The major challenges of construction in Portugal

Construction: labor shortage “will get worse”

The housing crisis in Portugal has led the government to launch a package of measures to combat the lack of supply: whether buying or renting, the country needs more houses (and faster). The construction sector therefore plays a decisive role in this context, but it has been struggling for several years now. In addition to rising costs – leveraged by rising inflation – this segment struggles with a lack of labor and difficulties in attracting new people, as Bernardo Soares Coelho, general director of Beelt, explains in an interview with idealista/news. Licensing, unsurprisingly, is another obstacle.

In the aftermath of the pandemic, and with the outbreak of war, the world witnessed the skyrocketing prices of materials and raw materials, a scenario that, so far, has not stabilized again, also as a result of the inflationary escalation. And these increases are reflected in the final price to be paid by the Portuguese who wish to buy a house.

“We see this new price level as a new reality that is here to stay. There will certainly be adjustments, but the truth is that it has extended to the entire economic cycle and persistently”, confirms the head of Beelt, a construction company specializing in construction and rehabilitation. “Logically, along with very high levels of demand for houses, the influence on final house prices is notorious,” he adds.

The lack of labor is another factor that continues to condition the sector and the market in general. In Bernardo Soares Coelho’s opinion, the “problem will tend to worsen because, in addition to a lack of resources, it is an industry that has many difficulties in attracting new people”. “This is largely due to unattractive working conditions,” he explains.

In this written interview that we now reproduce in full, the head of Beelt also reflects on the major challenges of construction in Portugal, leaving clues about what is most urgent to do / change to increase the productivity and attractiveness of the sector.

Who is Beelt and what kind of projects does it undertake? More construction or refurbishment?

Beelt is a construction company, which has been active for more than 10 years, and operates equally in the rehabilitation and new construction markets.

What kind of projects are you working on at the moment? And where?

Beelt is currently working mainly on residential projects in the rehabilitation and new construction areas, with a strong focus on the center of Lisbon and also in the Algarve, where it intends to grow.

In the portfolio are projects to start during the next year, which in addition to the significant increase in the size of the work will also include the development of other market segments.

What kind of segments and markets are they aimed at?

The projects under development are mostly for the residential segment, in which we have teams with a lot of experience and also a huge range of partners who have been with us for a long time.

Construction costs and lack of labor are a problem in the sector. How has Beelt dealt with these issues? Have they been reflected in the final prices of the works and the houses?

Beelt naturally deals with these issues with concern, because they effectively condition our sector and the market in general.

The problem of lack of labor is of enormous relevance for the country, for people and for the industry. We understand that the problem will tend to worsen because, in addition to a lack of resources, it is an industry that has many difficulties in attracting new people. This is largely due to unattractive working conditions, compared to other sectors that can hire the same profile of resources. This is a cross-sector problem that can be seen across the board, from the least trained to the most trained positions.

Regarding the increase in construction costs, the first increase occurred in a pandemic period, due to economic restrictions, and then entered an inflationary period where prices did not stabilize again. Our outlook is less positive and we see this new price level as a new reality that is here to stay. There will certainly be hits, but the truth is that it has extended across the economic cycle and persistently. We could see a significant increase in business margins, but that is not what has happened.

Of course, along with very high levels of demand for houses, the influence on final house prices is notorious.

What is the great challenge of construction in Portugal?

The great challenge, I think, is a greater industrialization of processes, so that, with greater efficiency of resources, we build better, faster and with better conditions for all stakeholders. Offsite construction, with the proper associated preparation, brings great advantages to construction processes.

Although change is beginning to happen, the sector is slow because it is mostly driven by small-scale companies with little investment capacity in this field, as opposed to larger companies, where this issue has been on the agenda for a long time.

What does the sector need to build more? What is most urgent to do/change?

The problem starts with the uncertainty inherent in licensing. Construction companies are contracted by developers, who are dependent on City Councils and a host of other entities to get their projects licensed.

As there is total uncertainty about permitting deadlines, construction companies find it very difficult to plan their work properly and efficiently. This represents a huge cost for companies, as, in addition to the opportunity cost, it represents actual costs of resources allocated to projects that often take, in some cases, six months or a year longer to start than initially anticipated.

On the other hand, as I have already mentioned, the sector is currently having great difficulty in attracting resources because attractiveness is falling and it is faced with all the inefficiencies related to the labor market in Portugal. We need to increase competitiveness and try to close the large gap between what companies spend on employees and what they actually receive. We should not continue to reward inefficiency by seeking to make the market more dynamic.

Finally, the sector itself will have to reinvent itself to increase productivity and attractiveness, otherwise the scenario will tend to get worse.

 

See the article published in Idealista News