical and long-term environmental characteristics of the bid, and the existence of innovative solutions which may save the client money and time across the entire building life cycle, as well as professional and comprehensible processes during the execution of the construction contract.
In some parts of the public sector, the best bidder principle is beginning to gain a foothold. This principle entails public-sector contracts not being automatically awarded to the company with the lowest monetary bid, but also taking social, environmental and sustainability criteria into account. The The STRABAG Group also supports this principle, an initiative that is being driven by the trade unions, environmental organisations and, increasingly, investment companies. From an overall perspective, the best bidder principle is better for the population and for the national economy than choosing what at first glance appears to be the most favourable bid. On the one hand, it is a way of securing local jobs. On the other hand, the costs of a building after the actual construction phase must also be taken into consideration – best bids include these costs in their cost estimate so as to minimise expenses over a building’s full life cycle .
Every building is unique. Unlike in industries with standardised products, therefore, it is not possible in the construction sector to perform sensitivity analyses showing the influence of changes to a dominant production factor on a company’s key performance indicator. Our business is not determined by just one driving factor; rather, the margins are influenced by several factors. These include certain business realities, such as the risk management system or the quality of our employees, as well as external influences such as economic growth (GDP) and demographic trends which affect the availability of qualified personnel as well as the demand for infrastructure. The level of public infrastructure spending – a euro invested in con- struction leads to demand in other sectors, with the result that the positive impact is multiplied in production and employment – and the financing environment for our clients constitute further factors