Modular construction represents the future of building development. The benefits over traditional construction should be huge: lower costs, accelerated schedules, greater predictability of both time and cost, and improved building quality. However, the modular supply chain is nascent, and benefits of the approach are largest where there is a degree of repetition well beyond individual, large projects.
Real-estate developers can be the catalysts for the transition to modular — and early movers stand to gain significantly, as they can pocket the cost savings over the traditional approach throughout the industry’s transition, until they’re forced to pass through the savings to the end customer to remain competitive. Developers must start by rethinking their product strategy with an eye toward enabling modular design — for example, by reducing the use of bespoke floor plans. From there, they can begin to build the supply chain by signing long-term partnerships with material and product suppliers.Real-estate developers are a natural catalyst for scaling modular construction, as they can determine how their projects are realised and by whom. The shorter timelines indicative of modular construction help to mitigate risk, as developers’ capital isn’t tied up in empty or developing land for as long. Furthermore, developers have what modular suppliers need: a forward-looking pipeline and control of the product to put through it. This position provides them with enough visibility to optimise factory operations and reduces the need to refit equipment for different projects.Those with sizeable pipelines per product can take the biggest leap toward modularisation. According to McKinsey research, a volume of about 1,000 units a year can be enough for a modular factory to break even, and a volume of 5,000 units annually allows for efficient automation.Developers capable of such scale can and should be the first ones to embark on the journey to reshape the industry — and some of them are. Berkeley Homes in the United Kingdom is building its own factory to produce 1,000 modules a year.
