Travellers’ tales: Construction’s global opportunity
UK contractors and consultants are venturing into new markets created by rapid urbanisation all over the globe. Stephen Cousins speaks to firms that have already packed their bags.
If you’ve ever fancied trying your hand at building a mega-city, the world’s largest bridge, a replica of New York’s Broadway in central Shanghai or a new stadium for Japan’s Rugby World Cup in 2019 – probably best not to pin your hopes on FIFA projects at the moment – now is the time to put out your feelers.
Global spending on big projects such as these is on the rise. Global Construction Perspectives’ and Oxford Economics’ Global Construction 2025 predicted the global construction market would grow at an annual rate of 4.3% until 2025, and most opportunities would focus on high-growth emerging markets, such as China, India and Brazil.
Another report, from Timetric’s Construction Intelligence Center, predicts that Middle Eastern and African markets are expected to expand fastest, at an average annual rate of 6.9% from 2016 to 2020, up from 4.9% from 2011-2015. Much of that growth will be driven by massive investment in infrastructure, particularly mass transit metro systems in large cities and intra-regional rail links.
“Our recent study on eco-city development revealed 179 eco-city initiatives being planned worldwide, including more than 40 entirely new mega-city projects being built from scratch.”
Simon Joss, director, University of Westminster’s International Eco-Cities Initiative
Speaking to Construction Manager, Madani Sow, deputy CEO of global construction group Bouygues Bâtiment International, is positive about global construction prospects – with caveats about some oil-based economies.
“Globally, we are seeing the impact of local economic growth on construction output: Switzerland is up, Hong Kong is up, and so are Poland, the USA, the UK, Chile, Peru and Ghana,” he says. “However, the impact of falling fuel prices has meant that countries that depend on oil for their revenues are struggling to invest in public infrastructure and housing.
South-east Asia is another region recovering strongly after the global economic downturn, he adds.
“We have three big tunnelling projects in Hong Kong, including one under the sea connecting the new airport to the main island of Macau. This is typical of the large number of tunnelling projects in south Asia. We have secured two others in Australia with connecting highways.”
In addition, the convergence of the sustainability agenda with “smart city” ambitions is also creating opportunities.
“Switzerland is not just talking about smart cities, it is now building them, with our help,” Sow says, referring to a new city quarter in Zurich called GreenCity, which is being built by Swiss subsidiary Losinger Marazzi.
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The underlying trend driving worldwide construction output growth is the speed of urbanisation, which is also creating demand for the latest national must-have: an eco-city project.
“Existing cities can’t cope with absorbing urban migration, which is so rampant they need to build new cities,” says Simon Joss, director of the University of Westminster’s International Eco-Cities Initiative. “Our recent study on eco-city development revealed 179 eco-city initiatives being planned worldwide, including more than 40 entirely new mega-city projects being built from scratch.”
Most of these are focused in Asia and south-east Asia, but Joss speculates that there will be many new eco-city projects in sub-Saharan Africa in the next 10 to 15 years. Indeed, the region is already experiencing high levels of investment and development.
“There is a resurgence of confidence from developers that projects in South Africa, and across the region, are worthy of investment,” argues Nick Demain, director for sub-Saharan Africa at Mace, whose African portfolio includes the V&A Waterfront development in Cape Town (see below). “We are seeing that from all sorts of angles. There are lots of infrastructure schemes in South Africa, and governments want PPP-related [public-private partnership] schemes and consortia or private companies prepared to take on the risk.”
UK Trade & Investment (UKTI), the government body set up to support UK exporters, estimates that the value of exports in construction, contracting and design services was about £3.5bn in 2013, and says the sector is set to become the most rapidly growing of UK exports.
Also, the UK exports just more than £6bn of construction products annually, and aims to double that by 2020 as part of an export drive: in January the government set an overall target to double UK exports from £500bn in 2012 to £1 trillion by 2020. Construction is a key component of that export growth.
“UK companies have a global reputation for architecture, design and engineering. They are very good at competitive ‘whole-life’ costs and sustainable construction,” says Mike Carroll, head of the construction team at UKTI. “Many are boosted by exploiting expertise in digital design techniques, principally BIM, while our manufacturers are known for producing innovative products.
“The UK also has a reputation for PPP, which, given some of the funding challenges in many places, altogether creates quite a compelling offer.”
UKTI set up its High Value Opportunities (HVO) programme to help UK firms win contracts on the largest overseas projects. HVO projects have contracts with a total value of at least £500m, of which £250m or more are available for UK competition. UKTI reports that it supported UK companies in winning more than £11.5bn of contracts in the 2014/15 financial year.
“There are currently 81 HVOs across 37 different markets in 15 sectors, the majority of which involve some element of construction,” says Julian Jacobs, HVO project manager at UKTI. “They cover airports, sports projects, healthcare, mining, oil and gas, and nuclear projects.”
Areas of interest
Jacobs highlights five HVOs of interest, starting with Expo 2020 in Dubai, where he is hopeful UK contractors will win work to complement the input of British architects and engineers. A lesser-known opportunity is a 25-year programme by Turkey’s Ministry of Health to commission 32 new health campus sites on a “design, build and operate” basis.
“UK companies are considered well placed to secure design, planning and advisory services in the early stages, and longer-term FM [facilities management] and operations contracts,” Jacobs adds.
Others highlighted by Jacobs are Hong Kong’s 40 hectare West Kowloon Cultural District, which overlooks Victoria Harbour. With 17 arts and educational venues, it is intended to become one of world’s largest cultural projects. The scheme is backed by £1.7bn of public funding to 2020, and two possible additional phases could attract further private investment.
Meanwhile, Japan needs help with the design, build, operation and legacy of buildings and infrastructure needed to host the 2019 Rugby World Cup and the Tokyo 2020 Olympic Games. And Singapore is planning a £525m rail project with 13km of track and nine new stations. In future there is also potential for a high-speed link with Malaysia.
The message is that there is a world of opportunity out there – and if UK firms do not take their expertise in project delivery, BIM and new technologies to overseas markets, global rivals certainly will.
To whet your appetite for international travel, here are seven opportunities that have been firmly grabbed. To receive regular updates on work available under the High Value Opportunities Programme register at www.UKTI.business.gov.
Zhejiang Circuit, China
Ridge & Partners
The high-octane world of motor sport is taking root in China, where Oxfordshire-based Ridge & Partners – which has built up a specialism in projects for motor racing and manufacturing – has been appointed as lead consultant on a flagship development in Shaoxing City on China’s east coast.
Zhejiang will be a luxury, multi-use motorsport destination featuring a 3.3 km racing track, a racing club for 500 supercar owners, a 50-bedroom luxury hotel, a spa and wellness facility, and 10,000 sq m of commercial development, including car showrooms and brand centres. Ridge is providing architecture, project management, quantity surveying and building services design for the development, which is due to open in 2016.
Graham Blackburn, head of architecture at Ridge, tells Construction Manager the project is part of a wave of leisure developments for China’s cash- and time-rich emerging middle class.
“The country has a growing middle class with a huge appetite for cars and transport, and there is a concentration of supercar owners in Shanghai and Beijing. These highly networked individuals don’t currently have anywhere to go to play with their cars. The only tracks in the country are the Beijing F1 circuit, one in Shanghai, and a handful of very poor motor racing circuits.”
He also anticipates the planning regime in China will shift to accommodate the needs of the new middle classes, who have traditionally spent holiday time with family.
“People don’t really know what to do with their spare time. Holidays are all aligned with each other, so you find at Chinese New Year everybody tries to go home, and the whole of Shanghai tries to go out to farms and villages, and people can’t get bus tickets. So they are looking for things to do, and there will be a definite planning encouragement for leisure uses in China over next few years.”
V&A Waterfront, Cape Town, South Africa
British architect Thomas Heatherwick’s radical transformation of a disused historic grain silo complex, built in the 1920s and once the tallest structure in Cape Town, is on its way to becoming a cutting-edge venue for the Zeitz Museum of Contemporary Art Africa.
The 10,000 sq m museum, due for completion at the end of 2016, will form the centrepiece of a massive 23-hectare multi-use development, comprising six schemes, all project managed by Mace and located on the harbour in the shadow of Table Mountain. The development is a 50/50 partnership between Growth Point, a privately listed property fund, and the Public Investment Corporation of the South African government.
“It’s an interesting collaboration between a footloose commercial company and a public body with deep pockets. We’re creating what is comparable to a small city in a privately owned suburb of Cape Town,” says Mark Noble, development manager for client V&A Waterfront. “When we saw Heatherwick’s designs for the grain silo, we thought: ‘That’s amazing, but how do we build it?’”
He explains that two years were spent working with Mace and Arup to produce a sequencing methodology and structural concept that would work. “We have to hollow out a large portion of the tube structures to insert box-shaped museum galleries. The tubes form a honeycomb structure – and interfering with that threatens to compromise structural integrity. It has been hugely challenging to develop a sequence of work to make it work.”
Nick Demain, director for sub-Saharan Africa at Mace, says the firm is a relatively lonely outpost of UK expertise on the continent. “Most UK firms left the African market in the early 2000s as a result of big construction booms in Dubai, the wider United Arab Emirates and Europe. They saw the risk profile of Africa being too much and decided to pull out. As a result a lot of South African construction firms have filled the voids into sub-Saharan Africa left by the likes of Taylor Woodrow, Costain and Skansa.
“Opportunities are there, but UK firms have to put in a lot more investment in terms of developing business. The question is: do they have the appetite for the risk? And have they lost the market intelligence? A lot of the intellectual property they had before has been lost.”
Hong Kong-Zhuhai-Macao Bridge, China
Bouygues Bâtiment International
This 38km dual three-lane carriageway bridge suspended over the Pearl River Delta, between Zhuhai and Macau on the Chinese mainland, and Hong Kong on the eastern side, will become the world’s largest sea bridge when it is completed in 2017.
Dragages Hong Kong and VSL, both subsidiaries of Bouygues, are working on the main 29.6 km section of the bridge, in Zhuhai waters. It comprises three cable-stayed bridges with spans ranging from 280 metres to 460 metres, viaducts spanning 75 metres and 110 metres, a 6km tunnel and two artificial islands.
The project represents huge construction challenges: works must be completed using marine-based equipment and require special logistical arrangements; navigational channels must remain open throughout construction; and proximity to an airport means very strict height restrictions must be observed.
Contracts linked to the construction of the bridge and related projects are still being tendered, and UKTI says there are “considerable opportunities for specialist consultancy and supply chain opportunities”.
West Hongqiao Broadway, Shanghai
Retail is already an important leisure activity in China, and architect BDP – which has benefited from advice from government agency UK Trade & Investment – is involved in several projects. Project director Garry Wilding identifies two key trends: projects that adapt historic buildings and evoke a sense of the past, such as Xin Tian Di in Shanghai, the Wide and Narrow Alleys in Chengdu, and BDP’s ongoing Nanjing Road project in Shanghai. Second, there is a growing trend by retailers to offer “showroom” shops where customers absorb the experience before ordering goods online.
“The new city spaces are designed to create a perfect setting for a new breed of showroom shops,” Wilding says. “We are designing beautiful schemes that will challenge the allure of the internet, so people are drawn away from their screens and back into town and city centres.”
In Shanghai BDP has drawn up a 350,000 sq m masterplan for an urban retail and leisure scheme that emulates Broadway in New York for developer Golden Kingdom (pictured above). The site is close to the city’s main railway station and domestic airport. It will feature streets and open plaza spaces with shops, offices, residential, a hotel and five theatres – one with a 1,200-seat auditorium. The individual buildings are at an early design stage.
“Developers in China continue to demand the creation of unique retail places with a strong identity to set them apart from the competition,” says Wilding. “Besides the retail component, there will invariably be a mix of uses ranging from hotels, office towers, residential towers and leisure uses. Fine dining and fast food are increasingly large components.”
Eco-cities in China, India and the Middle East
Rapid urbanisation, large-scale migration from rural to urban areas, pollution and efforts to create new economic growth have led to plans for a vast number of new eco-city developments worldwide, focused mainly on Asia and south-east Asia.
Most prolific is China, where a recent survey put the number of eco-city projects planned at more than 250, and there is talk of 20 cities the size of New York over the next 10 years.
“In China, they’re trying to achieve urbanisation, while also greening urban areas,” explains Simon Joss, director of the University of Westminster’s International Eco-Cities Initiative. “Existing cities can’t cope with absorbing urban migration that is so rampant that they need new cities. Also in some cases deliberate decisions by government to induce economic growth through active pursuit of urbanisation.”
However, any UK firm considering the sector would be wise to tread cautiously: “They’re often not coming through on the ground because of technical or political issues,” Joss says. “The Dongtan eco-city, where Arup was heavily involved, was held up as a leading project. But it was bogged down in political difficulties and was stopped in its tracks in 2008.”
Joss highlights Korea and India as likely locations for new eco-cities, pointing out that four are planned and being built in India as part of the $100bn Delhi-Mumbai Industrial Corridor Project spanning six states. And in Mongolia, the government is working on the 300,000-inhabitant Maidar Eco City (above).
But he adds that UK consultants and investors will face tough competition: “Initially we saw collaboration with experts and construction companies from Europe and US in Asia, but there is increasing south-to-south collaboration between Asian countries. The Indian projects are a collaboration between the Indian and Japanese governments.”
Expo 2020, Dubai, United Arab Emirates
With the Milan Expo now in full swing, preparations have begun for the buildings and infrastructure needed to host the next event, in Dubai. Expo 2020 is expected to bring 25 million visitors and $23bn of economic benefits to the country, putting additional pressure on its infrastructure, and several development projects are to be launched to cope with accelerating demand. Deutsche Bank has estimated that roughly £5.5bn of government funding will be needed in hotels and retail, bringing the total spend to £26bn.
Julian Jacobs, project manager for UKTI’s High Value Opportunities programme, tells Construction Manager: “There will be significant opportunities over the next seven years for architecture, especially iconic architects, design, engineering and technology, and products related to design and construction.
“There are already a number of UK construction majors operating in Dubai, which we expect to win some of the large construction contracts. There are also opportunities around legacy and subsequent uses for the Expo site.”
And let’s not overlook the United Arab Emirates’ penchant for massive towers. There are five skyscraper projects under way in the region, including the $1.2bn Kingdom Tower in Jeddah, Saudi Arabia, which, at 1,000 metres high, is set to become the world’s tallest building when it is completed in 2020.
Ararum Project, Sri Lanka
Rise Management Consulting
If pitching for a slice of an overseas client’s project does not appeal, it might be possible to create your own. That is the approach that Rise Management Consulting has taken in Sri Lanka, where it is negotiating to build up to 15,000 homes using offsite manufacturing.
As director Bob White explains, “I’ve always had a passion for modern methods of construction and offsite, so I thought I’d take a look at where there is a particular market for a particular commodity: high-quality and relatively economical housing.”
The search started in China, where Rise and a supply chain partner in Shanghai created Constructing Futures, to prefabricate light gauge steel structures. But after concluding that the Chinese housing market was resolutely geared to low-rise concrete construction, it widened the consortium to include South African prefabricated concrete panel manufacturer Elcon and sought clients in the Middle East and Sri Lanka.
White reports that it has now “a couple” of public sector clients in Sri Lanka interested in large-scale residential developments of 2,000 to 15,000 units, as low-cost housing for people moving out of shanty towns.
“We developed relationships with one or two people in Sri Lanka and they understood the potential in terms of materials and delivery,” White explains, adding that they are also presenting to clients in Abu Dhabi.
Sourcing the steel components in China, for delivery in shipping containers, was also key to the project’s financial viability, while the concrete panels will be cast from moulds in a facility near the site then pre-assembled into wall and floor units.
“You’ve got to have the right supply chain in the right place at the right price, and be smart about identifying needs,” says White.
He adds that Rise finds this “DIY” approach to overseas projects more appealing than staffing a representative office that then has to engage in competitive bidding. “With the intermittent nature of the international market place, we find it quite difficult to service. So working as a supplier gives us different opportunities.”