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Capital Projects & Infrastructure Modular construction: From projects to products by Nick Bertram, Steffen Fuchs, Jan Mischke, Robert Palter, Gernot Strube, and Jonathan Woetzel June 2019 Capital Projects & Infrastructure Table of contents In brief .....................................................1 Preface & acknowledgements ................................3 Modular construction could scale to an industry that represents more than $100 billion in US and European real estate, delivering $20 billion in annual savings ......................5 Modular construction encompasses a variety of methods . . . . .7 Modular construction can cut schedule by 20–50 percent and costs by 20 percent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Labor dynamics and demand are at the top of the list of factors driving adoption of modular construction . . . . . . . . . .19 Many markets worldwide have the conditions in place for modular construction to take root . . . . . . . . . . . . . . . . . . . . . .21 Modularization can disrupt the construction and real-estate ecosystem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Modular construction: From projects to products Capital Projects & Infrastructure In brief For decades, construction has lagged other well as digital technologies that enhance sectors in productivity performance. Now there design capabilities and variability, improve is an opportunity for a step change: shifting precision and productivity in manufacturing, many aspects of building activity away from and facilitate logistics. Countering the old traditional onsite projects to offsite reputation of prefabricated housing as an manufacturing-style production. While modular ugly, cheap, poor-quality option, some (or prefabricated) construction is not a new builders are focusing on sustainability, concept, it is attracting a fresh wave of interest aesthetics, and the higher end of the market. and investment on the back of changes in the — Multiple factors determine whether a given technological and economic environment. This market is likely to embrace modular research quantifies the potential benefits, construction. The two biggest determinants explores the challenges, and looks at whether, are real estate demand and the availability this time, modular construction will have a more and relative costs of skilled construction widespread and sustainable impact. Among our labor. In places such as the US West Coast, findings: the southern part of the United Kingdom, — As one of the largest sectors globally, a Australia’s East Coast, and Germany’s major profound shift in construction can have cities, labor shortages and large-scale major impact. Recent modular projects have unmet demand for housing intersect, making already established a solid track record of this model particularly relevant. accelerating project timelines by 20–50 — Capturing the full cost and productivity percent. The approach also has the potential benefits of modular construction is not a to yield significant cost savings, although straightforward proposition. It requires that is still more the exception than the norm carefully optimizing the choice of materials; today. Our analysis suggests that leading finding the right solution between 2D real estate players that are prepared to panels, 3D modules, and hybrid designs; and make the shift and optimize for scale will be mastering challenges in design, able to realize more than 20 percent in manufacturing, technology, logistics, and construction cost savings, particularly as assembly. It also depends on whether everyone involved moves up the learning builders operate in a market where they can curve. Under moderate assumptions of achieve scale and repeatability. Public penetration, the market value for modular in owners and regulators can facilitate a shift in new real-estate construction alone could the industry structure, too. reach $130 billion in Europe and the United States by 2030. — In many countries, modular construction is — Prefabricated housing has achieved a still very much an outlier. But there are sustainable foothold in only a few places, strong signs of what could be a genuine including Scandinavia and Japan. It has broad-scale disruption in the making. It is been in and out of favor in markets such as already drawing in new competitors—and it the United States and the United Kingdom will most likely create new winners and since the post-war era. Yet there is reason to losers across the entire real estate and believe the current revival could be different. construction ecosystem. The industry is adopting new materials as Modular construction: From projects to products 1
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