Modular construction: coming of age or work in progress?
Modular and off site fabrication have been around since before the second world war as a fast and effective way of building new homes.
Despite this, traditional on site construction techniques dominate the UK market by quite some margin with Reuters reporting that factory-based construction accounted for only 7% of housebuilding by value in 2015 according to data from Arcadis.
But things are changing with modern methods of construction being touted by both the industry and government as part of the solution to the housing crisis and national skills shortage; in October 2016 the government indicated that modular construction could contribute around 100,000 new homes towards the target of one million new homes by 2020. So if we are genuinely at the beginning of something new and substantial how is the industry changing to make the most of the opportunity?
"The key drivers for modular are saving time and money," explains Adrian Leavey, Real estate Partner at Trowers & Hamlins, "Traditional build costs are higher than they once were and modular can be more efficient in terms of materials."
"There are also labour force issues related to the ageing construction workforce. The Farmer Report issued in October 2016 identifies that within a decade the UK could lose 25% of its construction labour due to retirement and will need 700,000 new workers in the next five years, which may be exacerbated further by Brexit on the horizon."
Some big players are throwing their hats in the ring, with The Berkeley Group progressing plans for its own modular homes factory and announcing a target of 20% of their homes to be built using modular and Legal & General developing prototype modules at its modular factory near Leeds. For Legal & General the attractiveness of modular is clear – tight control of the construction process, greater management of risk and high levels of quality control aligned with their PRS model to engender long term consumer appeal.
It’s also not just large developments adopting new techniques; Squire & Partners designed Clarges development for British Land, in London’s exclusive Mayfair. A mix of residential and commercial, the development employed the use of 'Twinwall', one of Laing O’Rourke’s primary solutions for precast structural walls, enabling the core, structural connections and concreting works to be built at a rate of five days per floor. The numbers are compelling with Laing O'Rourke stating that "The site team believes it has managed to achieve a 50% saving in workforce and 30% reduction in programme compared to conventional construction techniques."
Quality control in a factory is easier to achieve and maintain in comparison to on site construction but it’s not completely without risk. "If a product or module leaving the factory is defective there is a high chance that the defect is going to be replicated in the other products or modules." Paul Bartter, A Projects & Construction Partner at Trowers & Hamlins, "This means that, for clients, getting the right contractual documents and testing and inspection regimes in place is extremely important – although these are often overlooked until something goes wrong."
Paul Bartter describes how inspection processes need to be established for factory construction "You can’t have parts turn up on site and not be right. There needs to be rigorous testing and inspection stages that each unit has to go through. When you’re working at volume it’s critical that these checks are in place so issues aren’t replicated across the line. If issues are not spotted until delivery to or installation on site then you have a real problem exacerbated by the limited ability of being able to rectify on site and the logistics of removing and returning products or modules to the manufacturer for replacement."
At the other end of the process, and an area which still remains largely unresolved, is whether people buying homes built using modern methods of construction are able to secure a mortgage and buildings insurance.
A spokesperson for the Council of Mortgage Lenders told Inside Housing magazine earlier this year that "Lenders also need to be guided by valuers… on appropriate valuation mechanisms, and to be assured about the structural integrity, longevity and adequacy for mortgage purposes of any properties of non-traditional construction. We are taking an active interest in the development of this market – but it is, of course, a matter for individual lenders to determine their lending criteria."
These are not insurmountable problems but they need to be addressed to ensure the necessary flow of capital to enable purchasers to get the mortgages they need. Major brand, Lloyds Banking Group does lend on off-site construction developments, providing the methods meet the standards of adequate testing so hopefully we will see other big names following suit.
In a country of home improvers and DIY enthusiasts, another question is the longevity and flexibility of modular construction for house buyers. What happens when you want to extend into the loft or make your living space open plan? Are modular methods flexible enough to allow owners to alter or extend and add value to their properties in the future? Will these new homes make it easier or harder for home owners to adapt their homes to new technology in 20-30 years’ time? Equally, does a developer have the ability to adjust the size of units and number of bedrooms throughout the build period to respond to market demand and changing sales strategy? "The UK industry should take the opportunity to look a little further into learning from its neighbours" states Paul Bartter.
In Sweden around 80% of homes use modular construction methods. Lindbäcks Group for example, who use timber build for their modular products, are factoring in adjusters and wiring that can be modified, highlighting ways that flexibility can be built into modular construction.
Adrian Leavey concluded that "the surest way to achieving success in modular is clearly to own the whole process. This way you can retain control throughout, ensuring quality control in the factory, reducing problems on site and tailor making homes for the market." Though for modular construction to have an impact across the industry, and to build capacity and flexibility there is an opportunity for specialist manufacturers to establish themselves in the market. By positioning themselves as centres of excellence of the industry, we could see faster development of off-site manufacturing techniques and technology. There is no doubt in many house builders and developers' minds that construction methods are changing and it’s an exciting time to be involved in the industry.