The evolution of modular construction in Canada

Following the Second World War, when Canada’s population and economy were booming, factory-built mobile and modular homes gained popularity. As the process of constructing site‐built homes improved and costs declined, the popularity of factory-built housing ebbed while the appeal of site-built grew.

During the past decade, starts of factory‐built residential housing have ranged from 8-16% of total single‐family housing starts.

With new innovations and improvements in manufacturing , customization, quality, performance and  sustainability, there’s been a recent resurgence of interest in modular across Canada.

No longer cookie-cutter boxes, many of these buildings now feature customized designs that incorporate green and smart tech.

These characteristics, along with modular’s streamlined and cost-efficient production process, has made it popular among policy makers as a solution for rapid deployment of affordable housing. British Columbia, as an example, has mandated provincially-funded affordable housing projects to use modular design.

Meanwhile, with the conventional Canadian construction sector being relatively slow to modernize, and costs and labour shortages escalating, prefabricated construction is appearing in a variety of housing – not only affordable buildings, but also single-family homes, apartment buildings, student residences and seniors housing. In 2018, domestic production of residential factory-built housing in Canada was about $1.4 billion.

But modular is not confined to the housing market. The US journal, Engineering Structures, estimates that in North America[1], 3% of new commercial construction is modular and this is expected to increase to 5% by 2022. More markets are embracing this form of construction, from education, to healthcare, and office to entertainment.

As demand for factory-built components grows, so have the number of suppliers. In Canada, construction company Ellis-Don established a new subsidiary, ED Modular, and in 2020 completed a 300,000-square-foot robotics factory in Stoney Creek, Ontario.

Advantages and constraints

Of course, modular construction has both advantages and constraints in comparison with conventional construction methods. Following are some of the most significant.

Constraints

When determining whether modular or conventional construction will be most advantageous for a project, there are also a number of constraints to consider.

Capacity limitations: Canada has only a modest amount of modular manufacturing capacity among a relatively small number of modular manufacturers. While most plants can build modules for any type of building, retooling and adapting worker skills for different types of products can be costly.

Since modular construction projects tend to involve only one or a few suppliers, this increases execution risk. For manufacturers, purchasing and setting up the facilities and processes to construct a modular building represents a large initial upfront investment; this can restrict the financial viability of undertaking smaller projects. There are fewer than 20 plants nationwide that can manufacture a high volume of units. Should something go wrong with a modular construction contract, a buyer may find themselves facing limited alternatives.

Moreover, prefabrication involves a front-loaded design process – more design and engineering are completed up front and require architects, engineers and contractors to be familiar with modular fabrication. This country currently has a limited number of experienced design/construction teams in modular construction.

Financing and cash flow: Many lenders are unfamiliar with modular construction projects, which can make it difficult to secure financing.

For a traditional construction project, a lender provides capital in a series of tranches as the project progresses and the onsite building becomes increasingly valuable as collateral. By contrast, for a modular project, much of the total capital is required upfront; the lender has only an empty lot as collateral. Thus lenders will frequently require additional security, guarantees and insurance.

For developers, cash flow during a modular construction project is also significantly different from standard construction. Manufacturers typically require deposits prior to final design and again prior to manufacture.

Proximity of suppliers and transportation logistics: The geographic proximity of the manufacturing facility is critical for any modular construction project. Transporting large modules long distances can offset the cost savings achieved by labour efficiency gains.

As well, there are transportation risks. A patchwork of roadway regulations across provinces can limit the dimensions and weight of modules. And a mishap during transport could lead to a need for repair or replacement, and unexpected project delays.

Compressed timing and project planning coordination: To achieve the time and cost saving advantages of factory‐built modules, extensive pre‐project planning, early engineering design completion and close project management are critical to ensure each stage of a project is completed in a timely, coordinated fashion.

Factory fabrication also requires the design and engineering of the units to be finalized early in the manufacturing process. This requires committing early to final design and limits the flexibility of later design changes.

Since onsite assembly and installation is accelerated, timing of components and contractors must also be carefully coordinated.

Emerging opportunities in modular construction

With streamlined fabrication processes, factory-controlled quality, and efficient use of labour and materials,  modular can, in many cases, be a very competitive alternative to conventional construction. At the same time, modular designs are becoming more cutting edge and modern.

Examples of modern modular construction

Housing

Highrise: The world’s tallest modular building was built in 2019 in Singapore. Nearly 1,900 prefabricated modules were used to build 505 luxury apartments in the 40-storey dual-tower Clement Canopy building.

Green: When completed, the 18-storey wood-and-plant Toronto Tree Tower will comprise 4,500 square metres of residential areas and 550 square metres of public areas with a cafe, a children’s daycare center and workshops for the neighboring community. The primary structure of the building is constructed from massive timber panels.

Seniors housing: The 126,000 square-foot Seasons Cambridge Retirement Residence in Ontario was completed in 623 days by A-LINX. This eight-storey senior living residence includes 125 suites, a memory care wing and 28,000 square feet of underground parking.

Student housing: Ninety light-wood-frame modules form the five-storey Jacobson Hall student residence of Trinity Western University in Langley, BC, which was completed in 2018 in nine months, adding beds for 220 students.

Single-family: sometimes what is old is also new again. Harkening back to Sears Roebuck days, IKEA and Scanska teamed to produce sustainable, quality, low-cost pre-fabricated homes called BoKlok. They have built more than 11,000 homes in Sweden, Finland, Denmark and Norway. The homes cost 40% less than their traditionally built counterparts and are ready in eight to 12 month.