To be most competitive, contractors need to fully embrace digital transformation, according to the report, “Technological advancements disrupting the global construction industry,” by Ernst & Young LLP’s Eric Ottinger, Harshit Minglani and Mark Gibson.

“To remain competitive, companies must explore new structuring options, improve the efficiency of operations and balance portfolios to maximize return on investment—all while mastering digital disruption and gaining a deeper understanding of customer preferences,” the consultants wrote.

Most contractors are already using building information modeling, which is the most commonly used technology in the construction industry from design through project completion and operation, according to the consultants. They cite Dodge Data & Analytics, which found that 73% of U.S. contractors now utilize BIM, with 79% of those using it on more than 30% of their projects.

An increasing number of contractors are also starting to embrace other technological innovations for use throughout the project lifecycle, with the internet of things (IoT) leading at the forefront. In 2019, the IoT industry market was estimated to be roughly $270 billion and is expected to grow at a 26% compound annual growth rate (CAGR) through 2025.

While 3D printing currently holds the smallest market share within the construction tech industry, the consultants project it will grow substantially at 245.9% CAGR through 2025.

Other technologies expected to grow during the next five years include blockchain (41.4%); robotics (38.8%); digital twins (37.8%); artificial intelligence (35%); smart buildings (31.6%); geo-enabled technologies (31%); robotic process automation (31%); augmented and virtual reality (21.8%); facial recognition (16.6%); BIM (12.7%); modular technologies (7%); and prefabrication technologies (6%).

If the industry were to more fully embrace digital transformation, full-scale digitization may help escalate the construction sector and generate an estimated 12% to 20% in annual cost savings within a decade, the consultants projected.

However, only 25% of real estate and construction firms currently have a digital strategy and only 9% feel they are prepared for the “digital revolution,” according to the consultants.

Why? The minimal profit margins systemic within the industry is a key factor. Contractors typically have profit margins of 2% to 3%, compared with an average of 20% in other industries.

“When profit margins are narrow, spending 1% of revenue on digital upgrades and innovation can seem like a heavy and risky investment—however, failing to invest in solutions that could boost output is counterproductive,” the consultants wrote.

The consultants cite World Economic Forum, which estimates that a 1% rise in productivity could result in savings of $100 billion per year in the construction industry.

Digital transformation can make all the difference, according to the report.

“With technological innovation quickly expanding, now is the time to embrace disruption, use change to enhance productivity and efficiencies, and prepare for the progressive digital evolution within the construction industry,” the report states.