These innovations aren't just limited to high-end luxury homes; they're being used for everything from new offices to affordable housing developments. In this article, we will take a look at a few new approaches in construction that are making significant headway and changing the landscape forever.

Construction Robotics

Robotics technology is being used to automate various aspects of the construction process, such as bricklaying, painting, and demolition. With the ability to perform repetitive tasks with high precision, robotics technology can significantly reduce labor costs and improve the quality of the final product. Additionally, robots can perform tasks that are too dangerous or physically demanding for humans, reducing the risk of accidents and injuries on construction sites.

BIM and VR Modeling

Building Information Modeling technology is being widely adopted by architects, engineers, and construction teams to create digital models of buildings. BIM enables seamless collaboration and communication between teams, improves the accuracy of cost estimates, and identifies potential problems before construction begins. BIM can also be used to optimize energy consumption, improve sustainability, and reduce the environmental impact of buildings.

VR modeling offers another way for designers to envision their projects before they become realities. With VR, users get an accurate representation of how a building will look from every angle possible — from above and below ground level up through its highest point — and they can even walk around inside these virtual spaces if desired!

Fabric Structures

A fabric structure is a type of building that uses a flexible membrane as its primary structural element. These structures can be used for a wide range of applications, from temporary shelters to permanent buildings. Fabric structures are lightweight, cost-effective, and easy to install, making them a popular choice for many construction projects.

One of the biggest advantages of fabric structures is their flexibility. Because they are made from a flexible material, they can be designed to fit almost any shape or size. This makes them ideal for use in areas where traditional building materials would be difficult to use, such as in remote or hard-to-reach locations.

3D Printing

3D printing technology is being used to create complex building components such as walls, columns, and even entire buildings. 3D printing technology has the potential to revolutionize the construction industry by enabling the creation of complex building components on-site, reducing the need for costly transportation and handling. With the ability to print customized building components to exact specifications, 3D printing can significantly reduce construction time and costs. Additionally, 3D printing technology can reduce waste by using only the exact amount of material needed to produce a component.

Prefabrication

Prefabrication involves building components off-site and then assembling them on-site. Prefabrication is becoming increasingly popular in the construction industry due to its numerous benefits. By building components off-site, prefabrication reduces the amount of labor required on-site, lower construction costs, and shortens the construction timeline. Additionally, prefabrication reduces waste by producing only the components needed for a particular project, which minimizes the environmental impact of the construction process.

Drones

Drones are being used for a wide range of construction applications and have the potential to revolutionize the construction industry by providing real-time monitoring and data analysis of construction sites. They can capture high-resolution images and videos of the site, which can be used for inspection, mapping, and surveying. By providing an aerial perspective, drones can improve accuracy and efficiency while reducing the risk of accidents. Drones can also be used to monitor construction progress and ensure that the project is on track.

Smart Home Technology

Smart home technology is being integrated into buildings, allowing for improved energy efficiency, security, and convenience. Smart home technology includes features such as automated lighting, temperature control, and security systems that can be controlled remotely using a smartphone or other device. Smart home technology is typically integrated into the building design and construction process. This involves planning and designing the necessary infrastructure and systems needed to support smart home technology, such as wiring and connectivity. The implementation of smart home technology requires a coordinated effort between the construction team, the technology provider, and the building owner or operator.

Green Roofs 

Green roofs are becoming increasingly popular in urban areas, as they provide numerous benefits, such as improved air quality, reduced heat island effect, and increased biodiversity. Green roofs also help reduce stormwater runoff and can improve building insulation, reducing energy consumption.

As these examples show, construction technology is constantly evolving. We can expect to see even more advancements in the future, as builders try to keep up with new building codes and regulations. The good news is that there are many ways for you or your company to get ahead of the curve on these changes.

Development finance offers the kind of flexibility that can accommodate the vast majority of larger-scale property development, conversion and construction projects; examples of which include repurposing entire properties, partially or completely demolishing properties to be rebuilt from the ground up, or transforming the early properties into luxury multi-purpose developments.

Importantly, development finance affords developers the opportunity to cover up to 100% of the total costs of the project - without eating into their own capital. As established developers often aim to have several projects on the go at the same time, this alone can make development finance a uniquely beneficial financial tool.

100% Project Costs Covered

The initial loan issued by a development finance specialist is referred to as ‘senior’ development finance, which is usually offered with a maximum LTV of 85%. This means that the primary loan secured against the development can be taken out to cover no more than 85% of the total project’s costs.

Another slightly different form of development finance is offered by some lenders, referred to as ‘stretched’ senior finance. This is where (under special circumstances) a lender is willing to increase this maximum LTV to around 90%, leaving just 10% of the project’s costs to be covered by the investor.

Again, property developers and investors often seek to minimise the direct investment of their own capital, in order to enable them to execute multiple projects simultaneously.

Whether the initial loan taken out is a standard senior development loan or stretched senior finance, the remaining funds do not necessarily need to be provided by the developer. There is also the option of seeking ‘mezzanine’ finance - a facility used to top up an initial development finance loan, which sits behind the first legal charge of the senior lender. 

Second-Charge Borrowing

Mezzanine finance can be used to take the developer's total borrowed funds from the initial 85% or 90% right up to 100% of the project’s total costs. A mezzanine finance facility will usually be sought from a separate lender to the first product, issued as a second-charge loan against the borrower’s assets - usually the development itself.

While mezzanine finance can be affordable in terms of monthly interest and borrowing costs, it is a facility which is usually issued on the condition that the lender takes a proportion of the final profits on the development from the borrower. This is not always the case, but some mezzanine finance facilities include a clause wherein up to 50% of the developer’s profits are claimed by the lender, upon completion of the project.

This is one of many reasons why it is essential to seek independent broker support, before applying for development finance. Irrespective of your target LTV or the nature of your project, broker support always paves the way for an unbeatable deal and the flexible terms you need to successfully complete your project.

Angelica Donati, Head of Business Development at Donati S.p.A, takes a look at inflation post-pandemic.

Although price rises vary widely across the zone, inflation in the eurozone is now 4.1%, a 13-year high. According to the European Commission's estimates, Europe’s inflation is expected to continue to record-high levels in the first half of 2022 and will last at least until the end of the year. As per other sources, the eurozone inflation is transitory and forecasts inflation will slow to 2% in 2022, but this remains to be seen.

However, the issue of global post-pandemic inflation is not only affecting the whole of Europe but also the US, and it is affecting multiple sectors, from the food industry to the automotive sector and the construction sector. 

How construction is dealing with a new emergency

2021 was a year of rebirth for the construction industry. It was one of the main drivers of the post-pandemic economic recovery across Europe, with peaks of up to 15% growth in countries such as Italy and the UK. 

That being said, in recent months the industry has been hit hard by another emergency: the drastic rise in commodity prices. The increase in the cost of hundreds of raw materials has had an impact on the entire sector globally, so much so that the price of construction materials jumped nearly 20% in 2021 according to Associated General Contractors of America.

The price of iron, for example, has increased by 243% in the last nine months, adding to the extensive list of construction materials that have risen sharply round steel serves as another example as its price increased by 250% in one year. In addition, other essential construction materials have risen sharply: the cost of copper has risen by 21.63%, aluminium by 35.76% and lithium by 98.92%, as well as fuels, electricity, timber, PVC, and concrete.

According to Associazione Nazionale Costruzioni Edili (ANCE), the anomalous dynamics of the prices of important raw materials are putting a strain on the construction sector that, after a long recession, is starting to show important positive signals, driven mainly by tax incentives on renovations and public investment. However, the current situation risks endangering the projects that are already underway and are producing negative repercussions on countries’ abilities (especially Italy’s, since it is the single biggest beneficiary of funds) to carry out planned investments under the National Recovery and Resilience Plan (NRRP) programme.

Health crisis and restart

Inflation is here to stay, and its effects will be felt all over the world. This spike is due both to the ongoing effects of the health crisis, which has caused a particular shortage of supply due to global lockdowns and logistics issues, and the consequences of the acceleration in 2021, which generated a sharp increase in demand. For example, one of the main drivers of inflation for steel, as indicated in the OECD's December 2020 report, was the sudden increase in demand from the construction sector in China. This rebound triggered an upward effect on the price of raw materials and on the entire global steel supply chain. It should be noted that China accounts for over 50% of world steel production and consumption and, in particular, construction in China accounts for 40%.  

Required measures

Prices are not expected to correct at least until the end of 2022. In fact, further inflationary surges could occur, especially with regards to energy prices which are being boosted by geopolitical tensions in Ukraine. Governments cannot turn a blind eye to this, and companies cannot be expected to cover this extraordinary cost increase on their own.

Without a significant price list adjustment and a structural price revision mechanism for public works, it will be difficult for companies to tender for work in 2022. Government action to counter rising materials and energy costs in the short to medium term is essential to ensure that the resources of the NRPP don’t go to waste. Italy, and all other European recipients of funding, are on a strict deadline. The Recovery Fund monies must be deployed quickly and efficiently over the next few years. In order for this to occur, policymakers need to tackle the issue of inflation head-on.

We all know how difficult the COVID-19 pandemic has made things throughout the world. Nobody has been unaffected. Almost all industries have been dramatically impacted by the crisis, which has left millions of people out of work. While the beginning of 2021 looks to continue to be rough, with Q1 being another lost quarter for many industries, the rest of the year looks promising for a huge resurgence.

Nearly all industries should see a bounceback in 2021 from a massive 2020 falloff. However, we'll focus on six industries that seem poised for massive rebounds.

Construction

The construction industry was absolutely decimated by the pandemic. Many factors affected the drop in the industries stake during 2020. With industries across the board struggling, many planned expansions were halted. Instead, companies diverted funds to help stay afloat rather than grow. Many construction projects were abandoned, either temporarily or permanently.

In addition to the halted projects, few people were looking to start new projects. With so much uncertainty, even organizations that weren't brought to the brink weren't likely to attempt to grow. Client bases were likely to be greatly diminished to non-existent due to potential buyers being out of work.

Another reason for the lull in the construction industry was that with so many businesses closing, the few companies that were looking to expand were likely to move into a previously occupied space. While there might be some construction called for in these cases, the projects were far smaller and finished much quicker than building a new facility from the ground up would have been.

With a likely rebound in industries across the board beginning in spring of 2021, expect a fresh need for the construction industry to get back to work.

Live Events

Live events nearly came to a standstill in 2020. Outside of protests and political rallies, large gatherings and even small gatherings pretty much ceased to exist. Fortunately, this is one industry that should come back with a vengeance later in the year. People have been isolated from friends and family, they have been working from home, and they haven't been to a party in forever. When getting together is deemed safe, expect big gatherings.

This will have an impact on every aspect of the economy that gets a boom from live events. Venues will clearly win big with pretty much guaranteed full bookings and sold out events once things return to normalcy. Other industries like hospitality and transportation will see a big boom as out of towners come to these events. The big sporting corporations will obviously get a big boost from being able to sell seats at full capacity.

Event planners, large and small, will see their services in full demand. Whether planning small gatherings of a handful of people or festivals that attract thousands, all types of event planners will be needed. Insurance companies that sell event insurance will also see a boost as this type of insurance has largely gone unpurchased over the past year.

Social calendars will likely be packed full from late spring onward. Artists will crowd the road to return to performing live concerts. City halls will be packed with people who have been waiting to tie the knot. Whether family, friends, schools, or any other type of group, expect reunions aplenty. Employers hoping to raise employee morale after a very difficult year will plan all sorts of retreats and outings. There will be no shortage of events in 2021.

Hotels & Other Accommodations

People are going to want to travel again. The world is suffering from a near-universal case of cabin fever. The best solution for that is to get out of town. People will likely be traveling in record numbers once it is safe to do so. While many hotels and other accommodations were forced to shut their doors for good during the pandemic, those that make it through should find an abundance of riches on the other side.

With such a high demand for accommodation and a narrowed competition pool, hotels can expect many nights of turning away guests due to no availability. Those able to time things just right could find the perfect moment to enter the hospitality industry and turn a profit immediately.

Airlines & Other Transportation

As mentioned, people will be looking to travel once they can. Expect the skies to be full and freeways to be crowded. Between border closures, lockdowns, high unemployment rates, and countless restrictions to the kinds of things that people look for in a vacation, people have generally been staying put this last year. Nomads are becoming restless and will look to be on the move as soon as possible.

Bars & Restaurants

Food and drink service was one of the hardest-hit industries. However, bars and restaurants that managed to make it through the pandemic should be facing a new type of dilemma later in the year. Making sure they don't violate fire codes by being overcapacity.

Some restaurants were able to adjust to the pandemic well enough to keep from being hit too hard with takeout options. However, many restaurants simply aren't suited well enough to make it in the world of takeout. Restaurants relying heavily on their atmosphere for their appeal and fine dining venues had a difficult transition.

Bars in many parts of the country were completely helpless, with a takeout model not really a possibility for them.

While due to financial concerns, not everyone who wants to go traveling will have that option, most people will be able to start going out to a bar or restaurant again. Nearly everyone will be looking to hit the town.

Movie Theaters and Playhouses

Many theaters had to close down entirely for parts of 2020. Once able to fully reopen, movie theaters are going to have a lot to work with in pulling in big crowds as many big event movies have been sitting on the shelf awaiting a theatrical release rather than going straight to streaming. Movie theaters can expect a huge influx of top-grossing films to fill their seats on a daily basis in 2021.

A Welcome Return to Normalcy

These are far from all of the industries that were negatively affected by the last year. It has been tough all around. Fortunately, these industries are far from the only ones expected to have a nice recovery later this year. People can expect a general rebound of the economy all around. It may take a little while to get back to the levels the country was at pre-pandemic, but we can certainly expect a strong move in that direction.

Jamie Johnson, CEO of FJP Investment, offers his thoughts on the trends that will influence the UK real estate market in the year to come.

With the Pfizer/BioNTech vaccine starting to be administered to UK citizens, it’s safe to say that the end of COVID-19 could be in sight. After almost one full year of lockdowns, social distancing measures and job retention schemes; we may be soon returning to something resembling normality.

However, our transition to the “new normal” will be notably different to the pre-COVID-19 environment. Tax reforms and spending cuts are looking likely, as the UK government scrambles to make up the shortfall for what it spent combating COVID-19’s economic impact.

The UK has been long been heralded as one of the world’s leading investment destinations. There is good reason to believe this will remain the case, despite the obstacles on the horizon. A recent piece of research commissioned by FJP investment revealed that 42% of investors are confident the UK shall remain a global investment hub following COVID-19 and Brexit.

So, given all of this, which assets have investors been retreating to amongst all of this uncertainty? Based on what we have been witnessing at the moment, there is no denying that residential property remains high on the list for sophisticated investors.

Spotlight on property

Amidst all the market volatility and global uncertainty witnessed throughout 2020, British real estate has demonstrated strength, resilience, and perseverance.

In fact, market demand for property has been rising at an impressive rate. If we use house price growth as measure of buyer demand, this is evident. Halifax’s House Price Index for November revealed that house prices have risen annually by 7.6%.

Amidst all the market volatility and global uncertainty witnessed throughout 2020, British real estate has demonstrated strength, resilience, and perseverance.

Understandably, it looks as those some buyers are investing in UK property to hedge against any financial uncertainty. While other asset classes are suffering from high volatility as financial markets adjust to new COVID-19 developments, the price of UK property has consistently trended upwards throughout H2 2020.

This is a reflection of the positive sentiment investors hold towards bricks and mortar. FJP Investment’s aforementioned research also found that a majority (51%) firmly believe UK real estate will remain a sound investment regardless of how Brexit and COVID-19 play out. And, as the year comes to a close, I believe that this optimism will soon translate into record levels of transactions. Already transaction numbers are high, with October 2020 witnessing approximately 8.1% more transactions than October 2019. What’s more, with the Stamp Duty Land Tax (SDLT) holiday coming to an end on 31 March 2021, we are likely to see transactions numbers spike further.

The SDLT holiday, implemented in June and potentially saving house buyers up to £15,000, has been credited with successfully luring investment back into British real estate after the first summer lockdown earlier this year. Given the considerable savings this tax break allows for, I suspect that investors will flock to property in the new year before the holiday ends.

Constructing new builds to meet demand

With regards to infrastructure and potential new builds, it’s up to the government as to whether they wish to push forward with their plans from earlier this year for a "housebuilding revolution". The UK is still suffering from a mis-matched housing sector, with demand far outstripping supply, so fulfilling the promises made during the 2019 General Election to ‘level up’ the nation via pouring billions into new builds should be welcomed by investors and seasoned property experts alike.

Allocating such funds for infrastructure and housebuilding not only fulfils electoral pledges but is paramount for facilitating a wider post-COVID-19 economic recovery. For this reason and others, I’m confident that Prime Minister Boris Johnson will push forward with previous plans to help fund construction and development projects in 2021.

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Regarding other plans, such as extending the SDLT holiday or implementing negative interest rates, it is difficult to make assured predictions at the moment. However, for property investors and housing developers, I’m personally optimistic about what 2021 may hold. Given the incredibly strong performance of UK property throughout this year’s pandemic, I’m confident that this sector will remain a prime destination for investment and a source of impressive long-term gains for the foreseeable future.

Tell us about some of the most important projects USA Escrow Fund has worked on in 2019.

In 2019 we spent a lot of time working with our newest clients in preparation for the exciting projects we’ll have in the future. We also wound down and completed a few projects which resulted in excellent results for both our clients and our company, and we had the opportunity to see how businesses can be built and flourish with financial help which is custom-made for their needs.

What would you say are the company’s top three priorities towards its clients?

When it comes to prioritising the needs of our clients, we approach this task with great attention to detail. We assess the true needs of our clients and prioritise accordingly. For that purpose, we assign a specific project manager to every project we handle. They meet with the clients in person, and through getting first-hand knowledge of the planned project, they are able to ascertain perfectly the sequence of priorities to suit both sides perfectly. The top three priorities in our company’s service to our clients are a personal approach to each project, frequent project oversight and making sure that we create custom financing programs for our clients' specific needs.

The biggest challenge we face is the conflict between the western way of doing business and the old socialist ways the countries in South-Eastern Europe are used to.

What are some of the main challenges you face when working on projects in South-Eastern Europe?

All of the countries in this part of Europe have recently gone through significant changes in their respective political and social systems. The biggest challenge we face is the conflict between the western way of doing business and the old socialist ways these countries are used to. Often, we are able to find common ground, but this is not always the case. In some cases, we, unfortunately, have to reject a project because of dishonest clients who present us with misinterpretations, governmental bureaucracy which very clearly would be a great obstacle in project performance, and very frequently, laws of the region which would make it almost impossible to ensure the safe financial return for our investors or a way to properly put up legal liens enforceable by law. Sometimes it is possible to work around those obstacles, but sometimes they are insurmountable.

What are the current financing trends in the construction sector in Europe?

What we see as trends, when it comes to financing, does not necessarily reflect the trends that the industry promotes. We form our view of trends and financial needs based on the information we get from the applications we receive from our potential clients, as well as from our people in the field. Currently, the need for niche financing is trending in our company and we have to be very creative in our approach to financing the projects we select.

Are there any exciting projects you’re working on in 2020 that you can share with us? What are your goals for the new year?

We have several new projects planned that I’m very excited about. The most exciting thing for me personally is the fact that they are in the tertiary sector and cover service and energy. Some of the projects are not necessarily huge by industry standards, however, I find them very exciting because their impact on these sometimes-struggling economies is of great importance and has a positive effect on them.

A few ongoing projects I am looking forward to in the coming year include a solar power plant, an elderly care facility, a hotel and villas complex located in South-Eastern Europe, warehouses and a transportation logistics centre in Western Europe.

How does development finance work and what are the criteria? Below Gary Hemming at ABC Finance explains the ins and outs of project financing and development loans in the property sector and beyond.

1. What is development finance?

Development finance is a type of short-term, secured finance which is used to fund the conversion, development or heavy refurbishment of property or properties. Property development finance can be used for a range of different building projects but tend to be used for ‘heavier’ projects, which require serious building works.

Projects which require ‘lighter’ works, such as internal refurbishment are likely to be better suited to a bridging loan.

2. How does it work?

Development finance can be more complex than residential mortgages, with funds advanced upfront and then throughout the build.

Funds are initially advanced against the value of the site, with most lenders happy to advance up to 60-65% of the value.

Once the build has begun, further funds are released at agreed intervals, with lenders often willing to advance up to 100% of the build costs. In order to agree to each stage release payment, the site will be re-inspected by either a lender representative or monitoring surveyor. If they feel that works are being done to a high standard and there is sufficient value in the site to release the next stage, funds will generally be released quickly.

The reinspection and further staged drawdown are then repeated until the project is completed.

3. How is the interest paid?

The interest is retained by the lender as each stage is drawn down, meaning there are no monthly payments to make. When the development is complete, the loan is redeemed along with any interest that has accrued.

This generally suits both the borrower and lender as cash flow can be difficult to mage during a build. As such, the removal of monthly payments makes the loan easier to manage for all parties.

4. How much does it cost?

The rate charged will depend on several factors, with the main ones being

• The developer's experience and track record
• The scheme being undertaken
• The location of the development
• The amount of funding required
• The loan to value/loan to GDV requested

Larger loans of say £500,000 or above will usually be between 4-9% per annum depending on the above factors.

Smaller loans of say below £500,000 will usually range from 9-12% per annum however if the deal is strong you could pay around 6.5% per annum. Usually, lenders price each application individually.

In addition to the interest charged, the will usually be a number of other fees, the main ones are:

• Lender arrangement fee – this is usually 1-2% of the loan amount
• Lender exit fee – this is not always charged but can be 1-2% of the loan amount.
• Valuation & monitoring surveyor fees – these can vary and it is almost impossible to offer a guide due to the number of variables.
• Broker fees – most brokers will expect to earn 1% for arranging a property development loan. Where they are not paid by the lender, they will usually charge it as a broker fee directly to you.

5. Understanding the maximum loan available

Property development finance lenders use a number of key metrics to calculate the maximum loan, they are:

• Loan to value (LTV) – The loan to value ratio is used to calculate the maximum available advance at any one time. The monitoring surveyor will revalue the site throughout the build to ensure the lender is never overexposed.
• Loan to cost (LTC) – Most lenders will want to know that you are putting up a certain amount of the money yourself, loan to cost is used to calculate this. For example, a maximum loan to cost of 90% would mean that the lender is not willing to put more than 90% of the total cost of works into the scheme. You would, therefore, have to pay at least 10% of the total project cost by way of deposit.
• Loan to gross development value – Otherwise known as loan to GDV, is the maximum percentage of the loan that the lender is willing to offer. If a £1,000,000 scheme had a maximum loan to GDV of 70%, the maximum total facility would be £700,000.

The lender will combine all 3 of these metrics to calculate the maximum loan. Where there is a conflict between the 3 figures, the lower of the 3 will be chosen to cap the loan.

6. What happens when construction works are complete?

When the works are complete, the loan will generally need to be repaid. Often, people look to refinance to a term loan such as a mortgage or switch to a development exit product whilst the site is sold as this can be cheaper than the development finance, maximising profit.

The facility will be set up to last for only the build period, with a grace period to allow time to refinance or sell. Development finance should never be used as a long-term finance solution.

To catch up on all things construction in Cayman Islands, Finance Monthly reached out to Samuel Marcus Menzies-Small, the Founder and CEO of Small Engineering Limited and SEL Consulting Limited.

Can you tell us about the products that Small Engineering Ltd. offers?

The products and effects that we offer our clients are firstly 28 years of Civil and Mechanical Engineering knowledge and experience. My concentrate degree is in Civil Engineering. As for our Civil Engineering (construction firm), we are the first of our kind to provide Quad-lock ICF - a panel type ICF wall system consisting of panels, ties, metal track and metal brackets. Quad-Lock Panels are made with high density, fire retardant expanded polystyrene (EPS) which uses no formaldehyde, HFCs or CFCs. Seven panel types and eight types of plastic ties allow virtually limitless design options, using standard components. R-values range from R-22 to R-59 and more - the highest in the industry.

In what ways have your offerings advanced over the years?

From concept to distribution - from a small office in my home after a devastating hurricane (Hurricane Ivan in 2004) and after complete mass building inspections, I was able to analyse an affordable, safe and lightweight system that would get the Island to its usual efficiency.

What are the main challenges that you and your firm face? How do you overcome them?

The main challenges I face is separating business with pleasure, as life does need balancing.

The challenges that my firm faces at the moment are connected to the market – I think that every business can agree in this capacity. Every problem has a solution and my piece of advice for finding the solution to your specific problem is to try to be futuristic and realistic, read a lot and don’t underestimate the power of networking.

Where do you see the company in 2-3 years?

In 2-3 years, I envision our company expanding into the other Cayman Islands and Jamaica, providing products and services to compliment the issue at hand, whilst offering affordable problem solving.

Why should your clients choose Small Engineering and SEL Consulting over your competitors?

We are in a class uniquely by itself. The web of qualifications, knowledge and experience that we obtain along with our clientele fee(s) are slim to none. We are the Ritz Carlton and Audi of our trade.

What’s your involvement in the community?

We support The Maple House of the Cayman Islands in respect to the late Joshua J Bodden, The University of the Cayman Islands, as well as local artists and special great minds that are on the rise in the community.

For more information, please go to: https://www.facebook.com/SmallEngineeringLimited

Determined CFOs need to stay ahead of the game if they are to make an impact in an ever-changing market landscape, says Philippe Henriette, SVP of Finance, Processes and IT for Volvo Construction Equipment. Below Phillippe discusses the drive that’s needed to push finance into the digital age.

The finance function has expanded from a laser beam focus on reporting, budgeting and control to include a more overarching strategic role. At Volvo CE we are no different to any other organization in our ambitions to allocate more funds to IT development and innovation. The market is changing and finance should have a clear view on how the digital spend turns into value for our customers. And to operate at its high-performing best, finance needs to have an overview of the 'big picture' and be prepared to invest in new technologies even without the promise of an immediate payback. The use of big data and predictive analytics to identify these new trends is a vital tool in this future focused approach.

We live in a fast-moving environment where digitalization is disrupting industries the world over, yet construction is a relatively conservative sector. At Volvo CE we have to think about how our industry might look further down the line and how we can adopt new technologies and new ways of working to shake up our traditional business model. After all, the demands of a customer today might be radically different tomorrow. And finance has a vital role to play.

Interpreting changing customer needs

We looked to the wider economy for inspiration to see how companies like Uber redefined

the way people buy and access services – a way of spending that is beginning to filter through into other industries. Owning an asset is becoming less important to customers who are shifting to a value-buying spending model. So if our business is to sell a construction machine, and its relevant parts and services, how can we adapt for the future? With the emergence of electrification and other technologies, shouldn’t rental services be generalized? Should we be selling our services by the hour? And it is already happening. This was the impetus behind us introducing a ‘power by the hour’ scheme for one of our key accounts. Our customer demanded to get the construction job done, but instead of purchasing our machines, they only pay the hours and value machines create. If this is the future construction business model, then finance cannot stand still. We need to be ready to support the business transformation from generating revenue on machine and parts to selling services.

Data-driven culture shift

Our aim is always to simplify things for our customers, and to do this we have to have a deep understanding of their needs and stay steps ahead of those demands. Shifting from a product centric to a data driven culture plays a key role. By putting data analytics at the heart of our research and development and turning customer and product information into insight we can be confident we are staying ahead of the game.

Equally, if we are going to provide the flexibility our customers require, we need to be brave when it comes to fixing a price point for our new services. I have learnt that we cannot test the waters by bringing new services to market without understanding how much it is worth. By doing this we would make it impossible to set a price when it proves a success. Instead we do our due diligence through data analytics so that we can be confident we are setting the right price from the very start. With this data-driven culture comes a huge responsibility on the part of the CFO to handle this information appropriately. We do this by ensuring we have proper systems in place to protect the data we use – an issue that is becoming increasingly important as digital technology leaps into the future.

ROI for a new digital era

Having an eye for future trends – and the risks and rewards that go with them – is one thing, but how can CFOs be assured of a profitable return on investment on these new innovations in the years to come? Developing the right set of measurements to monitor the progress of new digital offerings may not lend themselves to standard ROI calculations. It is essential therefore to adopt non-financial metrics alongside the usual measurements of cash generation and profit so that we have the big picture we need to drive the company through this new digital era.

We are working in a vastly different corporate landscape today than we were 20, 10, even 5 years ago. The finance function has navigated choppy waters during the economic downturn and is now learning to adapt to customer demand and increased innovation. This puts us in a unique position to act as a driving force for the digital revolution. The world is changing and it’s up to every CFO in every industry to stay ahead of the curve.

Paul Vick Architects recently won Finance Monthly’s Game Changers Awards 2018. They are a growing, agile practice based in West London. Their unique blend of skills and experience is backed up with a client-savvy world-view that sets them apart in their profession as does their 100% planning permission record on over 100 projects. The company’s Cambridge educated Director Paul Vick discusses the challenges faced by clients today.

What are the biggest challenges facing development?

Armed only with a commercial need, a strategic target, and an investment appraisal, risk and uncertainty loom large in the average construction client’s mind. Digital connectivity has laid bare how many different stories there are trying to make sense of the chaos of data and disordered world we work in. They have to stare through the fog of unknowns and lean on past performance, current valuations and economic indicators – any crutch, in fact, to mitigate risk. After all, huge sums of money are involved and whether they spend equity or take on debt, it all has critical implications for the wellbeing of their organisation.

And when the only constant is change, designing only for today’s conditions is a sure way to guarantee a sub-optimal solution.

What are the key issues clients face in relation to UK regulations and what are the incentives to encourage foreign participation?

Planning permission is a definition of viability – without it buildings don’t get built, investment is not forthcoming, and you are left with stranded assets. Stories of intransigent planners, vocal neighbours, mykfcexperience survey and delay are commonplace. Sometimes this is a result of an incomplete understanding of the process and the pressures planners face.

Our job at Paul Vick Architects is to confront uncertainty and negotiate remaining unknowns and trends intelligently in relation to the client’s brief. At the same time, we approach value from the start to enhance your business plans. The model we have developed addresses economic, use, identity, community, environmental and cultural values together to give opportunities for multiple users and positive feedback loops for your benefit. There is not much point in receiving planning permission for a care home, student hostel or hotel without enough rooms to make it viable for example.

The UK is known as being a structured and reliable environment to work for long-term interests – essential to successful construction projects.

The traditional distance of the developer to the user has become shorter. The public nature of development means users and neighbours have a louder public voice. They can be your supporters and market, and the developer seen as a catalyst for regeneration. An understanding of user needs is not just important to the planning process specifically, it is also important to the conception pre-planning and the physical detail delivery of it for user satisfaction.

For an office owner-occupier, that might mean design that attracts the best staff, encourages them to stay longer, work more productively and, ultimately, to make a more profitable enterprise. For investor-developers, that might mean private rented housing designed with a marketing cachet for cultural and social opportunities that commands premium rents, long leases and zero voids. For a museum, it might mean spectacular staging in and outside galleries themselves to create a destination powerful enough to attract people away from their screens.

Can you give examples where you have created value enhancement above client expectancies?

Apartments and Penthouses, London, UK. After some study, we agreed in a pre-application with the council that 100% increase in area would be acceptable. Previous consultants had thought only 25% was possible.

New Mini-Department Store, West End, London, UK. Our design increased the visibility of selected brands and improved the management and speed of stock delivery in store to boost client’s customers’ loyalty.

Daylight Studio, London, UK. Our design anticipated the client’s need to adapt over time to new media and alternative revenue streams, leaving them very satisfied.

Regeneration of a historic site with 7,000sqm of offices and retail, 80-bed care home, boutique hotel, low-energy homes, and museum, UK. The key objective is to design a destination to drive footfall, room occupancy, and sustainable client revenue.

Start-Up Hub, Innovation Warehouse, London, UK. Eschewing the trendy playroom motif, our fit-out supports growing, developing and selling ideas, and has nurtured several entrepreneurs who have turned into unicorn businesses.

Glass Bridge and Office Fit-Out for Global Communications Company HQ, London, UK. Our design crystalizes an identity that emphasises connectivity and facilitates idea-sharing.

What is your overall vision?

The magic needed to turn the faceless development appraisal with all its risks and changing parameters into successful ‘output’ value is understanding the various ‘input’ values. The examples above are about how user motivation and inspiration are harnessed - attracting them to come, stay, and return, as well as the word-of-mouth marketing will make the development attractive and relevant for longer. Focusing on the user is essential for any business.

Website: http://paulvick.co.uk/

To hear about real estate and construction in Africa, Finance Monthly reached out to the Executive Director of Tanzania-based Epitome Architects Ltd. - Nuru Susan Nyerere – Inyangete. Established in 1998, the company provides architectural, interior design, planning, contract administration and project management consultancy services. At Epitome, Nuru is in charge of design, procurement (especially international), quality assurance, whilst she also heads the company’s Real Estate Development wing in Nigeria.

What would you say are the most common types of projects that you work on?

We are not geared for a specific building type as in Tanzania, like many African countries, the economy is not big enough to sustain architects who are specialised in a specific building type. Thus, we have built a team with the capacity to successfully undertake a variety of projects.

We are very fortunate to work on a wide variety of building types i.e. corporate buildings (for both private and public clients); commercial and mixed use. We’ve also worked on petrol stations, banks, schools and universities, residential buildings – and the list goes on. We are one of the few Architectural firms in Tanzania that have worked on a number of health related projects.

Additionally, our portfolio also includes international projects such as Utako Bus Terminal in Abuja, Nigeria and Rwanda People’s Bank in Kigali.

Our work ethic and drive to satisfy our clients have enabled us to get numerous word-of-mouth referrals.

What specific tactics do you implement when assisting clients with development strategies?

• The desire and interest of our clients is our priority and we guide them by understanding their ambitions in order to deliver solutions that satisfy their expectations.
• We undertake extensive research based on client expectations and spend a good deal of time with them. This forms the basis of our execution plan.
• We have a passionate, highly skilled, multi-disciplinary team of professionals with international experience whose quality of work epitomises our services.
• The hallmark of our service is built on uncompromising adherence to contracts, development controls, regulations, best practice guidelines and documentation.
• We set out to educate our clients on the actual role of an architect in a development project.

What are the challenges that your clients typically face prior to embarking on a new project, in relation to laws and regulations?

A key challenge for our clients is matching their expectations and needs to the resources available, the regulatory requirements and the cost of compliance.

Processing of Statutory approvals like building permits, change of use (where change of developments use is required) is long drawn out and bureaucratic. In addition, every project needs to register with various regulatory bodies like AQRB, ERB, CRB and also undertake studies such as Environmental Impact Assessments (EIA), all of which are costly. Additionally, if the project involves acquisition of funds, the process may take longer than the client’s timeframe.

In regards to building laws and regulations, a potential challenge can relate to gaps in legislation, such as the absence of building codes for example. Change in policies can also cause numerous issues for our clients.

Do you have a mantra or motto you live by when it comes to helping your clients with the development of a project?

Our Motto is: ‘Strive for excellence regardless of project size’. Our business ethos is built on being loyal to our clients and the profession in our advice from the outset and our clients appreciates this.

The recent collapse of Carillion is one of the biggest domestic insolvencies in almost a decade, characterised by some as another Lehman. For Britain’s second largest construction company, its 43,000 global employees also provided a range of facilities management and ongoing maintenance services, most notably to a variety of UK government agencies. Until last July, the combined business had a market capitalisation of nearly £1bn, but today PwC is managing the lengthy liquidation process to salvage what it can for its many creditors. Below, David Allen, Chief Operating Officer of Monimove, delves into the issues that led up to Carillion’s downfall, from contracts to supply chain management.

The current consensus is that Carillion overreached itself, taking on too many risky contracts that proved to be unprofitable. In turn, with just £29m in cash assets, this made it impossible to manage its substantial £900m of bank debt and a similarly burdensome £600m pension fund deficit. Most acutely affected by Carillion’s demise are around 30,000 dependent businesses in its supply chain. Suppliers and subcontractors are owed roughly £2bn according to Carillion’s most recent results statement for “trade and other payables”.

According to a survey by assorted industry bodies, small businesses are owed an average £141,000; those with 50 to 250 employees face a shortfall of £236,000; while £15m is the typical debt owed to larger firms. Many of these supply chain companies are at risk of financial difficulties because of unpaid services: insurers estimate that they will pay out only £3lm to affected businesses who had appropriate cover for trade credit insurance. The future of these supply chain businesses, particularly smaller firms, is in doubt since most are unlikely to be paid anything of what is owed. Inevitably, some will go under themselves.

Many suppliers were using Carillion’s Early Payment Facility system which processed more than £400m in invoices, but this has stopped since the insolvency was announced. Meanwhile some subcontractors will be offered further protection through Project Bank Accounts (PBAs) which ring-fence money from the client when a main contractor goes under. But it is not known how many PBAs have been applied in Carillion contracts.

Under the heading ‘Sustainable supply chain’, the Carillion website boasts: ‘With an international supplier spend of around £3 billion, we believe our supply chain partners can help us make a tangible positive impact on sustainability.’ But the reality is that Carillion was not sustainable in any sense: its collapse was predictable because of a reliance on old school technologies to manage its extensive supply chain.

Lack of modernisation over recent years meant that the Wolverhampton-based conglomerate had poor control of labour, materials and services across its broad portfolio of projects. In this context, the specific problem was Carillion’s use of ineffective and irrevocable letters of credit to its contractors and sub-contractors.

One method employed by Carillion was to sign contracts, receive a large sum of money and then delay payments to subcontractors which allowed it to generate profits from holding that money. These down payments resulted in widespread neglect of key contractual requirements.

There was a systemic failure to ensure that there were robust terms and conditions with the necessary protection of enforcement clauses in the supply of goods contracts combined with an insufficient ability to exercise such clauses and if necessary, undertake injunctive action.

Sales were also prioritised over sound management. Carillion’s use of an inefficient supplier management system facilitated late payments to suppliers – over 90 days in most cases and often up to 120 days or more – which resulted in frequent late deliveries and penalties. The combined effect caused delay in project delivery across several key projects, such as the Royal Liverpool and Midland Metropolitan hospitals, with hefty penalties imposed on Carillion itself as a result, turning what should have been profit-making contracts into loss-makers.

Furthermore, the changing specifications of materials under “value engineering” cost time and encouraged bad suppliers. Consequently, there were no clear effective agreements between contractors, subcontractors and suppliers, which meant that all parties were operating in a “grey zone” that was conducive to gross mismanagement.

Within the context of backward supply chain management, Carillion’s downfall was circumscribed while the implementation of new supply chain technology may have saved it from going under. This is not a case of being wise after the event: these problems were entirely foreseeable and preventable.