The built environment provides the material framework for human activity. From residential housing and industrial buildings to hospitals and infrastructure, the sector spans a wide palette of companies working within architecture, urban planning, supply and vendoring, construction, real estate investment, and waste management.

The construction sector faces huge market turbulence due to the drivers of the new market reality formed by climate change. The sector can expect new policies and regulations, changes in investor demands for more certified buildings, increased energy and resource scarcity, new competitors putting circular building principles at the core of their business model, and not least, growing citizen demand for resilient infrastructure and people-centred cities.

In the midst of profound renovation

Globally, buildings account for 30% of energy consumption and produce close to a third of human-induced carbon emissions, making the construction sector one of the largest emitter of all sectors. If you combine this number with the fact that 1.6 billion people will need affordable housing by 2025, and urbanisation is projected to continue – with two-thirds of the world’s population living in urban areas by 2050 – the sector is at risk of potentially emitting enormous amounts of greenhouse gases.

Consumer demand for liveable, resilient and smart cities with improved infrastructure and air quality is growing.

According to the 2018 IPCC 1.5°C report, 1.5°C-consistent pathways require building emissions to be reduced by 80–90% by 2050. Given the carbon footprint of both the industry and the buildings themselves, the sector can expect numerous new regulations and building codes relating to energy, resources and waste, and circularity. The European Commission already launched a circular economy package in 2018, following new legislation on energy consumption in the building sector in 2017.

Investors across the world are also starting to demand that buildings are certified through green certifications like LEED and DGNB. Consumer demand for liveable, resilient and smart cities with improved infrastructure and air quality is growing. Resource scarcity is another ticking bomb: The building sector consumes 40% of the total materials produced and is the biggest consumer of non-renewable resources of all sectors. Global concrete production is becoming endangered as natural sand starts to become scarce.

The multitude of pressures is pushing the entire construction sector to develop and implement new solutions, value chains and building models.

Estimates suggest that the incremental opportunity of expanding renewable energy infrastructure could be between $165-605 billion by 2030,

Opportunities for first movers

Many companies within the building sector are already reinventing themselves. Some are quick to apply circular principles and smart technology to innovate design of buildings and infrastructure. This holds great opportunities. New materials from biodegradable materials such as wood, fungi, or recycled waste can address the issue of waste and large carbon footprints.

Modular systems, whereby products are combined mechanically rather than being glued together, and a line of new smart technology solutions are other growing trends.

There are great opportunities in the combination of digital solutions to increase buildings’ operational efficiency and develop new carbon friendly materials – this together can help ensure low-carbon buildings and also help improve the buildings’ livability.

Several companies are already moving in this direction. One example is the Danish architecture firm 3XN, who has established an intrapreneurial company, GXN. GXN has the clear task to develop, test, and scale new sustainable building solutions and alliances, as a response to growing global challenges.

The companies that are stepping into the new market reality as first movers face astonishing economics gains. If you look at the market opportunities to companies providing clean energy in cities, the value is expected to rise to between $555-770 billion. The circular economy – as a whole – is a $4.5 trillion opportunity. Steering onto a circular path for a country like India could bring annual benefits of $624 billion by 2050 – equivalent to 30% of India’s current GDP. The estimated markets for affordable housing are expected to exceed a staggering $1,080 billion in 2030.

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