3 min read
Incentives That Can Boost Investment in Off-site Construction
by
Anna Fischer
Published 19 Aug 2024
A new report from Bain & Company shows that industrial design and construction (IDC) bring significant benefits, especially for large projects in the Middle East. It also describes the difficulties faced by industry participants and suggests ways to improve adaptation of new designs.
Source: Decofice
According to the report, IDC can cut labor and materials costs by up to 20%, require 30% fewer on-site workers, and speed up construction by 20% to 50%.
Other benefits include designs that better fit resident's needs, higher construction quality, and strict adherence to design plans due to the more controlled environment. Modular construction can also be more sustainable, It creates less mess and pollution, uses materials more wisely, and often includes more recyclable options.
New designs adoption will shift profit pools, benefiting some industry players more than others. For example, real estate developers could see higher margins due to better executed projects, but they could also see pricing pressure as risk levels drop.
Other benefits include designs that better fit resident's needs, higher construction quality, and strict adherence to design plans due to the more controlled environment. Modular construction can also be more sustainable, It creates less mess and pollution, uses materials more wisely, and often includes more recyclable options.
New designs adoption will shift profit pools, benefiting some industry players more than others. For example, real estate developers could see higher margins due to better executed projects, but they could also see pricing pressure as risk levels drop.
Challenges the Construction Industry Faces
Mostly, contractors build homes and buildings bit by bit in uncertain conditions with inconsistent workers. These problems make construction inefficient and unappealing to investors.
Another significant challenge in the industry is its divided nature. The different roles for investors, architects, manufacturers, and construction firms, has made it difficult to adopt new design methods.
Architects and designers usually focus on how things work and look, but not on how to make them. They need to collaborate with manufacturers to better understand production. Encouraging more companies to adopt IDC requires these professionals to unite and jointly handle expenses. According to the report, this cooperation could result in better profits in the future.
The industry also faces other inefficiencies such as custom project needs, changing economic conditions, varying interest rates, and the uncertainty of long-term projects. A scattered network of smaller players and varied building regulations in different places discourage progress and hurt productivity. Meanwhile, ongoing issues among main parties delay the shift to off-site construction.
Another significant challenge in the industry is its divided nature. The different roles for investors, architects, manufacturers, and construction firms, has made it difficult to adopt new design methods.
Architects and designers usually focus on how things work and look, but not on how to make them. They need to collaborate with manufacturers to better understand production. Encouraging more companies to adopt IDC requires these professionals to unite and jointly handle expenses. According to the report, this cooperation could result in better profits in the future.
The industry also faces other inefficiencies such as custom project needs, changing economic conditions, varying interest rates, and the uncertainty of long-term projects. A scattered network of smaller players and varied building regulations in different places discourage progress and hurt productivity. Meanwhile, ongoing issues among main parties delay the shift to off-site construction.
Adoption of the IDC: Collaboration is Key
According to the report, different parts of the industry must collaborate to effectively adopt new construction methods. Each player, according to their role, must act decisively to ensure success.
Real estate developers can significantly influence the demand for modular, more efficient construction. By targeting long-term benefits, they can cover the initial high costs. By understanding residents' needs, developers can specify modular construction requirements, striving for projects that are more replicable, standardized, and profitable.
Architects and designers need more precision. Pre-made parts offer less flexibility than traditional construction methods, necessitating a skill upgrade, particularly in digital design. This allows for the creation of detailed plans for these products and necessitates close collaboration with manufacturers to explore production possibilities.
Manufacturers can change the way they make buildings and parts, which might grow their market share. They need to decide which components to make themselves or whether to partner with or buy companies that make key prefab modules. For example, making exterior walls can add more value than interior walls. Manufacturers should also give engineering advice and installation tips to designers and architects.
Construction companies need to expand their scope from on-site building to include off-site assembly and manufacturing. With the growth of prefab construction, the distinction between building and manufacturing will become even less clear, likely leading to the expansion of firms. This shift may result in the consolidation of companies with 50 to 200 employees who will need retraining to adopt new methods.
If companies in the industry manage to share the costs of change, then the use of modular construction methods will increase, shifting profits. Businesses that anticipate this trend and adjust their investments, designs, or construction methods will stand in a strong position to benefit.
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