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Construction firms that get tech right could see Silicon Valley-like valuations. Here's how an old-school industry can transform itself.

* A new McKinsey report says that $265 billion in new or shifting profits are at stake as the construction industry invests more in technology. * This transformation, already underway, has been accelerated by the coronavirus crisis, with 50% of the construction experts surveyed by McKinsey saying they've increased their investment in technology since the virus hit.  * While the changes will disrupt the whole construction value chain, the biggest impacts will be on the contractor and subcontractor labor field, design and engineering, and material production and logistics.  * Visit Business Insider's homepage for more stories.  A $265 billion pool of annual profits is up for grabs for construction companies that invest technology and digitalization, according to a new report from McKinsey Global Institute.  This shift, already underway, has been accelerated by the coronavirus pandemic, and the unprecedented amount of remote work that followed.  The report, published on Thursday, found that 40% to 45% of construction incumbents' value added in certain segments, such as design and engineering or actual contracting, is at risk in the face of increasing tech adoption. The report estimated that players that "move fast and manage to radically outperform their competitors could grab the lion's share of the $265 billion in new and shifting profits and see valuations more akin to those of Silicon Valley start-ups than traditional construction firms." In a call with the press on Tuesday, Jan Mischke, a partner at the McKinsey Global Institute stressed just how existential this particular moment is: "Companies need to move now or be left behind."  Construction's lack of digitization, compared to industries like manufacturing or logistics, had kept the industry from seeing a drastic increase in productivity, McKinsey found. But in the last few years construction technology has gone from an extremely niche industry to one of the buzziest sectors in venture capital.  The latest McKinsey report said it expects the coronavirus to accelerate that growth. McKinsey surveyed around 100 experts and construction executives, half have already increased their investments in tech since the pandemic began.  Read more: 7 top VC investors reveal where real-estate tech portfolios are hurting the most and what they need to stay alive through a year of crises Mischke said that some of the people they talked to said they were now squeezing their five-year plan for tech adoption into a six month period to accelerate the rate of change. As in every industry, the shift into remote work has highlighted exactly why a digital workflow is so much more efficient. Construction executives had a number of realizations during the crisis, said Maria João Ribeirinho, a McKinsey partner and global leader of the firm's engineering and construction practice, on the call.  "It is not okay to get to your construction project and have to deal with a bunch of paperwork or have to do 10 phone calls to see that your materials end up on-site in time," she added. The transformation in the industry, which could lead to a 60% increase in productivity over time, will turn a localized and fragmented industry into one that is consolidated and focuses on buildings as if they were repeatable products, instead of one-off projects. It will be driven by both new entrants, like SoftBank's Katerra, and from more traditional builders.  While there are potential impacts across the construction value chain, companies in the design and engineering, materials, and general and specialist contracting fields will see the biggest potential impact. In design and engineering, new software will reduce the amount of human input necessary in building, while materials companies, powered by recent changes in logistics, will become much more efficient, and likely cheaper.  Contracting and subcontracting may also see big hits, as easier offsite construction and modular building will require less labor than traditional building techniques.  Read more: 5 startup founders explain how they reimagined an old-school industry to break into the buzzy construction-tech scene Mischke noted that private equity has taken a very close interest in the industry, investing in both innovative startups and in more traditional building companies that are adopting technology. In 2019, Goldman Sachs' venture-capital arm made an investment in Built Technologies, a construction lending platform, and in TopHat, a modular housing company. Alternatively, private equity may also seek out underperforming companies to transform by connecting them with innovative technology. The public sector, which Mischke said is the "single biggest constructor" will also be key, both in the types of buildings and infrastructure they have built and in the way they adjust regulations to accommodate technological change. Another key element to this change will be attracting Silicon Valley-type tech talent to an industry that isn't typically known for its innovativeness. In order for that to happen, firms will need to show a commitment to using new technologies. "We need a renovation of the sector to attract more diverse and more digital talent," Ribeirinho said. Read more:  * The CEO of real estate heavy-hitter Eastdil explains the types of deals that are must-do right now — and warns that a 'de-retailing' trend is set to accelerate * Here's which real-estate tech startups will soar and which will flop in the new normal of how we occupy space, according to 7 top proptech VCs * Companies need to add contactless-entry tech to safely reopen offices. Here are 7 firms ranging from startups to huge conglomerates that are set for a surge in business SEE ALSO: 10 CEOs from Coldwell Banker, JLL, Cushman Wakefield, and more lay out a post-pandemic future of how we'll buy, build, and use real estate SEE ALSO: Silver Lake just added to a string of bets in the struggling travel sector by leading a $108 million investment in vacation property startup Vacasa SEE ALSO: Venture capitalists worry about their portfolio companies' cash runways and their ability to adapt to the conditions of the coronavirus crisis. BI Prime FINANCE Jun 4, 2020, 10:29 AM conan shorty power broker Here are 27 books on real-estate personalities and power players that industry insiders say you need to have on your bookshelf Titles ranged from "Power Broker," the classic biography of NYC planner Robert Moses, to a novel about a 19th-century real estate developer. BI Prime FINANCE Jun 2, 2020, 8:00 AM Matt Roberts_Vacasa CEO Silver Lake just added to a string of bets in the struggling travel sector by leading a $108 million investment in vacation property startup Vacasa Silver Lake's investment in Vacasa, North America's largest vacation property-management company, follows bets on Airbnb and Expedia. BI Prime FINANCE Jun 1, 2020, 11:41 AM man in protective suit disinfecting office work space Companies need to add contactless-entry tech to safely reopen offices. Here are 7 firms ranging from startups to huge conglomerates that are set for a surge in business. A CBRE report found that half of companies are considering adding contactless access control. Here's 7 companies who will benefit. NEWS May 31, 2020, 5:06 PM uber ceo dara khosrowshahi Uber CEO tweets that the company will donate $1 million to groups 'making criminal justice in America more just for all' The company is donating $1 million in total to two criminal justice reform groups "in solidarity with the Black community and with peaceful protests." BI Prime FINANCE May 28, 2020, 1:29 PM Lucas Haldeman SmartRent A smart home startup just raised $60 million from Amazon, Fifth Wall, and Bain days after launching an app that lets residents give remote access for deliveries, guests, and self-guided tours SmartRent provides keyless entry, smart lights, and other software for apartment units and was launched by former Invitation Homes and Starwood Waypoint executives. BI Prime FINANCE May 26, 2020, 10:00 AM VergeSense CEO Dan Ryan VergeSense, an office-sensor startup that tracks employees' movements, just nabbed $9 million. From social distancing scores to real-time occupancy alerts, here's its pitch to big companies on its tech. JLL and MetaProp-backed VergeSense's raised the money in a round led by Allegion Ventures, the corporate venture fund of security and access control company Allegion. BI Prime FINANCE May 20, 2020, 3:05 PM Regina Benjamin Zillow is restarting its iBuyer business with the help of a former US surgeon general. She laid out how the company will get home-flipping up and running safely. Dr. Regina Benjamin has helped the company develop protocols to prevent the transmission of coronavirus during Zillow's home tours. BI Prime FINANCE May 20, 2020, 1:01 PM Anthony Noto SoFi just cut 7% of staff based on performance reviews, and is eliminating a team by automating it away. The moves come a month after the fintech announced a $1.2 billion acquisition. Personal finance fintech SoFi has cut about 7% of its staff, or roughly 112 people, following its most recent round of quarterly performance reviews. BI Prime FINANCE May 18, 2020, 9:59 AM reopening office disinfecting office coronavirus Global firms are cutting down on their real-estate footprint as CEOs across industries are considering a permanent switch to remote work Business Insider spoke to roughly 200 CEOs about coronavirus's impact. Remote work will become more common, but the future of the office is uncertain. BI Prime FINANCE May 15, 2020, 7:30 AM Constance Freedman, founder and managing partner, Moderne Ventures Here's which real-estate tech startups will soar and which will flop in the new normal of how we occupy space, according to 7 top proptech VCs Flexible office, hospitality and retail startups are hard hit, while sanitation startups are one of the biggest new winners in the proptech space. BI Prime FINANCE May 12, 2020, 6:45 PM Zeus Living Founders Airbnb-backed Zeus Living slashes almost half of its remaining staff less than two months after a round of layoffs Last week, the company raised a down round that halved its valuation to $110 million, Bloomberg reported. BI Prime FINANCE May 12, 2020, 11:51 AM JLL Christian Ulbrich 10 CEOs from Coldwell Banker, JLL, Cushman Wakefield, and more lay out a post-pandemic future of how we'll buy, build, and use real estate The crisis has accelerated trends toward technology and remote work that are already underway in the real estate world. BI Prime STRATEGY May 11, 2020, 9:33 AM Google office The office as we knew it is dead CEOs across industries are reconsidering their real estate footprint after seeing the success of remote work — threatening the office as we know it. BI Prime FINANCE May 7, 2020, 3:34 PM Roy March, Eastdil Secured CEO The CEO of real estate heavy-hitter Eastdil explains the types of deals that are must-do right now — and warns that a 'de-retailing' trend is set to accelerate Any real estate deals are at a deep discount, as buyers smell blood in the water. Strong sectors, like industrial, are seeing almost no deals. BI Prime FINANCE May 7, 2020, 12:06 PM Flatiron School Flatiron School slashed at least 100 jobs and is permanently shuttering some campuses as part of bigger WeWork cuts. Here's everything we know about the layoffs WeWork is quietly rolling out. The Flatiron School is winding down its design program. WeWork acquired the Flatiron School in 2017 for $28 million and has been cutting jobs across departments. BI Prime FINANCE May 6, 2020, 3:57 PM blackstone heads of acquisition and origination 43 Meet the 4 dealmakers driving Blackstone's $325 billion commercial real estate portfolio. They walked us through how they're thinking about opportunities in the downturn. These four are private equity real estate power players. Blackstone's portfolio grew post-2008, and it's looking at new opportunity amid the pandemic. BI Prime FINANCE May 1, 2020, 11:22 AM Sandeep Mathrani WeWork is rolling out global layoffs over Zoom and has kicked off talks to slash jobs in the UK as the coworking giant struggles to cope with coronavirus fallout Other venture-backed competitors, like Knotel, Industrious, and Convene, have laid off hundreds as the pandemic has driven down demand for offices. BI Prime FINANCE Apr 30, 2020, 7:58 AM Ryan Gorman, CEO of Coldwell Banker The future of real estate could be virtual open houses on Facebook. Coldwell Banker's CEO explains why the in-person industry needs to embrace going digital. The firm is working with Facebook to help agents use Facebook Live to host open houses for potential buyers and for their wider community. VIEW MORE by TaboolaVIDEOS YOU MAY LIKE Join the conversation about this story » NOW WATCH: How waste is dealt with on the world's largest cruise ship
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