Construction Professional Services - Essay Example

CONSTRUCTION PROFESSIONAL SERVICES BUSINESS OPPORTUNITY IN GERMANY INTRODUCTION The construction market in Europe is both large and complex. However,while this represents a very large market indeed, it is a fragmented one; fractured by both language and culture. Materials in use, construction practices and market profile all differ widely, both between eastern and western Europe and between individual countries within the two wider areas. New markets and business opportunities open up from time to time in various countries and any company which plans to do good business overseas has to find out these opportunities and act accordingly. This report contains material that explores the opportunities in Bulgaria, one of the member states of the European Union for doing the business of construction professional services, from a UK firm's perspective. The first part of this report attempts to assess the scope and value of the Bulgarian construction market comparing it with the UK. The second part of the report focuses on the scope for service integrators or managers that manage the operational service procurement for their customers in the construction industry, especially in the residential and office building sector. BULGARIA - LOCATION: Bulgaria is situated in the South-East Europe, on the Balkan Peninsula, and is one of the oldest European states. To the south it borders with the Republic of Turkey and the Republic of Greece, to the west - with Former Yugoslav Republic of Macedonia and the Federal Republic of Yugoslavia. The Danube River is the natural north border with the Republic of Romania, and to the east Bulgaria borders on the Black Sea. It is characterized by an extremely varied terrain: huge plains and lowlands, high and low mountains, plateaus, caves, basins and gorges. The lowest altitude is 0 metres (at Black Sea), the highest altitude is 2925 metres (the peak of Mussala in the Rila mountain). It has favourable position in terms of location from national and international perspective, and easy accessibility by air, rail and road. BULGARIA - LANDSCAPE Encompassing just 2 % of the territory of Europe, Bulgaria is richly endowed by nature with extremely varied landscape, mild, moderate continental climate, suitable for relaxation all the year round, a wealth of flora and fauna and numerous mineral springs. Bulgaria is a country of tranquil, ecologically clean, distinctive places of interest, where one can be absorbed by the traditional Bulgarian customs and culture at the same time. Capital Sofia (pop. 1.2 million) is a vibrant city thriving on expansion, architectural buildings and deep respect for multi-cultural diversity. The Black Sea coastal stretch faces east and extends over 378 km, its seawater clean and not tidal and its vast beaches covered with fine golden sand. The majority of Bulgaria beaches have been awarded the EU Blue Flag for their environmental excellence. The conditions for investments in the real estates sphere in Bulgaria have never been better. Bulgaria is a country of unlimited possibilities and it is the time to be first. Bulgaria is the newest hot destination for the real estate market in Europe. CONSTRUCTION INDUSTRY IN BULGARIA - AN OVERVIEW Over 36,000 construction companies are registered in Bulgaria, 2,400 of which can be classified as medium and a few as large-sized. The volume of building and construction activities amounts to 2,500 million Euros per annum and the industry has a 5 % share in Bulgaria's GDP, which is expected to double over the next two years. Estimated annual growth is 15%. The sector employs some 120,000 people. Smaller companies have tended to merge into large joint-stock companies and consortiums, particularly seeking foreign technologies and management expertise. Bulgaria has been receiving large amount of donor aid and PHARE/ ISPA funds for infrastructure projects, the implementation of some of which will continue until 2008. Major road/ railroad, waste disposal, water/waste-water and landslide stabilisation projects are expected to be financed through EU money, offering plenty of opportunities for consultants and contractors. Local companies generally do not have technical and financial resources to bid for / carry out large-scale projects and are, hence, seeking trustworthy, foreign, incl. UK partners. Active construction work takes place in the business / public buildings and tourist sectors. A number of business centres, retail complexes and amusement parks have appeared in the country over the past 10 years. New tourist facilities along the Black Sea Coast and the ski resorts (Pamporovo, Borovetz, Bansko) appear to an area of 200,000 sq. metres per year. Several golf course projects also await realisation. Luxury housing estates have come to fruition with the growing purchasing power of the population and the buoyant real estate market, propelled by a flood of foreign investors. Real estate prices are expected to increase at an annual average of 10-15% over the next few years. Impressive developments are also taking place in the construction of industrial facilities: textiles, glass-making, food-processing, metalworking, plastics mills. PROPERTY MARKET The Bulgarian property market is among the cheapest in Europe, along with Portugal, Italy, Lithuania, Greece, The Times points out that last year prices rose by about 35 per cent, and in the lead-up to EU accession in 2007 annual rises of 25 per cent are predicted. Among Bulgaria's advantages the article singles out its rich culture, stunning un-spoilt villages and scenery as well as rock-bottom living costs. The Times notes that most Brits are buying on the Black Sea Riviera, especially at Sunny Beach, Golden Sands and Bourgas, and the resort city of Varna. "An impressive, but affordable, development launched this year is The Garden of Eden, above, on a prime beachfront location. The development has a marina, five swimming pools and landscaped gardens, bars and restaurants. Properties range from studios to large duplexes. One-bedroom apartments are about 52,000 pounds, with two-beds at 63,000 pounds." BUILDING MATERIALS MARKET Bulgaria's market for building materials is among the fastest growing sectors of the country economy (20% per annum), currently standing at around Euro 450 million. Given the relatively stable economic conditions in Bulgaria, the building materials market is expected to expand by a steady 12% annually over the near term. Value-added products that may have very good market prospects include ventilated window/door panels, flooring, suspended ceilings, insulations, adhesives, roofing shingles, heating and ventilation equipment , air-conditioning, cooling systems, special lacquers/ coatings and . The remodelling/ housing stock rehabilitating market may grow significantly over the long term, with emphasis placed on energy-efficient products and techniques. NEW OPPORTUNITIES OPENING UP Over the past 15 years, Bulgaria has been gradually de-industrialising with a great number of industrial sites becoming obsolete. Smaller municipalities, previously featuring intensive production activities, are now trying to re-develop brown-field sites and build modern residential complexes, amusement centres, parking lots, etc. Creative ideas and advanced design / project know-how may prove particularly important in this field. British expertise in the area of regeneration will prove particularly useful in Bulgaria, including the ways and means to attract EU money through viable and excellently presented projects. The creation of a Brownfield Register could be another field requiring first-class consultancy support. Times are good for Bulgaria's construction industry, with continued growth in the real estate sector, in addition to a host of infrastructure improvements spurred by EU accession, keeping local firms busy. This success only looks set to continue, with the Bulgarian Entrepreneurial Chamber in building forecasting annual sector growth of between 12% and 16% until 2010. The private sector accounts for around 90% of housing development, and also contributes heavily to infrastructure works. Local supply companies are stepping up production to respond to the heavy demand, though rising prices for materials are becoming an increasing concern across the sector. EU accession has highlighted irregularities in the tendering process, with calls for more clarity and better competitive practices across the board. Labour issues are also still prevalent, with calls for better educational opportunities to increase the supply of skilled professionals in the industry. It is hoped that the master plan for the development of capital city Sofia, ratified in 2007, will bring some clarity to land usage and provide further opportunities for the private sector. The real estate sector is maturing, with significant interest from foreign investment . As Bulgarians' incomes grow, and more people move to urban locations, housing costs are on the rise, particularly in capital city Sofia. This has meant steady growth in housing loans and mortgage loans. Despite analysts' predictions of a slowdown, prices increased by 28.9% in 2007, though a much smaller growth figure is anticipated for 2008. Increased interest is being shown for office space, with a number of projects underway or recently completed. Much of Bulgaria's available office space has been B-grade, though EU accession has brought about more demand for prime spaces, of which there is currently a lack. While the outlook for Bulgaria as a whole looks balanced for the short-to-medium term, demand may soon outstrip supply in rapidly expanding Sofia. Thus, it is clear that there is a lot of scope for construction business to root here. COMPARISON OF UK AND BULGARIA UK and Bulgaria are both European countries belonging to the European Union. But there is a lot of differences between them in terms of climatic and land profile conditions. Same type of knowledge cannot be applied to both the countries for construction works and hence firms must prepare to adapt to Bulgaria. One interesting feature is that the prices are a lot cheaper in bulgaria than in the UK. Cost of living in bulgaria is very much lesser when compared to living in UK. This has a positive effect on business activity plans because the labour costs are drastically decreased. Since 1997, the country has been on the path to economic recovery, with GDP growing at a 4%-5% rate, increasing FDI, macroeconomic stability and European Union membership. Further, the lower taxes in Bulgaria than in UK attract all type of businesses from UK to show interest in the country. The low taxes have increased business activity from other countries also, indirectly leading to administrative building construction projects. Population density in Bulgaria is 68.9/km2 as compared to 246/km2 in UK. Thus, it is a lot lesser and the economic growth suggests there will be a steady rise in the population and hence demand for residential apartments. RISK FACTOR There are threats to the growth of bulgarian construction market, even as opportunities remain huge. The main threat is in the form of insufficient supply in man power caused due to the emigration of people to other europe union states. This is an important issue to be tackled. BUSINESS STRATEGY THAT CAN CLICK The combination of factors such as opportunities/ finding the right time and the right market, mobilizing own capacities and strategy for our complete establishment on the market is to be driven by the consideration of offering them the high quality possible at the present moment. As already mentioned, there will be a boom in the administrative buildings sector and hence opportunities have to be seized at the strategic locations in Bulgaria. A good amount of research and expansion of knowledge base for a foreign company like from UK can be a value in terms of doing business. Also, a study and understanding of the Bulgarian architecture can help a firm from UK to have Design-Build contracts and success thereof. CONCLUSION The report has attempted to cover the general objectives of the firm which are to gain knowledge about opportunities for new business activity within Construction professional services within the European Union. The report has identified Bulgaria as the choice to be looked into and has placed reasons to support the choice. Also, the business activity that has been identified in this report is the construction management services for construction activity in residential and office building sector. As has been detailed throughout this report, Bulgaria is a country full of opportunities for doing construction business. The location and economic climate in Bulgaria is favourable and the first to utilize this situation will be benefited the most. REFERENCES Andrew Knight, Mike Hoxley & Mohieddin Grada(2007) Construction Professional Services: A Process Model London,RICS. Available from http://www.rics.org/NR/rdonlyres/2D803BF1-6F36-4C37-ACCF-8F7AA188E45C/0/Cob2007Hoxley.pdf Accessed on 29th April 2008. CK Construction. Projects implemented Available from http://www.ck-bg.com/wwden.php Accessed on 29th April 2008 Country reports - Bulgaria (online) available from http://www.countryreports.org/Bulgaria.aspx Accessed on 29th April 2008. Construction and investment company Sevex. About Bulgaria. Available from http://www.sevexbg.com/en/g Accessed on 29th April 2008. Building News UK Construction Industry goes from strength to strength. Available from http://www.azobuild.com/news.aspnewsID=4256 Accessed on 29th April 2008. Invest Bulgaria. Bulgaria's Advantages. Available from http://www.investbulgaria.com/advantages.htm Accessed on 29th April John J. Brown (1995) Construction in the European Union at a glance Available from http://findarticles.com/p/articles/mi_m3035/is_n2_v41/ai_17546671/pg_2 Accessed on 29th April 2008 Property News for Bulgaria (April 28th 2008) Growth in Bulgaria will continue Available from http://www.sofia-view.com/property_sofia_bulgaria/property_news_bulgaria.htm Accessed on 29th April 2008 Bulgarian construction market - dynamic growth and outstanding prospects Available from http://www.pmrpublications.com/index.phppr_id=71 Accessed on 30th April 2008. Construction Sector: Business Plan- 2007/8 Available from https://www.uktradeinvest.gov.uk/ukti/ShowDoc/BEA+Repository/345/406332 Accessed on 29th April 2008 Fujita Research. Construction in Europe Available from http://www.fujitaresearch.com/reports/construction.html Accessed on 29th April 2008. Read More