Shortages on the labour market
We are still facing shortages in the labour market. Many companies are experiencing the consequences of this either directly or indirectly, including Heijmans. The number of vacancies in the construction industry continues to rise. This is a point of concern, given the continuing trend that there are fewer and fewer people with practical training. Skilled workers are scarce. We see that this is increasingly affecting both suppliers and subcontractors, which has an impact on Heijmans. Despite these developments, Heijmans itself is not yet experiencing a labour shortage, but we know it is essential to remain alert. Of course, this is something that has our attention now, but especially for the future. Among other things, we aim to deploy the available people as efficiently and smartly as possible by using automation, standardisation and digitalisation, for example by developing new digital solutions, tools and modular construction solutions.
Pressure on availability and affordability
Over the past year, procurement prices increased significantly across the board in our industry, and we do not foresee prices falling substantially anytime soon, and expect them to stabilise at this high level. Materials and labour availability have also been under unrelenting pressure. In particular, energy and the semi-finished products it is used to produce are considerably more expensive than in previous years. This continued increase in costs means that we only accept larger works or works with a longer execution period with clear indexation agreements. If this is not possible or the contractual frameworks are not reasonable, we choose not to compete for the contract.
Digitalisation
Digitalisation has become an integral part of the construction industry. Developments in products and services follow each other in rapid succession. Millions of sensors such as cameras and other monitoring and measuring systems are now running in public spaces. Augmented reality (AR), virtual reality (VR), artificial intelligence (AI), drones and digital project management tools for the likes of building inspections, construction and production processes, maintenance, management and project monitoring are also playing an increasingly important role at Heijmans. The development of innovative products and services not only helps us to meet customer demands and needs more effectively, but also to deploy our people where they add the most value. Standardising and automating repetitive work and better planning based on data enable us to deploy our people more efficiently. That is not unimportant in the current and future labour market. Furthermore, the digitalisation, automation and industrialisation of our processes also help us improve safety. At the same time, the increasing dependence on technology makes society, the industry and the economy vulnerable. That is why investing in digital safety, or cybersecurity, is vital.
Legal and regulatory requirements
Changes in legislation translate almost directly into impact on our business operations. The construction industry has an interest in a long-term and consistent policy from the government to enable the continued smartification of the construction sector. On 1 January 2024, the Environment and Planning Act came into force. This act should make business more predictable and procedures faster and cheaper. For instance, the Environment and Planning Act incorporates the General Provisions of Environmental Law Act (Wabo), the Spatial Planning Act (Wro), the Nature Protection Act (Wnb) and the Water Act (Wtw). The fifty thousand existing zoning plans will be bundled into one environmental plan per municipality. From financial year 2024, the Corporate Sustainability Reporting Directive (CSRD) will also apply to Heijmans, which means we will report even more on the impact of our activities on people and the environment. The Building Quality Assurance Act (Wkb) will take effect in stages on 1 January 2024. The Building Quality Assurance Act aims to improve construction quality and construction supervision by engaging private quality assurance companies. In this respect, a type approval for our industrially produced houses in our timber frame production plant could increase efficiency. In addition, the Act extends contractors’ liability towards private and professional clients. Heijmans has prepared for all these developments, including by mapping out the impact on its business operations and communicating this by organising webinars with employees. Furthermore, the government wants ‘health’ to be explicitly included in the development of spatial policy. This mindset is laid down in the National Policy Document on Health 2020-2024 and other policy documents. Local authorities are now supposed to put users first and encourage healthy lifestyles. Heijmans embraces this thinking. Creating the healthy living environment has been our mission for many years and we already think from the user’s perspective.
Energy transition
The commitment to zero-emission operations, such as zero-emission construction, transport and use, is increasing the demand for electricity tremendously. Consequently, there is an enormous demand for charging infrastructure. The charging requirement for 2030 is estimated at 1.7 million charging stations. What is more, the central government will require the purchase of electric business cars from 2025. As a result, the existing power grids cannot handle the demand for electricity and are simply running at full capacity. We see a similar risk when connecting utilities in new construction projects. Grid operators cannot handle the demand for new electricity and gas connections, which results in delays. Securing energy supply in the future requires major adjustments and expansions of both local grids and the main infrastructure.
Clients are also increasingly demanding the use of sustainable equipment. For instance, the Dutch Ministry of Public Works and Water Management wants to be fully climate-neutral and work in a circular way by 2030 at the latest. Heijmans Infra fulfils this ambition by applying new techniques, reusing materials and using emission-free equipment. Creating a good economic business case for the purchase of emission-free equipment remains a challenge, as only a limited number of clients are asking for this and they are not always willing to pay the additional costs. This requires consistent policy from the government.
Climate change
We are increasingly feeling the impact of climate change and concerns are growing. Long periods of drought and heat stress (higher temperatures in built-up cities) are alternating with increasingly heavy showers resulting in flooding. The National Delta Programme aims to protect the Netherlands from flooding, ensure sufficient fresh water and contribute to a climate-proof and water-robust design of our country.
In addition, the Netherlands is committed to the goals of the Paris climate agreement for the reduction of greenhouse gas emissions, including CO₂. The Netherlands aims to emit 95% fewer greenhouse gases by 2050 than in 1990. The agreement in the Climate Agreement is for seven million homes and one million other buildings to be disconnected from natural gas by 2050. As a first step, the first 1.5 million existing homes will be made sustainable one neighbourhood at a time in the period to 2030. This is also a major challenge for Heijmans. After all, climate change and the transition to sustainable energy require a smarter and faster construction process.
Circular economy
In the circular economy, products and materials are reused and raw materials retain their value. Many raw materials can be endlessly reintroduced into the natural or technical cycle. Circular thinking is gaining traction in our industry. The more we build in a circular fashion, the more we spare the climate and the environment. True circular thinking encompasses the entire life cycle of an object to be built. From design for reuse to life-extending maintenance and collecting and reusing the residual materials. However, switching to circular thinking requires change and a great deal of effort. For example, the evolution of material flows into cycles has major implications for the entire construction sector. The use of bio-based materials and reuse of construction raw materials and materials should help to reduce CO₂ emissions in construction and the use of fewer primary materials. Although circular construction will have an impact on reducing CO₂ emissions, it is not enough to achieve CO₂-neutral construction. To do that, we also need to focus on sustainable materials, such as sustainable concrete and asphalt. In addition, prefabricated construction, such as timber frame construction, also offers many advantages and environmental gains. Heijmans contributes to this by creating circular designs and building circular objects. We can draw up a material passport for each project and this insight helps us to reduce the use of primary raw materials and makes it easier to reuse materials in the future.
Nitrogen
The nitrogen issue remains a concern in the housing market. The fact remains that the construction sector accounts for a very small share of nitrogen deposition (less than 0.6% nationwide), but it still has to demonstrate that its activities have no negative impact on nature for each of the tens of thousands of projects it carries out every year. In November 2022, the Council of State ruled that the construction exemption was no longer valid, as it violated European nature conservation law. Thanks to thorough preparation, we managed to minimise the negative consequences of this ruling for Heijmans. Projects that were under construction continued. New housing projects are also still possible, provided the nitrogen deposition during the construction phase remains within the legal limits. We demonstrate this using Aerius calculations. Heijmans had Aerius calculations of the construction phase made for almost all its projects under its own development in anticipation of the Council of State’s ruling on the construction exemption. This is how we try to keep any delays to a minimum.
Need for homes
According to CBS projections released in 2023, the population of the Netherlands will grow from 17.8 million today to 19.6 or even 20.6 million in 2050. Demand for rental and owner-occupied housing remains as high as ever, and affordability remains a concern. High cost levels add to the problem of affordability and the borrowing capacity of consumers. The focus in recent years on ever more inner-city construction has not improved affordability, housing type diversity or construction speed. Inner-city construction has become more complex. Inner-city projects, consisting mostly of apartments, are realised in a complex pre-existing environment with numerous stakeholders and have therefore become increasingly complex. This complexity means costs are higher. The high densities mean that pre-sales percentages of 70% are not always achieved in a declining market and so construction cannot be started. This does not contribute to the circulation in the housing market.
To accelerate housing construction, what is needed above all is more planning capacity, especially in suburban areas. Building houses in suburban areas, in addition to existing inner-city plans, is absolutely necessary to realise the government’s building ambition in the coming years. We have responded to this by acquiring Van Wanrooij with a land portfolio in predominantly suburban areas. Heijmans has confidence in the housing market, as the demand for housing remains high and will increase in the coming years.
There are enough initiatives and plans in the Netherlands to meet the demand for housing more effectively, but not enough of these plans have been made concrete. Only a small percentage of the planning capacity has been laid down in an established and/or irrevocable zoning plan. A lack of hard planning capacity, delays in spatial planning (RO) procedures due to the ever-increasing need for everyone to object to the granting of permits for new plans, plus capacity shortages in local authorities, mean that the implementation of a large proportion of plans is not certain in the near term.
Dutch renovation challenge
In the coming decades, the Netherlands faces the immense task of renewing its existing infrastructure. Many roads, bridges, viaducts, tunnels and locks were constructed and built in the 1950s and 1960s. It is essential to replace or renovate these objects in time to keep the Netherlands safe, accessible and liveable. The government will choose renovation and maintenance wherever possible, as this is more sustainable and less expensive than demolition and new construction. Smart and sustainable techniques will be used in these projects. The Netherlands is also facing the enormous task of renovating existing housing owned by housing corporations and institutional investors. This involves making homes more sustainable, as well as the large-scale renovation of 1950s and 1960s homes. The renovation task is a considerable one in itself, with bottlenecks in the construction sector, such as a looming shortage of labour and building materials and high cost levels. Added to this is the challenge of carrying out the necessary replacement and renovation in an increasingly climate-neutral manner, with minimal CO₂ and nitrogen emissions and with a greater focus on circular construction by reusing materials. Heijmans wants to respond to this and make its contribution to meeting this challenge.