Modular construction holds huge potential to reshape the way we design and build. Despite significant investment, the approach hasn’t paid off – yet. Jake Bush explains how a reframing could transform modular construction into a self-sustaining sector.
Modular construction has been lauded as the answer to many construction-related headaches, from the ever-increasing need for affordable housing delivered at scale, to reducing environmental impact.
Despite these issues continuing to grow quicker than solutions can be found or actioned, modular’s contribution seems to have diminished. With a number of high-profile players all ceasing to exist in recent years, one could be forgiven for believing that this might signal the beginning of the end for modular construction, especially in housebuilding.
Still, there is a key role for modular to play. First, it must reframe itself, focusing on its niche strengths as opposed to trying to fit into an existing, unsuitable mould.
Why has modular construction struggled?
In recent weeks, we’ve had conversations with several key figures within the modular world. Opinions vary on what the sector’s biggest challenges are, but one point has been raised by almost everyone: the majority of the collapsed modular businesses focussed purely on residential projects. The general sentiment is that modular’s role in large-scale housebuilding is small and supplementary, and not a sustainable business model.
The new government’s manifesto pledge of 1.5 million homes shows an increased demand for scale in delivery, but that isn’t a realistic possibility for modular housebuilding currently. Could it be in the future? Possibly, but for now, the infrastructure doesn’t exist for modular to be a significant part of the solution.
Transport & logistics are major obstacles. Components typically fall into the oversized freight category, increasing costs and the likelihood of damage in transit. It also brings scheduling and site access challenges; there simply isn’t enough space for multiple lorries on site every day.
There’s also the very real consideration of desirability for prospective homebuyers. Compared to a traditionally built house, the options for customisation and design are usually very limited, decreasing appeal for buyers.
Another significant threat is the capital-intensive nature of the manufacturing and production process. High set-up costs and the need for efficiency put cost pressure on modular businesses before the first product even leaves the factory. With costs so heavily and immediately scrutinised, it feels as though there’s an uphill battle from the outset.
When a production line isn’t consistently running at high utilisation, as is common with modular, it becomes much harder to identify improvements. This lack of utilisation caused by the lumpy nature of work in the construction world, means that businesses may take on lower value, non-core work just to keep production lines running.
That said, it’s important to remember that whilst there are downsides to the factory production process, it can also be the very thing that makes modular great.
Focusing on the benefits of modular construction
Modular construction must reposition itself as a niche supplement to traditional construction, rather than a replacement. It’s unrealistic to expect modular to deliver large-scale building projects in the same way a traditional construction business can, especially in the residential space.
Instead of trying to compete with traditional housebuilders, modular needs to sell what it’s best at: speed, precision, and minimising disruption. By focusing on these attributes, it can provide much-needed supplementary services to larger commercial projects.
It’s long been the case that snags, reworks and waste are all issues for traditional construction, whereas the specialist production involved in the modular space can eliminate all three almost entirely. When parts are made with absolute precision in a factory, it gets rid of costly excess materials that usually come with the end of a job and lowers the chance of expensive remediations or reworks. Once components are on site, modular projects can be built much quicker start-to-finish than traditional construction methods.
This is especially valuable in specific construction settings such as schools, where building has to take place within a six-week summer holiday. Modular makes it easy to plan in advance and meet building deadlines in time for the start of term. Or, where urgent construction needs to take place during school time, such as for RAAC remediation, temporary modular classrooms can be quickly built on site. The same is true for hospitals, which can’t afford any downtime whilst work takes place. Modular can speed up the process or create on-site offices and temporary facilities to enable construction to happen in other sections.
It can help to overcome NIMBY issues too – for example, with quick service restaurants. The majority of objections raised in the planning stages are around expected disruption from the construction process. Using modular construction means the sites can be up and running quicker. Minimising disruption in this way lessons problems with objections, smooths the planning process, and is better for people in the local area.
There is also opportunity in the build-to-rent space, where the current housing shortage means the ability to quickly create homes within under-served communities is desperately needed. Having fewer customisation options doesn’t create as many limitations for rental properties.
Modular can also provide temporary space for businesses, such as short-term office space for companies that can’t commit beyond a few years, or additional factory space for manufacturing firms who need to increase output following a challenging few years but don’t need the extra capacity long-term.
This shift from residential towards commercial projects, and focusing on the benefits of MMC, could unlock huge potential for growth for modular companies.
Leadership for a successful modular construction industry
For this major repositioning effort to be successful, modular companies need to ensure that leadership teams have all the right skills in place. This will require strong strategic thinkers. So far, nobody has worked out the optimal business model for modular, so people cannot follow the lead of other companies as they might in other sectors. The blueprint isn’t there yet, so leaders need to be able to come up with original and innovative ideas, as well as create clear strategies and execute them.
Sector knowledge is another area to consider for a leadership team. The knowledge and experience that is gained when hiring from large housebuilders won’t necessarily translate for a modular construction business, although of course there are transferable skills. Instead, modular companies should consider looking for leaders from a manufacturing background, who will understand the process of designing, producing, and selling these factory-built products.
Although modular construction holds huge potential, the sector has so far struggled to overcome the challenges of competing with larger building companies. Through strategic leadership and by carving out its niche offering, it can grow into a self-sustaining sector, complementing rather than competing with traditional construction.
To speak to us about finding the right leaders to overcome your sector-wide challenge, request a call.