"To Modular, or not to Modular that is the question"

Whether 'tis nobler in the mind to suffer and not provide housing to our great nation......

Modular construction, when optimised & capably delivered, can clearly demonstrate a series of benefits over traditional construction. 

They include:

i. Reduced build cost & overall lifetime cost of the building—while these are not always demonstrated, will provide ways to unlock such savings

ii. Accelerated build schedules

iii. Greater certainty on both build times & costs

iv. Improved quality of the building, including better energy performance etc

Modular construction is particularly in demand for all building types where these benefits play a key role.

Potential annual cost savings

The trade-offs involved favours modular construction in particular when the type of structure has a degree of repeatability, a unit size that suits transport, and a value density where the savings of shifting activities to the plant outweigh logistics cost. Any building being manufactured needs to be designed for the manufacturing process and hence constrain the number of different variations required. 

For example, affordable housing, student housing, & hotels are highly standardised and repeatable. This doesn’t mean that all of these buildings now need to be the same—understanding the level of customisation desired by the end user/customer and what can be built into the manufacturing process is a key element of developing the modular solution. In terms of unit size, narrow hotel rooms, for instance, are easier to pre-produce than wide lobby halls. And bathrooms with a high built value are more feasible for modularisation than simple structures.

In the United Kingdom, offsite manufacturing has been used in about 15,000 new homes in 2018. Production costs are still high, but rising labour costs are making modular products more competitive. Modularisation can disrupt the construction and development estate ecosystem;

• Shifting from traditional, familiar building techniques to more efficient modular fabrication will require major changes—not only from modular manufacturers but also for developers, construction firms, investors, and the public sector.

Improving capabilities. 

Most modular suppliers will need to invest in building skills and expertise. Companies will need new capabilities in design, manufacturing operations, and digital technologies. Their go-to-market strategies may include deeper partnerships with developers, construction firms, and funders. They will need to compete with other industries for scarce digital talent. Finally, they will need to introduce and maintain the classic kind of “continuous improvement” mentality that leading manufacturers have developed over the years. This contrasts with the struggles the construction industry has faced in training talent, which is a result of the low-margin nature of the business.

Developers: Scale up, move toward “product” offerings with a clear value proposition, and partner. An increasing number of developers are intrigued by modular construction’s potential, but are not sure how to make the leap in a way that guarantees reliable advantages.

A good starting point for developers is identifying the segments of a portfolio where volume, repeatability, and retained ownership come into play. These can be designed as a “product core” that remains consistent across developments. These products may then need to be tailored for a modular approach (for instance, reducing the use of basements and bespoke ground floor designs, changing room widths to maximum transportation limits, or minimising variability). Using modular, while offering a degree of customisation—such as enabling customers to choose some interior finishes and altering the fa?ade and layout, will be crucial to satisfying both end customers and local authorities. Developers should look to understand and optimise the strategic trade-offs in the products they commission and develop between quality, cost savings, and time savings.

For developers, value creation requires trade-offs between various factors.

Cost

? Offered unit cost today

? Optimisation potential with higher volumes, industry learning Cost curve, or Specification changes

? Penalties when agreed volume not reached

? Logistics cost incurred today— and after potential opening of new sites

Time

? Time savings for construction, and end-to-end including foundations

? Ramp-up time until first supply

? Payment schedule/financing terms

 Quality

 ? Material used vs local customer preferences

? Building dimensions and floor space vs optimised in-situ design

? Lifecycle: Durability, maintainability, energy and opex properties, and resale value