ENVIRONMENT PROSPECTS Singapore’s construction demand to remain strong in 2023

Total construction demand this year is expected to be similar to last year’s projection. Also, Built Environment (BE) firms are increasing their transformation efforts, against the background of the strong construction demand.

The Building and Construction Authority (BCA) projects the total construction demand in 2023 (i.e. the value of construction contracts to be awarded) to range between SGD 27 billion and SGD 32 billion.

These figures were released at the BCA-REDAS BUILT ENVIRONMENT AND PROPERTY PROSPECTS SEMINAR 2023, organised by BCA and REAL ESTATE DEVELOPERS’ ASSOCIATION OF SINGAPORE (REDAS), and held on 12 January 2023.

Mr Desmond Lee, Minister for National Development & Minister-in-charge of Social Services Integration, delivered the Opening Address.

The public sector is expected to contribute about 60% of the total construction demand, i.e. between SGD 16 billion and SGD 19 billion. This is supported by a continued strong pipeline of public housing projects amidst the Housing Development Board’s (HDB) ramping up of the Build-To-Order (BTO) flats supply.

Industrial and institutional building construction is expected to contribute strongly to public sector demand, with more projects for the construction of water treatment plants, educational buildings and community clubs.

Civil engineering construction demand is anticipated to stay firm with continued support from MRT line construction and other infrastructure works.

Private sector construction demand is projected to be between SGD 11 billion and SGD 13 billion in 2023, which are comparable with 2022 figures. Both residential and industrial building construction demand are expected to be similar to last year’s level, underpinned by the development of new condominiums and high-specification industrial buildings. Due to the rescheduling of some major projects from 2022 to 2023, as well as the redevelopment of old commercial premises to enhance asset values, commercial building demand is anticipated to increase.

Preliminary actual construction demand in 2022

The preliminary total construction demand for 2022 reached SGD 29.8 billion, within BCA’s earlier forecast of SGD 27 billion to SGD 32 billion, and similar to the SGD 29.9 billion recorded in 2021. The continued firm demand was largely supported by residential and infrastructure projects, in both public and private sectors.

Public sector construction demand improved slightly from SGD 17.8 billion in 2021 to SGD 17.9 billion in 2022, underpinned by major projects such as the Cross Island MRT Line (Phase 1), Jurong Region MRT Line, the Ministry of Health’s (MOH) healthcare facilities and HDB’s new Build-To-Order (BTO) units.

On the other hand, while the private sector construction demand moderated slightly from SGD 12.1 billion in 2021 to SGD 11.9 billion in 2022, amidst various economic downside risks, demand for private residential and industrial building developments remained resilient.

Forecast for 2024 to 2027

Over the medium-term, BCA expects the total construction demand to reach between SGD 25 billion and SGD 32 billion per year, from 2024 to 2027.

The projection excludes Changi

Airport Terminal 5 development and its associated infrastructure projects, as well as the two Integrated Resorts’ (IRs) expansion, in view of the confirmed details, such as award timelines and construction phasing for both mega developments, being still unavailable at this point in time. The public sector will continue to lead demand and is expected to contribute SGD 14 billion to SGD 18 billion per annum, from 2024 to 2027, with about 60% of demand made up by building projects and the rest by civil engineering works. Besides public housing developments, public sector construction demand over the medium term will be supported by various major developments such as MRT projects including the Cross Island Line (Phases 2 & 3), Downtown Line Extension to Sungei Kadut and Brickland North South Line Station, Toa Payoh Integrated Development and Woodlands Checkpoint redevelopment.

Private sector construction demand is projected to remain steady over the medium-term, reaching approximately SGD 11 billion to SGD 14 billion per annum, from 2024 to 2027, in view of healthy investment commitments amidst Singapore’s strong economic fundamentals.

Construction output

The total nominal construction output (value of certified progress payments) is projected to increase to between SGD 30 billion to SGD 33 billion in 2023, from the preliminary estimate of about SGD 30.2 billion for 2022.

This is due to a steady level of construction demand and some backlog of workload impacted by the COVID-19 outbreak, since 2020.

p: preliminary, f: forecast

*Construction demand: Value of contracts awarded

^Construction output: Value of certified progress payments

Note: Construction demand forecast in 2023-2027 excludes any potential awards of construction contracts for expansion of the two Integrated Resorts as well as the development of Changi Airport Terminal 5 and its associated infrastructure projects, as the confirmed details such as award timelines and construction phasing for both mega developments are still unavailable, at this point in time.

Stepping up the Built Environment value chain collaboration

With strong construction demand projected for the year, Built Environment (BE) firms are also stepping up transformation efforts to seize these opportunities by developing stronger and longer-term relationships with their value chain partners.

Four developers – CapitaLand Development, City Developments Limited, GuocoLand and UOL Group Limited – have signed Memorandums of Understanding (MoUs) with their respective value chain partners (builders, consultants and sub-contractors), to support one another on this transformation journey and collectively achieve best-in-class outcomes, to improve productivity, reduce foreign labour and build resilience against unprecedented crises. These firms will be jointly applying for BCA’s Growth and Transformation Scheme (GTS) which was announced in March 2021, and other relevant grants. To receive support in the transformation journey, the firms are required to demonstrate that their proposed business plans and initiatives will meet outcomes under five categories:

• Strategic Collaboration/Business Growth

• Human Capital Development

• Advanced Manufacturing and Assembly

• Integrated Planning and Design

• Sustainable Urban Systems

BCA will continue to support all stakeholders across the BE value chain in transformation efforts. This will enable BE stakeholders to be better equipped to meet an increased construction demand.

Transformation across the BE value chain

To enhance industry resilience and collaboration, it is imperative that firms in the BE sector take a long-term view and work with their partners to collectively transform business and human capital practices, while they attend to business-as-usual work. Adopting this approach has helped firms better manage the negative impacts of the COVID-19 pandemic and has prepared them well to seize new opportunities, post-pandemic.

The Growth and Transformation Scheme

The Growth and Transformation Scheme (GTS) was first announced at the Committee of Supply 2021, as a scheme that supports value chain transformation efforts in the BE sector, and the qualifying criteria were announced at the International Built Environment Week

2022. This is a significant shift from project-based support schemes, where stakeholders usually focus on implementing initiatives to deliver the project on hand.

The GTS supports initiatives that build best-in-class capabilities and enable holistic transformation for BE value chains. These initiatives are undertaken by groups of firms –each led by a progressive developer, and includes consultants, builders, and subcontractors, – to achieve mutually beneficial, transformation outcomes. The key objectives of GTS are to:

• Groom a core group of strong industry leaders to drive industry transformation.

• Push the boundaries for best-inclass capabilities, and spearhead adoption of advanced technologies such as Advanced Manufacturing and Assembly (AMA), Integrated Planning and Design (IPD) and Sustainable Urban Systems (SUS).

• Achieve transformative workforce development and business growth/strategic collaboration goals.

Over the past year, BCA has worked with the industry to refine the scheme further. The developer, as how the group of firms will work collectively over multiple projects to meet more ambitious business transformation targets. This ensures that firms take a longer-term view on capability development and their working relationships. Applicants are required to demonstrate that their proposed business plans and initiatives will meet all of the de fined outcomes.

The expected benefits of collective transformation

Recognising the value of collec tive transformation, CapitaLand Development, City Developments Limited, GuocoLand and UOL Group Limited have stepped forward to further strengthen their relationships with builders, consultants, and subcontractors, through the signing of MoUs with their respective partners. The MoUs are a demonstration of the strong commitment of industry-leading firms to support each other on this transformation journey and collectively achieve best-in-class outcomes to improve productivity, reduce foreign labour and build resilience against unprecedented crises.

supply chain resilience in Singa pore. These SMEs can potentially benefit from the collective process improvements, leverage available support to improve human capital practices and digitalise their operations to achieve longer-term transformation.

Through the strategic partnership, CapitaLand Development (CLD) and its MoU partners are studying the implementation of collaborative es with enablers, such as a digital platform and systematic mechanism, to facilitate better communications and collaboration, guide early identification of issues as well as manage dispute resolution and risk allocation.

CLD’s MoU partners are Woh Hup (Private) Limited, Threesixty Cost Management Pte Ltd, SJ Architecture, Santai Construction (S) Pte Ltd and Kai Peng Construction Pte Ltd.

City Developments Limited (CDL) is working towards establishing a Common Data Environment (CDE) platform that connects value chain partners working on a project. CDE enables data sharing across all par ties, creating a one-stop conducive environment for upfront cross-dis ciplinary collaboration and facilitat ing a single source of truth for all stakeholders.

CDL’s MoU partners are Woh Hup (Private) Limited, ADDP Architects LLP, Teamtech Private Limited and China Star Building Construction.

GuocoLand aims to establish a cloud-based CDE platform from De sign to Facilities Management (FM), that will enable the value chain partners to work towards com mon productivity, quality control, decarbonisation and Environmental, Social and Governance (ESG) goals. GuocoLand will look into making it commercially available for their partners. In addition, GuocoLand has also begun to transform existing assets into smarter and greener buildings, and implement integrated data delivery and digital solutions for all their ongoing developments.

GuocoLand’s MoU partners are Kimly Construction Pte Ltd, Woh Hup (Private) Limited, ADDP Ar-

Integrated Precast Solutions Pte Ltd, APP Engineering Pte Ltd, DLE M&E Pte Ltd and Sing Moh Electrical Engineering Pte Ltd.

UOL Group Limited (UOL) is committed to supporting its partners in the adoption of new technology, to improve productivity across the value chain. UOL and United Tec have collaborated on several projects, including the 56-storey Avenue South Residence which is the world’s tallest residential building using the success of such support and collaboration has increased confidence between partners, to leverage technology, develop strong alliances and accelerate transformation growth in the BE industry.

UOL’s MoU partners are United Tec Construction Pte Ltd and P&T Consultants Pte Ltd.