Pros and Cons of the Modular method for Multifamily projects

by ALISA BANKS SNYDER, customer advocacy manager, Procore Technologies | Sep 29, 2015

All building methods have their strong and weak points, and it’s no different for modular construction. But, while modular is possible for every type of structure, there are demographic factors and unique aspects to it that foretell its increasing use on multifamily projects.

The modular method brings manufacturing processes to residential building. According to the U.S. Census Bureau, the use of modular construction in single-family residential has held steady for the past five years at 2% of the completed single-family housing units each year. In multifamily construction, modular is joined by panelized construction to account for between 2% and 7% of completed rental units built annually over the last five years. The Census Bureau describes a panelized process as one where a builder joins preassembled components at the job site. With modular construction, builders assemble fully completed building sections at the site.

BIGGER PROJECTS, BIGGER SAVINGS

While modular construction in multifamily isn’t on a strong growth trajectory, it is increasingly used on larger and larger projects. In Winston-Salem NC, a developer and contractors recently used modular construction to complete the 65-unit Hilltop House apartment building in just 47 days. That period included the time needed to manufacture the 52 modules that went into it. Meanwhile in CA, the Eviva Midtown, a 118-unit, mixed-use community in Sacramento, is now scheduled for completion in early 2016, having shaved six months off its original estimated schedule by using the modular method. And then there’s The Domain in San Jose, CA, the largest modular apartment project completed to date in the U.S. It has 444 units and was completed nine months a head of schedule.

PROS FOR MODULAR MULTIFAMILY

Four factors are conspiring to make modular a contender for greater use in the multifamily sector:

1. The rush to cities. By 2050, two-thirds of the world’s people will live in cities, according to United Nations’ estimates. In North America, urban populations are expected to increase from the estimated 292 million in 2014, to 390 million in 2050. All this urban concentration will require multifamily housing that fits into a densely packed environment. Tests also have shown that when you build multifamily using modular construction, there’s a strong chance the project will be ready for occupancy up to 50% faster. Such time savings allow developers to get a quicker return on investment;

2. Duplicating buildings is quicker and more exact. Design costs drop each time the building is replicated because major portions of the ensuing projects are the same. With each replication, the design costs are spread out over multiple projects, reducing the cost on a per-project basis;

3. Environmental impact on site is reduced. There is less waste, lower levels of pollution, and lower levels of dust. Noise pollution is also generally reduced;

4. Control over the process. Although there is still plenty of site work that will be affected by weather and the typical challenges with staging and security, those uncertainties are greatly reduced. In effect, controlling these variables also lowers overall project risk.

Like everything else though, modular construction also has its drawbacks.

While it is popular to cite reduced costs as another advantage of modular, the reality is that project costs are dependent on too many other factors to say this is always true. Analysis of one project in the Metropolitan D.C. area, for instance, found modular and conventional total building costs were the same when using union labor, while conventional construction cost was less when using nonunion labor. In a separate Brooklyn, NY, project, the prime contractor expressed concern re the building leaking. The resulting fallout among the participants left the structure costing far more in the end.

CONS FOR MODULAR MULTIFAMILY

Modular construction also challenges tradition in at least a few ways.

1. Traversing new territory. In the early stage of the project, the design and documentation processes as well as the financing structure have to be altered. This, in turn, limits the pool of potential participants in a project, either because they lack the skills and experience, or because they don’t want to step out of their comfort zone. On the banking side, the cash draws need to be structured to cover the demands of having multiple phases under construction at the same time. And first-time projects run into resistance from banking because of the perceived higher risks;

2. Takes more planning time. In one example, a developer said the typical 200-unit project could easily require an additional four months of planning. That’s why designing with an eye to use the same components in future projects is important. It helps offset the higher initial planning costs;

3. The perception that modular is cheap and ugly. Some people even go as far as claiming it is of lower quality. And, the entrenched interests in the industry, from product and materials suppliers, to industry associations, to union and anti-union interests, all help shape perceptions about modular construction, and ultimately affect its adoption rate.

Meanwhile, though, modular’s benefits for multifamily construction continue to be exploited by developers and contractors who aren’t afraid to try it on projects where it makes the most sense. With all the urban multifamily construction in the pipeline, the day might not be far off when modular will finally hit its stride.

Based in Los Angeles, the author is Customer Marketing & Advocacy Manager at Procore Technologies. Contact her here. Founded in 2003, Procore is a cloud-based construction management software application built for the construction industry professional, striving to make project management effortless, one task at a time.

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