MMC is a broad term that covers a range of off-site manufacturing and on-site techniques that provide alternatives to traditional construction and aim to build homes more quickly and efficiently. The use of MMC varies from country to country and many factors have impacted its adoption – namely,  the cost and availability of labour, supply shortages and regulatory or government intervention.

In many global markets, the cost of adopting MMC is often higher than traditional construction, which has reduced the incentive to change. However, as the construction industry adapts post COVID-19, we could see an increased take-up.

Richard Valentine-Selsey, associate director, Savills Research, said, “The speed of delivery and the opportunity to catch-up for lost time will be a factor. The ability to implement social distancing while maintaining higher productivity than on-site construction will also play a part.  The efficiency of construction, i.e. minimal material wastage, could also mitigate any increased costs of building materials due to shortages. This could to a degree offset the cost difference for MMC.”

With traditional techniques, it is difficult to achieve high levels of energy efficiency, and studies show substantial material wastage. However, building homes under factory-controlled conditions allows much tighter tolerances to be met, improving energy efficiency and generating significantly less wastage of materials.

Historically, Sweden and Japan have led the charge when it comes to modern construction methods. In Sweden, around 45% of all new homes utilise off-site construction and for single-family homes, it’s closer to 80%. Japan produces the highest number of homes using MMC which equates to 150-180,000 homes per annum.

There are a number of countries where the drivers for change are in place to support rapid increase in MMC use. In Europe, we expect the UK to see the strongest growth. The country’s construction workforce is ageing, annual housing delivery needs to increase by 24% per annum to meet need, and regulatory changes around energy efficiency are on the horizon. Furthermore, there is government support for MMC through Homes England as well as the recently launched ‘Homes for Heroes’ campaign to build 100,000 modular homes over the next five years for key workers. This will lead to increased adoption over the next decade and we expect that the proportion of housing built using MMC will rise from around 10% today to closer to 20% by 2030.

We also expect to see strong growth of MMC in the US, especially on the West Coast. California needs to build 3.5 million homes by 2025, yet the industry is suffering from labour shortages, with more than 400,000 vacant construction jobs. Overall usage is likely to increase to close to 10% by 2030.

The Middle East, especially Saudi Arabia and Dubai, is also set for major innovation. Saudi Arabia needs to build 1.5 million homes over the next five to seven years and has signed an agreement with US MMC start-up Katerra to deliver 4,000 homes.  Dubai has introduced regulations that will require 25% of components of all new buildings to be 3D-printed by 2025. This is an ambitious undertaking, with limited existing construction being delivered this way.

“In the short term, the confluence of labour shortages and the need to increase housing supply will be the main drivers for increased adoption of MMC in certain markets. However, over the medium to long term, the need to tackle construction’s environmental impact will force MMCs adoption globally”, concludes Richard.

Savills has examined the key trends set to determine future global real estate investment activity in a series of articles and interviews launched today as part of its Impacts research programme, where the international real estate advisor studies the various social, environmental, demographic and technological ‘tipping points’ immediately facing global real estate.