Is the future modular construction?
Updated: Sep 28, 2021
For years, construction has lagged behind others in terms of productivity. Modular construction offers the industry an opportunity to make a step change: shifting many aspects of building activity away from traditional construction sites and into factories with off-site, manufacturing-style production. Modular (or prefabricated) construction is not a new concept, but technological improvements, economic demands, and changing mind-sets mean it is attracting an unprecedented wave of interest and investment.
To date, modular housing has only achieved a significant foothold in, Japan and Scandinavia. However, new entrants and first movers that are unwilling to tolerate the industry’s fragmentation and lagging productivity are starting to disrupt the market and change the mind-sets of incumbents. There are a number of factors that determine whether a given market is likely to embrace modular construction, but the biggest determinants are set out below.
(1) Construction costs are a significant determinant for modular housing. Construction costs are at historic highs, especially in major cities. This is driven by rising materials costs and significant labour shortages. Modular units can be built to meet conventional construction codes less expensively.
(2) Real estate demand, is a significant driving factor for modular housing. Large-scale unmet demand for housing drives the move to modular because these modules are assembled in a factory and the construction timeline isn’t affected by weather or other onsite issues, making modular construction, on average, a faster building process.
There is also an argument to be made that modular building is more sustainable in the long term. Building modules in a controlled factory environment generates less waste and reduces the potential for moisture to be trapped in walls and construction materials.
Building modular is not for everyone. A good starting point for developers is to identify the segments of a portfolio where volume and repeatability come into play. These can be designed as a “product core” that remains consistent across developments. Developers should assume that successful modularization will require more than merely asking suppliers for tender offers on existing designs; rather, they will need to work with the supply chain to optimize for manufacturability and make the right trade-offs among quality, cost savings, and time savings.
This is a construction technique most suited to projects featuring identical units, such as seniors and student housing, apartments and hotels. For example, EllisDon who built a state-of-the-art factory in Stoney Creek, Ontario, as part of the ED Modular division, will be using the Hamilton-area plant to fulfill its contract for new GTA seniors housing locations.