Off-site and modular a major opportunity for construction projects

29 July 2024 Consultancy-me.com

The use of off-site and modular construction techniques can provide a major boost to efficiency and financials returns in the construction industry, according to new analysis from Bain & Company.

The trend of off-site and modular construction has been around for years, but has not yet taken off across the construction landscape. However, the technique is seeing an acceleration in its uptake worldwide, as technological advancements and growing scale in the scene make shifting to prefabrication more attractive and feasible.

In its report, Bain & Company said that the adoption of modular construction can help save condense the time for construction by 20% to 50%, reduce the need for on-site labor up to 30%, and save as much as 20% in labor and material costs.

Houssem Jemili and Karim Shariff - Bain and Company

Houssem Jemili and Karim Shariff

Other benefits include design that focuses more on residents’ needs, better quality of construction, and full adherence to design specifications due to the more controlled production environment. Modular construction can also be more sustainable, as efficient processes generate less waste and fewer emissions, and as improved designs use less material and may be more recyclable.

Karim Shariff, Head of Construction, Building Products & Real Estate at Bain & Company, said that these benefits can make a huge difference to the return on investments on projects, especially in large greenfield projects such as those found across the Middle East.

To gain some insight into the potential scale of benefits: analysis from Knight Frank previously found that total construction output value in Saudi Arabia alone is expected to hit $150 billion by 2025. Add to that the many construction projects that are being planned or built in the wider GCC region, and the potential is evident.

Bain & Company estimates that modular construction currently accounts for less than 10% of projects in many countries. But with benefits realization becoming increasingly viable, “off-site modular construction promises to transform the construction industry, especially for large, greenfield projects where the benefits of standardization and efficiency can be fully realized.”

The pre-requisites for scaling

There are however several challenges that need te be overcome in order to scale the technique, said Houssem Jemili, Global Leader of the Industrial Design & Construction service line at Bain & Company.

“The transition to modular construction will require three key prerequisites: clarity on the most adequate building technologies to the asset class mix, adjustments to the developers’ operating models, and finally upgrade to the capabilities that may not be available locally. Builders will need to ensure tighter coordination between Design, Procurement and Delivery functions as well as developing awareness and skillsets across all layers of the organization.”

Another key area will be collaboration, with the industry’s fragmented nature among investors, architects, manufacturers, and construction companies putting the brakes on wider-scale adoption.

“None of the main stakeholders have incentives to adopt modular construction on their own. But through shared action, the industry can move in this direction,” explained Jemili. “Industry players will need to work together and share transitional costs in the interest of generating better returns on investments in the long run.”

Shariff noted that each player in the value chain will have a role to play in driving adoption. And if done well, they will face opportunities in the process.

“Real estate developers are in a strong position to shape demand for modular construction, more than most other industry players. A long-term focus on higher returns could help many real estate firms weather a period of higher investments, as the industry climbs the experience curve.”

“Architects and designers will need to skill up in digital design, so that they can produce plans for fully engineered products and modules.”

“Manufacturers have a rare opportunity to rethink completely how they construct buildings and their components. Innovations are likely to set new standards and those who set them will be poised to capture a greater share of the profit pool.”

“Construction companies will expand their business beyond on-site construction, moving increasingly into off-site assembly and even manufacturing. With the growth of prefabrication, the boundary between the builders and the manufacturers will blur further, and scale will matter more, leading to a consolidation of companies.”

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