Between the pandemic and the war, we’ve had our work cut out for us here at Core
With the ongoing war in Ukraine and the sanctions and restrictive measures imposed against Russia, considerable long-term effects have reverberated through the construction (and therefore architectural!) industries.
Much of what is built today is done on short-term contracts and with low margins, meaning that any disruption can hugely impact the sector’s stability. Think about it – we never want to line up too many jobs at once, or we’ll have clients waiting months until we get to them. However, this means we feel any changes in the market almost immediately. When they’re this drastic, it can feel like we’re quickly falling into a tailspin, unable to quote jobs, pin down materials, or even determine timeframes…
Because these effects also impact our clients, and we advocate for maximum transparency, we wanted to share the latest goings-on with you so that you’re kept up to date about what’s going on. Our aim? Reducing confusion and frustration and working more effectively to get your job (literally) off the ground. Ready to get the lowdown?
It all started with the Covid-19 pandemic
First, there was the pandemic. We were all there – we all experienced it. Shut-downs, lockdowns and standstills have got to be an overarching memory of 2020, and an unprecedented decline in construction production was registered as building work fell by a quarter. Then it sprung straight back up again, so no worries, right?
Wrong. While staffing shortages were one problem, which was then quickly solved, material shortages were quite another. We’re talking supply chain disruptions and straight-up shortages in items no less fundamental than concrete, bricks, and cement, not to mention timber and steel. And this has meant that though demand may have remained constant, a sharp drop was seen as supply-side shortages pushed up both material prices and shipping costs. And the industry couldn’t have kept up with the demand anyway…
And just when we thought we were on the up, came the war
Then, as we rang in 2022, champagne flute in hand, toasting to seeing the back of the worst, war struck. Just like the rest of the world, we were horrified to see the devastation, and our hearts truly do go out to the Ukrainian people, but our horror was quickly replaced with despair as we felt the effects of the war for ourselves.*
*It goes without saying that our hearts go out to all those directly and indirectly affected by the war, their families and loved ones, and we hope this is all over soon, far more for their sakes than for ours. However, while we by no means seek to minimise the pain felt by the citizens of Ukraine, we’re going to keep talking self-centredly about our industry here, as we know you don’t have all day to hear about our inner thoughts on the matter… so please bear with us.
The effect? Further global disruption, of course. As domestic and international markets struggle with the plethora of political sanctions on Russia, rising energy prices and those of other commodities (pasta, bread, vegetable oil?), the global economic downturn has been eating steadily away at new project demand and investor confidence. The consequences include widespread layoffs and dampening prospects for the construction industry and architects alike, taking us back to square one.
Back to raw material shortages and supply-chain disruption
The Russia-Ukraine war has caused renewed supply-chain disruptions and production stoppages, resulting in a worldwide shortage of raw materials, which has led to a rise in prices and an increase in construction costs for new buildings. Sound familiar?
But why are the effects of war on Europe’s eastern edge so widespread? Well, Russia and Ukraine are critical suppliers of metals, raw materials, chemical products, and machinery. And as if that wasn’t enough, as basic commodities, such as energy, become more expensive, we’re also facing a continued shortage of materials with energy-intensive production processes – the bread and butter of construction, for example – bricks, cement, and iron. Added to this, increased oil and gas prices have affected the costs of production, as well as transportation of equipment, materials, and project parts, which have prompted a rise in on-site operating costs, with fixed costs increasing and overheads shifting.
For the construction industry and architecture projects, this means building material companies now charge higher material prices to their end customers, feeding into a rise in project costs and reduced contractor margins – a lose-lose for everyone involved.
The higher the prices, the lower the demand
As the war drives up the price of in-demand materials, contractors are faced with lower demand for architecture projects, which may have to be delayed or put on hold
While the conflict has had a huge impact on the construction industry as a whole, any one (or several) of the issues we’re listed could be affecting projects currently under construction and those still in the preliminary design phase. For both, clients may be reluctant to proceed until the war ends and prices settle down.
After all, what they’re seeing is ever-rising prices and extending deadlines, fixed-price periods for tenders, and conversations about additional expenses that may be faced as construction goes on.
What our clients must be thinking
From our clients’ perspective, all they’re seeing are worse conditions based on “the war”, though the hows and whys aren’t usually explained. In fact, we don’t blame them for thinking that the war’s become an excuse for everything and anything these days. However, while we understand their frustration, there just isn’t a huge amount we can do to limit the uncertainty faced.
We’re grappling with the unavailability of in-demand materials, inflated prices, and delays in material supply, and even here at Core, we’re feeling the pinch.
Yes, we use mainly locally sourced materials, so shipping shouldn’t be an issue. Our projects don’t rely on run-of-the-mill concrete and bricks (we’re sure you’ve heard about our super-insulating clay bricks and mortar-free butt jointing), but there are simply materials that aren’t available in the Algarve. For them, we need to outsource (think wood, for example). As you may imagine, this gets us entirely caught up in the industry goings-on, meaning our clients may be subject to the all-round frustrations felt.
Looking to the future
Given all of the above, we’d like to apologise in advance and encourage you to speak to us. Air your frustrations so that we can all get through these tough times and get to the other side with your dream house complete and a smile on your face. After all, while the road may not be an easy one, there’s certainly a dream at the end, and making dreams come true is what we’re all about.