Don’t Complain,
Improve Your Game

When the con­struc­tion indus­try fal­ters in the wake of a boom, a domi­no effect typ­i­cal­ly sets in. The pieces at the front of the line begin to fall, while the ones at the back are still stand­ing strong. Seem­ing­ly strong. While the first com­pa­nies are start­ing to slump, other mar­ket play­ers are still fill­ing their order books from the boom phase. And then? Then it will hard­ly be pos­si­ble to keep busi­ness­es from declin­ing; it’s just a mat­ter of time — like with dominos.

The pieces at the very front, which are affect­ed early on, include the project devel­op­ers. These are spe­cial­ized com­pa­nies that iden­ti­fy sites, con­cep­tu­al­ize suit­able prop­er­ties, and arrange fund­ing and per­mits. Indus­try experts antic­i­pate a major mar­ket shake­out here. A bleak mood is spread­ing. After the devel­op­ers, it will be the trades’ turn if they don’t take prompt action. A new and unusu­al mind­set — for the con­struc­tion sec­tor — is need­ed, name­ly, a focus on cus­tomer needs instead of indi­vid­ual suc­cess. Tra­di­tion­al thought pat­terns that pro­mote spe­cial­ized and oper­a­tional iso­la­tion instead of col­lab­o­ra­tion are out­dat­ed, as is skep­ti­cism about indus­tri­al­iza­tion. With­out a cross-trade approach to pre­fab­ri­ca­tion, whether of 2D ele­ments or com­plex mod­ules, the sec­tor will no longer be viable in the future. If for no other rea­son than the short­age of skilled work­ers and spe­cial­ized exper­tise, which are need­ed for new tech­nolo­gies. Espe­cial­ly in civil engineering.

The switch from “turn­ing down work because order books are full” to “active­ly seek­ing work and cus­tomers” is dif­fi­cult for many com­pa­nies in the real estate and con­struc­tion world. And it’s not very help­ful to ascribe clients’ abrupt cau­tion to the rise in mort­gage rates alone. Even when inter­est rates on loans go down, the prob­lems will remain. And gov­ern­ment sub­si­dies are not the answer for long-term sta­bil­i­ty and resilience. No, the sec­tor needs to learn from under­ly­ing mis­takes if it wants to pro­tect itself from seri­ous risks.

Niklas Köster, a pro­fes­sor of real estate man­age­ment at Hamburg’s Fre­se­nius Col­lege, lists some of the main rea­sons for many project devel­op­ers’ dif­fi­cul­ties, which have dra­mat­i­cal­ly increased in 2024. “The prob­lems are espe­cial­ly severe for com­pa­nies that have moved aggres­sive­ly into the mar­ket, acquired a lot of over­priced prop­er­ty, and now are unable to go through with their projects,” writes the expert in the “Han­dels­blatt” busi­ness paper. With­out finan­cial reserves from rosier times or solid rental income from exist­ing prop­er­ties, the road will be rough. The con­se­quences are grad­u­al­ly rip­pling through the entire indus­try, and can only be curbed by a com­pre­hen­sive new approach. Coor­di­na­tion, col­lab­o­ra­tion, and pro­vid­ing solid over­all per­for­mance “from a sin­gle source” are com­pet­i­tive advan­tages that can save the day, par­tic­u­lar­ly in hard times. In short: Don’t com­plain, improve your game!

Com­pa­nies that want to attract and retain cus­tomers need to align them­selves to these cus­tomers and their needs. Qual­i­ty, reli­a­bil­i­ty in price and per­for­mance, punc­tu­al­i­ty, first-class coor­di­na­tion, inno­v­a­tive thought, and per­fect ser­vice are the time-hon­ored com­pet­i­tive keys to win­ning lucra­tive con­tracts. With the con­struc­tion boom hav­ing sub­sided, cus­tomers are tak­ing a stronger posi­tion. As shown by a sur­vey from Porsche Con­sult­ing, they expect added value from providers. A “two-bed­room apart­ment” is no longer enough. Instead, they seek sophis­ti­cat­ed, holis­tic con­cepts that com­bine hous­ing and qual­i­ty of life into attrac­tive products.

How­ev­er, offers of this type are in short sup­ply. Unfor­tu­nate­ly, devel­op­ment projects in the hous­ing sec­tor gen­er­al­ly start by look­ing at the prop­er­ty, pos­si­bil­i­ties for con­struc­tion, and antic­i­pat­ed rental income in their busi­ness cases. Build­ings are tra­di­tion­al­ly viewed from the out­side in. What shape will the struc­ture take, and what will its façade look like? The result­ing shells will usu­al­ly con­tain more or less homo­ge­neous one‑, two‑, or three-bed­room apart­ments. Devel­op­ers take this approach to gen­er­ate return-opti­mized con­cepts, but these are often stan­dard solu­tions with­out much character. 

Whether for res­i­den­tial, com­mer­cial, or indus­tri­al build­ings, a large num­ber of project devel­op­ment com­pa­nies have tra­di­tion­al­ly left the actu­al imple­men­ta­tion to other play­ers in the sec­tor. Their teams typ­i­cal­ly con­sist of busi­ness advi­sors, sales spe­cial­ists, attor­neys, archi­tects, and engi­neers. But what comes after the plan­ning, the offi­cial per­mits, and the con­tracts with buy­ers and investors? Con­struc­tion itself has tra­di­tion­al­ly been quite frag­ment­ed in nature and there­fore sus­cep­ti­ble to imped­i­ments, dis­tur­bances, delays, and short­ages — even under the direc­tion of a gen­er­al contractor.

Spe­cial­ized teams from Porsche Con­sult­ing have been active in the con­struc­tion indus­try and large-scale projects for near­ly three decades now. Right from the start, the con­sul­tants have observed the fol­low­ing: in many places there is a sharp divide between plan­ning process­es and imple­men­ta­tion. Only a few con­struc­tion com­pa­nies have thus far suc­ceed­ed in bridg­ing this divide. Pre­cise­ly here, how­ev­er, is the oppor­tu­ni­ty that could enable the sec­tor to mas­ter its cri­sis: project devel­op­ment should no longer be con­sid­ered fin­ished when the ground­break­ing cer­e­mo­ny is over. 

As con­sul­tants, we rec­om­mend inte­grat­ing the trades into the pre­lim­i­nary plan­ning stages. The ideal set-up here includes shared office space with inter­dis­ci­pli­nary teams. This ini­tial col­lab­o­ra­tion is advan­ta­geous for all con­cerned. Con­sor­tiums can be formed early on that work hand in hand until the owner receives the keys — with the aim of shared over­all suc­cess. Sub­se­quent busi­ness oppor­tu­ni­ties are also in the cards. Why shouldn’t sat­is­fied new own­ers com­mis­sion their facil­i­ty man­age­ment and tech­ni­cal main­te­nance ser­vices from what are now trust­ed busi­ness partners?

Com­pa­nies that want to keep their ambi­tious per­for­mance and price promis­es should also look into advanced con­struc­tion tech­nolo­gies. Pos­si­bil­i­ties in the realm of ser­i­al and mod­u­lar con­struc­tion are rapid­ly under­go­ing fur­ther devel­op­ment — from sim­ple grid schemes to high­ly flex­i­ble yet nonethe­less stan­dard­ized solu­tions. Com­po­nents of indus­tri­al­ly pre­fab­ri­cat­ed build­ings are known for reli­able qual­i­ty, short­er pro­duc­tion times, cost advan­tages, and sched­ul­ing ben­e­fits. The con­struc­tion indus­try can already point to intel­li­gent solu­tions here, fueled by real inno­va­tions in mechan­i­cal engi­neer­ing and com­plete­ly dig­i­tal­ized process­es at smart fac­to­ries. The best way to achieve cus­tomer-cen­tric solu­tions these days is with the help of pre-struc­tured or mod­u­lar con­struc­tion sys­tems. And for this, the sec­tor needs indus­tri­al­iza­tion — along its entire chain.

Regard­less of how belea­guered the con­struc­tion econ­o­my might be, the sit­u­a­tion also offers oppor­tu­ni­ties. They require a will­ing­ness to con­sid­er new orga­ni­za­tion­al forms, to opti­mize coor­di­na­tion and col­lab­o­ra­tion, and to inte­grate tech­no­log­i­cal inno­va­tions in every stage from pre­lim­i­nary plan­ning to build­ing occu­pan­cy. Once again, the auto­mo­tive indus­try can serve as a model here. With­out close coop­er­a­tion and inte­gra­tion of all depart­ments right from the early stages of vehi­cle devel­op­ment, the industry’s high­ly com­plex series pro­duc­tion lines could never run smooth­ly and yield the cars that each cus­tomer has indi­vid­u­al­ly con­fig­ured in advance.