Friday, July 19, 2019

Thinking Outside the Offsite Construction Box

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.

Currently touted as the ‘wunderkind’ of offsite construction is modular – or if you are of a certain vintage – an updated prefab for the 21st century. Whichever term you prefer, modular construction means three-dimensional homes built in a factory and shipped to the site almost fully made. Assembling involves fitting the modules together, connecting services and adding the finishing touches.

Several financial investments have accelerated the buzz about modular. In April Goldman Sachs dropped a cool £75m into a UK modular housing manufacturer TopHat. Then Japanese housebuilding giant Sekisui House took a 35% 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 8,000-10,000 homes, with fewer, actually delivered. Modern methods of construction as a whole, according to the National Homes Building Council, accounts for 15-20% of new-build homes, while modular itself probably accounts for less than 5%.

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