Australia's Smart Building Revolution: A $9 Billion Opportunity Waiting to Be Unlocked - And More

Australia stands at the threshold of a construction industry transformation that could deliver $9 billion in annual economic benefits by 2033. The Smart Building sector—combining offsite prefabrication with Industry 4.0 manufacturing technologies—represents one of the nation's most significant untapped opportunities for industrial growth, housing affordability, better carbon and environmental performance, and economic diversification with a new knowledge-intensive industry.

Yet despite this enormous potential, Australia currently lags behind international peers, with Smart Building having recently grown to around 7% of total construction compared to 45-80% in Scandinavian countries and around 15% in Japan. A key difference is Australia’s lower take-up of mass housing. The question isn't whether Australia can afford to invest in this transformation—it's whether the nation can afford not to.

The $9 Billion Prize

The headline figure of $9 billion in annual benefits by 2033 represents a conservative estimate based on achieving a 20% cost advantage over conventional construction methods, with the growth of Smart Building to 30% of total construction. According to industry development specialist Lance Worrall, who co-authored Australia's first Smart Building roadmap, prefabAUS’s Building The Future We Want, this calculation focuses purely on cost savings. It doesn't account for broader productivity gains, innovation and scale flowing through the economy.

"When you look at the construction sector's contribution of around $153 billion to GDP in 2022, achieving a 20% cost reduction across 30% of that market represents substantial savings," Worrall explains. "But this figure only captures the direct cost benefits—it doesn't include the productivity multipliers, innovation spillovers, or second and third-round effects that flow through to increased consumption and investment."

The employment implications are equally significant. Australia's construction sector faces a critical skills shortage, with nearly half a million new workers needed by 2026. Smart Building could help address this through safer, more technologically advanced working environments that the roadmap suggests may attract a broader workforce.

Scale of Transformation

The roadmap's ambitious target of growing Smart Building from Australia's current share to 30% by 2033 represents a fundamental shift in how Australia builds. This transformation would see Smart Building methods applied to thousands of homes, schools, hospitals, and commercial buildings annually.

Worrall emphasises this isn't about replacing traditional construction entirely, but applying industrial manufacturing principles where they deliver the greatest benefits, and meeting greater and greater demand. "We're talking about projects with sufficient scale and repeatability—affordable housing developments, student accommodation, hotels, schools, and hospitals," he notes. "These are the building types where prefabrication can fully realise its advantages."

Crucially, Smart Building doesn't mean cookie-cutter uniformity. "Prefabricated buildings and homes do not all have to look the same. They can be customised and they can be beautiful," Worrall explains. "They can help diversify the housing mix in response to Australia's changing demography and increasingly diversified housing needs, including the need for more inclusive, diverse communities." This mass customisation capability challenges outdated perceptions of prefabrication as producing identical, low-quality structures.

The housing sector presents the most significant opportunity. With the National Housing Accord's target of 1.2 million new homes by 2030, Smart Building could accelerate delivery while boosting productivity and reducing costs, simultaneously addressing some of Australia's most pressing challenges.

Australia Primed for Take-Off

Whilst Australia currently trails international leaders in Smart Building adoption, Worrall argues the nation is uniquely positioned for rapid growth. "The conjunction of high unmet housing demand and constrained labour supply creates the perfect conditions for prefabrication take-off," he observes.

“But beyond this, Smart Building is central to our carbon-neutral future.  Only Smart Building allows full utilisation of Industry 4.0 digital manufacturing technologies. These provide for increased precision and reduced wastage in production, as well as monitored high energy and climate performance throughout the building’s life, greater scope for use of low carbon and recycled materials, and so on”.

“Even more than this, Smart Building needs to become a focus for national industrial policy. The combination of Australia’s vast array of world-significant minerals being demanded by a decarbonising world, with abundant renewable energy sources providing the ability to process them onshore, forms the major pillar of our reindustrialisation This combination positions Australia to lead in producing 'responsible' low-carbon materials that Smart Building increasingly demands, while also dramatically reducing materials wastage in production,’ Worrall notes.

National Housing Accord a Catalyst

The National Housing Accord's ambitious target of 1.2 million new homes represents more than housing policy—it's a potential catalyst for the Smart Building industry's development. The scale and timeline align perfectly with Smart Buildings' advantages in speed, productivity, cost reduction, an d quality control.

Worrall sees the Accord as offering a unique opportunity to demonstrate Smart Building's benefits at scale. "Housing has the highest potential for rapid Australian Smart Building growth," he argues. "Focusing on housing will build Smart Building capacity and capability applicable to all prefabrication subsectors."

The roadmap proposes that by the Accord's final year (2030), prefabrication and Smart Building should account for at least 50% of new housing delivery. This target would help create the scale necessary to justify significant investments in digital technologies and manufacturing capacity.

Future Made in Australia: $22.7 Billion in Aligned Opportunities

Although the Future Made in Australia initiative didn't initially explicitly mention Modern Methods of Construction, this is beginning to change as policymakers recognise the strong alignment between the program's objectives and Smart Building principles. The initiative's $22.7 billion commitment creates multiple pathways for Smart Building development that industry advocates actively pursue.

The FMA Innovation Fund allocates $1.5 billion to support renewable energy and low-emission technologies. Smart Building techniques directly support these objectives through reduced material waste and lower carbon emissions than traditional methods.

"The decarbonisation imperative creates a massive opportunity for Australian reindustrialisation and Smart Building," Worrall explains. "Energy-intensive, responsible steel and aluminium production must be close to renewable energy sources. Smart Building provides the demand driver for these low-carbon materials whilst building new value-adding industries for Australia. Low carbon mass timber and innovations to lower carbon in concrete are also vital"

Strategic Procurement: Government as Market Maker

The roadmap identifies strategic public procurement as the most powerful lever for accelerating Smart Building adoption. Unlike conventional procurement, which focuses solely on the lowest cost, strategic procurement considers innovation, lifecycle value, and broader policy objectives, including sustainability and industrial development.

"Strategic procurement uses large-scale purchasing to stimulate innovation and create new products, processes, and technologies," Worrall explains. "It's about building project scale with visibility and capacity for planning by industry."

International examples demonstrate the effectiveness of this approach. Singapore mandates volumetric modules for 35% of public projects, while the UK combines prefabrication requirements with digital technology mandates and whole-of-life cost assessments.

Australia could apply these principles across major government projects—from the National Housing Accord to Olympic Games infrastructure and defence facilities. The roadmap proposes that by 2033, prefabrication and Smart Building should provide the majority of all public sector construction.

The Cost of Inaction

Perhaps the most compelling argument for Smart Building transformation lies not in its potential benefits, but in the consequences of maintaining the status quo. Australia's construction industry faces mounting challenges that conventional methods cannot alone address.

"Unless we expand our construction sector to include Modern Methods of Construction alongside conventional construction, we're essentially accepting that housing will remain unaffordable, that construction productivity will continue lagging, and that we'll miss the decarbonisation opportunity," Worrall warns. "The opportunity cost is much more than  the $9 billion in direct benefits—it's the broader industrial transformation that Smart Building would catalyse."

The demographic pressures alone make transformation urgent. With 8% of the construction workforce exiting annually and immigration resuming, demand for construction continues to grow while labour supply remains constrained. Conventional construction alone simply cannot scale to meet Australia's infrastructure and housing needs while maintaining quality and affordability. Highly productive, scale-based Smart Building need to be added to the mix.

International competition adds another dimension to the cost of inaction. Prefabrication will be a larger part of Australia’s housing scene. But will it be an Australian industry with high digital manufacturing capability, sustainability credentials, and manufacturing-scale efficiency, or will decision makers hurriedly default to the easy short-term option of imports? “That would see us pass up the opportunities for Australian industry to find durable, high-quality and innovative solutions to the problems we face”. 

"We're at a critical juncture," Worrall concludes. "Australia can choose to lead this transformation and capture the benefits of industrial innovation. We can make the change, or have the change made to us on terms less of our choosing”.

Seizing the Moment

Australia's Smart Building opportunity represents more than an industry development strategy—it's a pathway to addressing multiple national challenges simultaneously. From housing affordability to industrial diversification to carbon reduction, to social inclusion, Smart Building offers integrated solutions that conventional approaches cannot match.

The infrastructure, policy frameworks, and market conditions align to support this transformation. The National Housing Accord provides immediate scale, the Future Made in Australia initiative offers funding pathways, and strategic procurement can create the demand certainty necessary for significant industry investment.

At $9 billion in annual benefits and the potential to transform multiple industries, Australia's Smart Building opportunity demands urgent attention and coordinated action. The future of Australian construction depends on the choices made today.

This article was originally published in Smart Building Review Australia, the official publication of prefabAUS, Australia's peak industry body for prefabrication and Smart Building.