Modular construction: A silver bullet?

The construction and real estate sector faces an enormous challenge. It needs to radically reduce the 115 billion tonnes of CO2 it produces every year and the 230 million tonnes of rubble and demolition waste it generates annually. The industry is currently one of the biggest polluters and Germany’s top waste generator. Moreover, construction is expensive (and slow) due to rising mater­ial costs, energy prices and interest rates. Modular construction, where three-dimensional room modules are produced under factory conditions and then assembled on site as prefabricated components, would allow construction projects to be executed and completed much faster. The prefab house industry in Germany has been successfully using modular construction methods for years. In 2021, the sector posted record sales of around €3.5 billion, with one in five new homes across the country now being prefabricated. Multistorey buildings and commercial properties could also be built this way if techniques such as modular timber construction were scaled up. 

Modular construction methods are suitable for both residential and office buildings

The Wood City quarter currently under construction in Helsinki shows what is possible. Modular timber construction is being used here on a 3.4-hectare site to build two residential blocks up to seven storeys tall, plus two office complexes – as the headquarters for gaming company Supercell and cyber security solution ­provider WithSecure. The project was enabled by new regulations in force since 2011 that allow multi-storey timber buildings of up to eight storeys in Finland. 

The rationale is compelling. Finland has a long tradition of timber construction, and wood offers many benefits – it is light, easy to work with and has a low carbon footprint. Sprinkler systems and specific construction solutions ensure the necessary fire protection.

The office project acquired in Wood City by Union Investment for institutional fund UniInstitutional European Real Estate is due for completion by mid-2024. The sevenstorey building is already fully let and meets strict sustainability criteria, making it one of the first projects in Finland to be aligned with the EU taxonomy. Modular construction can also be used to ease pressures on the housing market. Unlike conventional methods, where getting from planning to shell construction and completion is a slow and expensive business, modular construction is efficient and low cost, helping to create urgently needed homes and contributing to sustainable urban development. In Germany, Daiwa House Modular Europe wants to take industrial and sustainable building solutions mainstream. One of the company’s first projects is the 12-storey Community Campus student residential block in Bochum, totalling 737 apartments, which will be Europe’s tallest modular building once completed. 

Modular construction methods could help overcome the housing shortage

“The property isn’t just a beacon project for modular construction and an answer to the shortage of homes in Germany,” says Olaf Bade, Manager Germany at Daiwa House Modular Europe, “it contributes to sustainable urban development.” 95 percent of the steel frame is made of recycled steel. Because work on the shell and modular construction take place simultaneously, the build time is just half that of the traditional method. The project also demonstrates how the circular economy works in practice in the ­construction industry, he adds: “When a building reaches the end of its lifecycle, it can simply be dismantled and reused.” In a collaboration with fund and asset manager Capital Bay, a gigafactory is set to begin operations near Berlin in 2023, producing building modules and micro-apartments. The initial plan is to manufacture 2,500 modules a year, with production due to increase to 50,000. 

Siemens also chose industrial prefabrication for its new campus in Erlangen, on a site of around 7.4 hectares. The central reception building and four new office blocks were digitally planned using building information modelling and constructed using timber hybrid methods. Union Investment is involved on behalf of major institutional clients via a club deal.

Compared to traditional concrete building methods, using timber cuts construction phase emissions by up to 65 percent. It also significantly shortens the shell construction phase and generates less noise, dust and waste on site. However, there is one drawback to modular construction: the supply chain must run like clockwork, with every element that arrives on site being assembled immediately. If (short-term) storage is nevertheless necessary, a plan for storing the often very large (timber) components out of the weather is essential. 

Demand for a standardised building code

So the technology for modular construction exists, as does interest from investors and project developers. The positive environmental effects have also been proven. What is missing are changes to the building code in order to achieve the target of 400,000 new homes per year. Accordingly, the German Property Federation (Zentraler Immobilien Ausschuss) and German Construction Industry Federation (Hauptverband der Deutschen Bauindustrie), together with other real estate bodies, are calling for standardisation of planning permission procedures to smooth the way for assembly line manufacture of prefabricated housing. It is hoped this will lead to obstacles on the road to sustainability being removed.

Von Dagmar Hotze