With the UK and Scottish governments keen to tackle the housing crisis – and setting stretch targets for the number of new homes – institutional investors have pricked up their ears to the potential earnings from offsite construction.
Modular (or, if you are of a certain vintage, an updated prefab for the 21st century) is being touted as the “wunderkind” of offsite construction. Modular construction means building three-dimensional homes in a factory and shipping these to site almost fully made. Assembling involves fitting the modules together, connecting services and adding the finishing touches.
Several investments have accelerated the buzz about modular. In April Goldman Sachs dropped £75 million into UK modular housing manufacturer TopHat. Then Japanese building giant Sekisui House took a 35 per cent stake in Manchester-based Urban Splash. Most recently Places for People confirmed the purchase of 750 modular units from Ilke Homes, with financial backing from Homes England.
However, while the buzz is getting louder, it’s worth bearing in mind that the current capacity of the industry is tiny – around 8,000 to 10,000 homes – with fewer actually delivered. Modern methods of construction as a whole, according to the National Homes Building Council, account for 15 to 20 per cent of new-build homes, while modular itself probably accounts for less than 5 per cent.
There is no doubt that offsite construction is a game-changer when it comes to tackling the housing shortage, not least because of the well-documented skills shortage. Modular has many positives – it’s quick, easy to assemble, more energy-efficient and less reliant on good weather than traditional brick or block construction. But we need to be mindful that it will only ever be part of the solution. There’s another offsite method that offers even more benefits: timber frame construction.
Scotland leads the way in this, with 83 per cent of new Scottish homes using timber frame, compared to 23 per cent in England. This is partially explained by the impressive thermal performance of timber-built houses given Scotland’s climate. Timber is also particularly attractive option for self-build, which has always played a larger role in Scotland.
According to the Structural Timber Association, the market share for timber construction is rising steadily, aided by technologies such as cross-laminated timber and insulated panel systems. Indisputably, offsite-manufactured timber structures have low operational and maintenance costs and achieve high performance standards. And taking a “fabric first” approach – where energy efficient properties are built into a building’s exterior “envelope” rather than relying on add-ons such as photo-voltaic panels or smart home gadgets – can reduce overall energy consumption by up to 33 per cent over a building’s lifetime.
Cost saving is an important factor, too. A timber frame solution can be cheaper in many instances, and that’s before you factor in the significantly shorter build time. For me, timber frame also wins over modular when it comes to aesthetics. Modular, by its very nature, has to fit together in a pre-ordained way – the properties all look the same. Timber frame properties can be constructed to specific designs and have high kerb appeal. This also applies to large, custom-build projects for numerous or bespoke house types.
While modular will certainly play a part in helping the industry deliver more homes, it is only one of many offsite solutions. While it works for short-term homes in popular city areas, the need for something more personal will usually prevail with most buyers.
My message to colleagues is this: by all means consider modular homes as part of your offsite construction strategy, but think timber frame, too. It offers a much more attractive, versatile and cost-effective package of benefits for your future house buyers.
- Malcolm Thomson, sales director at Scotframe