In recent years, the need for transparency and accountability in terms of cost, construction schedule and quality has become a major concern for construction projects in Japan. As a result, the number of projects in which management companies and consulting firms specializing in construction management (CM) and project management (PM) work on behalf of clients from a standpoint completely independent of designers and constructors is rapidly increasing.
In this article, we will discuss the outlook for the construction management market from the following perspectives.
- Construction management demand in Japan
- Services provided by construction management companies
- Educational environment for construction management
- Employment environment for construction management companies
1. Construction management demand in Japan
First, the demand for construction management companies for projects is likely to grow dramatically in Japan in the future. There are three main reasons for this, which we will explain below.
(1) Project management from an independent standpoint is becoming more important
First, there are two major reasons why we are entering an era in which project management will become more important. The first is that the labor force in the construction market is likely to decline continuously over the long term, and the second is the impact of work style reform.
In other words, not only will the labor force continue to decline, resulting in a chronic shortage of workers, but the impact of the work style reform will also be felt, resulting in longer construction periods, higher site management costs due to longer construction periods, and higher labor costs due to higher wages. The environment surrounding construction projects is expected to change drastically.
As a result, the demand for construction management services is likely to grow significantly, as construction companies will be required to manage and scrutinize process, quality, and cost from a standpoint independent of the client, designer, or contractor, and to explain the appropriateness of the project to investors and clients.
For more information on the background behind the need for construction management companies and the increasing need to use them, please refer to “Why is it Necessary to Use a Construction Management Consulting Firm in Japan?”
(2) The internationalization of projects is accelerating further.
Next, we will explain why we believe the demand for construction management will expand as the internationalization of projects accelerates further.
First, the index shows the total amount of capital investment based on capital investment by Japanese companies outside Japan and capital investment by foreign companies in Japan, which can be obtained from the Ministry of Economy, Trade and Industry (METI), or in other words, Japan’s cross-border capital investment, and this index is one of the indicators to measure Japan’s level of internationalization.
The amount of cross-border capital investment, which was around 5 trillion yen 20 years ago, exceeded 10 trillion yen in fiscal 2015, the highest level in the past 20 years, and has remained at a high level of over 9 trillion yen since then.
In general, cross-border capital investment fluctuates greatly due to the influence of domestic and international economic trends, and although it has been sluggish in recent years due to the impact of the new coronavirus, it shows that internationalization is progressing over the long term.
The domestic population is expected to decline and long-term domestic construction demand is expected to remain in a shrinking trend, while the overseas population is expected to increase and cross-border capital investment is expected to remain at a high level, although some aspects are influenced by economic trends.
Given these two points, the ratio of cross-border projects to the total will increase year by year, and the internationalization of construction projects will further accelerate.
In addition, foreign-affiliated projects and overseas projects are generally managed by independent management companies and consulting firms, so the demand for construction management is expected to increase.
(3) Increasing number of construction management companies and PM/CM departments and services
Third, the number of project management (PM) departments and construction management (CM) departments in construction management companies and design firms is increasing.
More specifically, more than 25 years ago, there were very few companies specializing in construction management that were independent of the client, designer, or contractor.
Today, however, the number of management companies specializing in construction management and design firms offering PM/CM services is rapidly increasing, and we believe that the steady increase in the number of companies providing services in line with the increase in demand will further stimulate the market.
Major independent and foreign management companies and design firms that provide PM/CM services in Japan are introduced in “List of Major Construction Management Consulting Firms in Japan and Their Features.”
2. Services provided by construction management companies
Next, we will introduce the outlook for the services provided by construction management companies. In the past, construction management companies provided a wide range of services to meet the needs of clients.
For example, they have been flexible in terms of the use and scale of the project and the content of the management services, even if they have no experience in similar projects or services.
However, in the future, the services provided by construction management companies and the way they are chosen will change in the following directions.
(1) Acceleration of specialization and segmentation in each company’s field of expertise
This indicates that the services provided by construction management companies will change from the broad and flexible services they have been providing in the past, to specialization and segmentation in the specialized fields in which each company excels.
Specifically, there are companies that specialize in specific building applications and provide construction management services, and companies that concentrate on specific, subdivided areas of construction management services.
Some construction management companies have already branded their own specialty as the mainstay of their services, such as a company specializing in hospital management or a company specializing in cost management among construction management services.
As the demand for construction management increases, the services provided by construction management companies are expected to become more specialized and segmented in the future.
(2) Clients’ selection of services shifting from companies to consultants
On the other hand, from the client’s point of view, the decision to select services will shift from the construction management company to the consultant retained by the construction management company.
This can be explained by taking a specific example of a client who is considering project management (PM) by a construction management company for a hotel construction project.
Prospects for service selection by the client
1) Previous Service Selection
⇨ Let’s go to Company A or Company B that has experience in PM services for hotels.
2) Future Service Selection
⇨ Let’s ask Company C or Company D that specializes in PM services for hotels.
3) Further Future Service Selection
⇨ Let’s go to Company G with Mr. F or Company J with Mr. H who have a lot of experience in hotel PM business.
There are two major reasons why the client’s approach to service selection is likely to change in this way.
The first is that the basis of the client’s service selection is the natural inclination of the client to ask the consultant with the most experience in similar projects to be in charge of the actual project.
In other words, when the client selects a construction management company for a project, it is not the representative of the management company or the person in charge of the project, but the consultant who is actually in charge of the project. This trend is expected to accelerate in the future.
For more information on how to select the best construction management company for a construction project from the client’s point of view, please refer to “How to Select the Best Construction Management Consulting Firm in Japan.”
The second reason is that as the demand for construction management increases and the number of management companies increases, each company will accelerate the promotion of their consultants in addition to explaining the details of their services in order to brand themselves and differentiate themselves from their competitors.
In this regard, some companies are already trying to differentiate themselves from other companies’ services by explaining their services in considerable detail on their websites, while others are trying to establish their own brand by fully promoting their consultants on their websites. Some companies are trying to establish their own brand by fully promoting their consultants on their sites, thus enabling clients to select services from a wider range of information and options.
In this way, there is a strong possibility that clients will become more and more familiar with the fundamentals of service selection, and that the selection of services related to construction management will move from the concept of selecting a company to selecting the consultants that a company has.
3. Educational environment for construction management
In this section, we will introduce the prospects for the educational environment related to construction management.
In general, education is divided into two categories: education for students and education for working people. This section introduces the prospects for the educational environment at universities among students.
(1) Current Status and Prospects of University Education Programs
First, there are currently few universities in Japan that offer educational programs related to construction management, such as project management (PM) and construction management (CM).
However, the day will come soon when construction management programs will be introduced as an educational program in universities in the future. There are three main reasons for this.
First, not only is the importance and recognition of management in construction projects already increasing, but it is also likely to increase dramatically in the future.
Secondly, from a student’s standpoint, the addition of a construction management program can lead to future planning with a broader perspective.
For example, in the past, most architecture students had a limited choice of career paths, such as design firms, construction companies, and developers. However, with the addition of the construction management program to the current focus on education in planning, design, and construction, new options such as construction management companies and construction consulting companies will be added.
In fact, construction management companies are gradually broadening their hiring criteria, and are beginning to include new graduates in their hiring criteria, instead of only those with more than three years of work experience.
Thirdly, many universities overseas have already introduced educational programs related to construction management, and there are several models of educational programs outside Japan. In other words, from an international perspective, construction management education has already been accepted as an educational program at universities, and it is expected to be more sought after in the future as domestic construction projects become more internationalized.
(2) The first step is to introduce cost management education programs.
It is also expected that university education programs will be introduced in construction management, especially in cost management.
For example, as described in the column “What is CM (Construction Management) in Japan“, PM and CM not only cover a wide range of tasks, but also have a strong practical component, such as coordination, process and quality.
Cost management, on the other hand, has many academic aspects, such as methods of calculating construction costs and methods of ordering and contracting.
In the United Kingdom, for example, many universities offer a wide range of courses, and there are many different models of educational programs.
4. Employment environment for construction management companies
The following are some of the prospects for entry into construction management companies.
(1) In the past, a minimum of three years of work experience was a requirement.
In the past, construction management companies required candidates to have at least three years of work experience in a construction-related company such as a design office or construction company.
In the past, construction management companies required at least three years of work experience at a construction-related company such as a design firm or construction company. The following are some of the concerns that construction management companies have had about hiring and training new graduates.
- The cost of hiring new graduates and training them is enormous.
- The cost of hiring and training new graduates is enormous.
- Even if we spend a lot of money to train new graduates, if the people we have trained change jobs, we will not be able to hire new graduates.
For this reason, the mainstream has been to hire young people who have been trained at design firms and construction companies, and to hire consultants with sufficient career experience.
(2) In the future, we will move into an era of hiring and training new graduates.
However, we believe that the time has come to hire new graduates and train them to become consultants in their own companies.
The first reason for this is that a background in construction is not necessarily required for management and consulting. This is evident from the fact that there are many excellent project managers and construction managers with liberal arts backgrounds who have nothing to do with construction.
Of course, there are many situations where knowledge and experience in construction are required for management.
However, the essence of the management abilities and skills required in PM and CM is not necessarily equal to technical knowledge, experience, or qualifications related to construction, but rather to the ability and skills as a consultant, such as organizing the current status of the project, identifying issues, explaining them clearly to the parties concerned, coordinating and coordinating the parties concerned, etc. The abilities and skills as a consultant are far more important.
The most suitable environment to cultivate these management abilities and skills is not a design office or a construction company, but a management company or a consulting company that specializes in the management of construction projects.
Furthermore, in recent years, some management companies have begun to hire new graduates, and this trend of hiring and training new graduates will gradually accelerate in the future.
From the perspective of construction management companies, for example, it will become increasingly important to develop programs to train new graduates and to create a more comfortable work environment and working conditions. At the same time, it will be worthwhile for each company to invest in creating a better environment and structure because the people they train will become the face of the company in the future.
As mentioned above, this article introduced the outlook for the Japanese construction management market by management and consulting companies in construction projects.
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