From 2000 to 2022, global construction productivity grew just 10%, a mere fraction of the overall economy's growth rate, according to McKinsey & Co. Despite the growth of the global middle class and a forecasted $22 trillion in construction spending by 2040, the industry faces significant challenges that could prevent it from fulfilling this potential.

Jan Mischke, a partner at McKinsey & Co., explains that while the outlook is positive, the industry needs to improve its growth rate, particularly outside of China, where growth must nearly double from 1.3% to 2.7%. Additionally, there is a growing labor shortage, with a significant portion of the workforce nearing retirement. In the U.S., job vacancies in construction doubled between 2017 and 2023, according to Kevin Stokvis, another McKinsey & Co. partner.

Moreover, productivity growth in the sector has been stagnating, with advanced economies like Europe and the U.S. experiencing declines in productivity since 2000. This trend, coupled with rising costs, could result in a $40 trillion shortfall in construction output by 2040.

To mitigate this, Koen Vermeltfoort, a McKinsey & Co. partner, suggests that addressing workforce gaps and improving productivity by just 1% annually could significantly narrow the $40 trillion gap. However, several challenges need to be overcome, including the lack of standardization in design and slow adoption of modular construction techniques.

Three key solutions to boost construction productivity include:

Upskilling the Workforce‍

Temporary labor has a detrimental impact on productivity. To address this, companies should invest in skill-building programs and create attractive career paths in construction, focusing on partnerships with universities, community colleges, and high schools to nurture talent.

Nurturing a Supplier Ecosystem‍

Supplier ecosystems provide stability, transparency, and credibility. Promoting collaboration across the ecosystem can accelerate learning and improve efficiency, helping to foster trust and positive change within the industry.

Reforming Project Management‍

Current project delivery models often prioritize short-term cost management and lack integrated systems thinking. Shifting focus to production rate metrics, similar to manufacturing practices, could enhance project flexibility and early problem detection, while spreading risk in complex projects could improve long-term productivity.

Construction is critical to global GDP and employment, and failure to address these challenges could lead to a significant impact on the quality of life and infrastructure development worldwide. Companies must act quickly to meet growing demands, or risk falling behind.