Blog

How to get the best out of your relationship with Modular Manufacturers, or not

Something I have been meaning to put together for a while despite a daily bombardment of blogs sharing our passion for Off-Site Manufacturing which one a month features on our website.

My own journey in OSM started 3.5 years ago. We previously ran successfully Europes Leading Print Management firm working with suppliers from 27 countries. We sold the company successfully in 2002 to a PLC for £42 million pounds who successfully managed dilute the firm in 12 months applying heavy handed tactics to suppliers and upset our loyalty clients, and since gone out of business. Since I have spent 16+ hour days touring the world meeting 50 OSM’s and deciding to be based in the Baltic States with easy access to a plethora of robust factories. Culture plays a huge part in trading effectively, understanding for example Soviet times and the effects on how it has shaped a country considering only 30 years ago many former countries have been playing catch up with Western style business. The Baltic States for example have a lot to offer, known for highest quality craftsmanship, lower cost base and high level engineering education and the younger generation becoming more impressive by the day. But let me say right now by the time transport is added overseas OSM is not much cheaper if at all and not all OSM’s are perfect by any means. Using MMC is more cost effective based on pre-lims and other obvious reasons including Health & Safety highlighted in my daily rants.

Key problems come to mind with OSM in the UK

Relationships – OSM’s overseas are far bigger and more experienced than homegrown start ups appearing the past few years. The lack of investment in to UK industry these decades including poorly delivered apprenticeships is clearly evident with the UK trying to play catch up. Despite investment and huge promises and unrealistic targets the UK is reliant upon international collaboration whether we like it or not. Now Covid has delivered a further huge blow to the world and the UK is suffering way over and above for example the Baltic States who have less people, density but made a faster move to efficiently delivering a tough regime to stop the pandemic accelerating compared to other countries but let’s not compare the UK to smaller populated countries – the UK had bad luck also. The problem is that many overseas OSM’s have no interest or experience in the UK and those that do are incredibly cautious who they spend time with – we managed to convert a few to see the light willing to deliver their superior product and are working on our own Joint Ventures put off by working with contractors who had no intention of embracing our supply chain using us for pricing. The UK construction industry is outdated as outlined by Mark Farmer’s report and we see the biggest problem is the lack of understanding by many architects, project managers, construction and development firms. Albeit technically expert in their field of traditional build without doubt many (not all!) are missing experience in delivery with OSM. More delivery firms such as our partners Modular Connexions are expanding and with the right momentum from investors and planning departments MMC will grow but not nearly at the rate one could expect. There is still a huge sticking point for many potential UK clients who basically just don’t understand the market and don’t wish to change the way it has always been done. Many OSM’s come in blind to the UK employing teams of Export Managers most of which may have not even visited the UK but educated themselves to speak English which doesn’t necessarily mean they understand our quirky unique British culture! Talk spreads like wildfire of very few disasters in OSM of which compared to success are tiny however bad news travels fast and is a lot more interesting.

Some get their fingers burnt spending years flying over at huge expense and then find out how brutal the UK construction industry is, sometimes for good reason. Some get it right but then decide to pull out as it is far more profitable with other markets including Scandinavia. Getting it right requires open minds, a willingness to do business and to act professionally and ethically. Consistency in sustainable contracts and commitment from all parties is critical.

Vast contracts have been allocated to UK firms who have never delivered in such scale which is deeply concerning, I hope for their and our nations sake they deliver these homes.

Biggest Mistakes made – attitude towards factories in general can be good to appalling. The OSM market despite the obvious requirements of quality, fit for purpose, assurances and price is all about Production Capacity. The factory holds the cards to who they work with so similar to the Timber Industry right now this is a ‘sellers market’ – many run out of patience with in-experienced architects etc by the day. Too often uneducated bullying folk demand prices per square metre without giving any information and then expect the factory to spend time ascertaining and guessing on their behalf spending weeks working for free. This is highly unprofessional, disrespectful and at the end of the day not the right way to build relationships. Anybody can make an uneducated guess then ramp up the price on extras which defeats the purpose of OSM where costs can be controlled far more effectively compared to traditional build. Don’t try to ‘out manoeuvre’ a factory, the likelihood is the aggressor will loose, play fair gain friends for life enabling mutual growth with the factory. Yes it’s about being Commercial but too many times we experience a lack of respect towards factories here in the Baltic States and other countries. It’s unethical and unacceptable. Times have changed and those that do not start to embrace ethical supply chain relationships will regret it. Traditional construction alone will not achieve 300,000+ homes per annum target set out by the Government, it takes a myriad of build technology including MMC: 3D Volumetric, Panels/Elements, Hybrid from a mix of sources homegrown (where applicable) and core overseas factories. This is not about being anti-Britain, this is about being realistic, patriotic and working together internationally accepting our strengths and weaknesses. Our own future plans are to create Academies or at least collaborate to teach young people to understand the merits of MMC and to help towards increasing UK manufacturers successfully. Britain has a hell of a lot to offer and indeed learn with adopting genuinely MMC. Eventually it may come but we need to provide sufficient data analysis on an ongoing basis working with open minds.

Production Capacity – the UK is very slowly indeed moving towards entertaining OSM, still only roughly 8% of new build uses MMC. Why? we all know the answers; lack of experience, existing relationships (some stagnant) and risk- or what they deem is risk when it isn’t at all and can be de-risked. Advancement with lender acceptance including BOPAS Accreditation is a big step forwards, we held an event with MACE and invited them to speak in late 2018 and attended their recent Webinar listening in from here in Lithuania. The key outcomes of that particular production were the UK is way behind the times. Lack of data has not helped MMC but now lenders especially the past 2 years have educated themselves in the main and investors of the build are demanding far more effective quicker better quality build to improve ROI, less maintenance and more value for money.

To understand the business one must understand ‘production capacity’ world-wide and appreciate we need their ‘capacity’ more than they need us, forget colonial style attitude towards Eastern European or Asian suppliers there to serve us – this is the 21st Century – we underestimated many countries including China and look at their tremendous growth. Let’s get building and support the governments intention, despite their disillusion of how. Without investment and modern application the UK will not be any further down the line in the next few years target wise proportionally. Without PEOPLE nothing will be achieved.

Build long lasting trusted relationships where everybody wins, not screwing the hell out of suppliers and expecting loyalty, forget it. Since Covid appeared people are valuing people more so and those that don’t radicalise the way they work will surely die in business.

Conclusion

Of course not every UK construction related firm can be accused of inappropriate behaviour towards OSM’s by any means but there are far too many that expect too much giving little commitment having no control over a project and demanding the impossible acting like Kings or Queens with no substance. Those that are professional, understanding and appreciative will win – we know plenty and are delighted to work with them. It is all about collaboration and fair trade -mutual respect and achieving delivery together in what is a sellers market.

To find out more about how we help clients inbox me and we shall send you our solution with pleasure. We are looking for joint ventures with local authorities as a priority and have a separate paper to present.

It’s all about collaboration!

Covid shapes new opportunity in the form of Modular

ACE Modular Construction

When Adversity appears Opportunity knocks – that’s life.

The leisure industry amongst others has taken a real hammering since the pandemic, for obvious reasons. However, lately the take up of Staycation has increased rapidly with holiday makers opting to travel local within 1-2 hours close to home.

Landowners are looking desperately to diversify creating much needed income

Modular construction has a huge role to play based on speed and highest quality products using different technologies from Elements to 3D Volumetric. From wooden to light gauge steel frame the Baltic States alone have been making modules for generations, built to handle extreme weather conditions these luxury pods provide a robust solution for an expanding requirement worldwide. Around the mid-1990’s modern day OSM accelerated to a more lean streamlined solution using state of the art technology. Combined with highly experienced architects, engineers, project leaders, factories & local delivery partners to hoist in to place on site the cost for high quality ‘leisure modules’ from the Baltic States are around 700-1200 euros per square metre plus groundworks, delivery & installation for a high quality module.

(Photo below around 35m2 1000 euros per square metre) – of course sizes & quality of build differ widely depending on specification – luxury ‘turnkey’ Norwegian style homes will cost around 2,500 euros per square metre (photo at very bottom). The savings made on ‘prelims’ by using MMC provide ‘points of difference’ to the way we build.

The UK uptake in using Modern Methods of Construction for new builds is incredibly low at just 8% albeit very slowly increasing 2021 onwards

Our European engineers experience is worldwide including impressive turnkey residential and commercial projects in Scandinavia (perhaps considered ‘The Kings of Modular’) both leisure and large residential city developments utilising modern methods of construction. Considering the critical state of housing in the UK alone (300,000 homes needed per annum) there is a huge need for modern methods in what is a risk adverse industry unfortunately decades behind. We are failing to achieve such targets over a 10 year period moving forwards – why? It is all very doable only if people accept change.

Our friend Mark Farmer’s 2016 report Modernise or Die identifies the significant problems in the United Kingdom with our construction industry. Inbox me for our MMC Solution paper.

Being based in the heart of ‘the modular world’ here in Lithuania gives you a distinct advantage with access to over 50 ‘proven’ Off-Site Manufacturers Europe & Asia wide; Architects, Engineers, Project Leaders & Local Delivery Partners are a vital component to achieving success. We have a big presence in the UK also so happy to meet or Zoom call etc whichever your choice considering Covid times.

Keep safe & healthy in these distinct times of adversity!

The Leisure industry could easily lead the way in MMC

No alt text provided for this image
No alt text provided for this image
No alt text provided for this image
No alt text provided for this image
No alt text provided for this image

Excuses running thin not to embrace MMC

During the past few years the UK has heard every excuse in the book by some not to adopt Modern Methods of Construction. Partly a result of distinct lack of education, training and investment with only 8% of UK housing built using MMC.

Many large construction development firms conducting what they consider professional in-depth MMC reviews visiting factories in the UK (4-5 relatively small compared to overseas), perhaps 1-2 mega-plant OSM’s in Poland, and even perhaps one or two in Latvia is no way sufficient to understand the worldwide current market and how to operate/trade within it. The word ‘partner’ is overused in many sectors, particularly construction where suppliers can often be looked down upon which is unacceptable. Building trust, we all appreciate surely takes more than one’ red carpet’ visit.

It’s a sellers market, genuine partnerships are critical to ensure success

The past 3 years we, ACE Modular Construction, have visited 50 Off-Site Manufacturers, mostly overseas in Germany, Poland, Latvia, Estonia, Lithuania, Asia etc multiple times, constantly impressed with highest levels of quality and ability to adapt to any countries specific regulations & standards. I personally decided to re-locate to the Baltic’s full time on the basis being on the doorstep of the finest OSM and better quality of life. Is it built to British standards we are asked? We say NO, it is better!

There is still total some confusion with terminology using the word ‘modular’ alone which can consist of either a multitude of panel types (including concrete, wood & steel) or 3D volumetric (which most consider as modular) which is built up to around 95% complete modules in the factory or even bathroom & kitchen pods installed in to traditional build to help speed up the process – what we call a hybrid solution. (See my previous blogs that go in to significant detail)

We prefer to use the word MMC which incorporates OSM which can include Modular as a potential solution.

Key issues

  • The word ‘Prefabrication’ is reminiscent of Post WW2 cheap housing built to last 10 years introduced by Sir Winston Churchill 75 years ago. The polar opposite in 2020 including quality and valid warranties. In a recent blog posting I experienced “we have houses that are 600 years old in the UK with modular you cannot do that” – a ridiculous comment for a multitude of reasons. With a dire shortage of 3.4million homes in the UK we do not need to build houses that last 600 years. We work with a German OSM that has been in business for 115 successful years that build robust concrete modules which will last a very long time put it that way. Warranties are not an issue.
  • Albeit a significant increase of late with more factories opening there are only 4-5 substantial factories in the UK, due to serious lack of investment previously by government in particular. Despite more serious government commitment more recently it’s too late to be able to help solve the UK Housing Crisis alone, overseas OSM’s are plenty, highly more experienced for the past few decades when the UK was still building using bricks. Significant uptake in Scandinavia, Germany and other countries has given the Baltic States alone an advantage to upscale, cash in and perfect their delivery. Whilst it is fantastic news the UK are increasing production they haven’t experienced mass scale delivery in housing. It’s not easy to get a factory fully operational and the huge risks attached are not for the faint hearted. I commend those that have created impressive factories in the UK and genuinely want Britain to succeed and adopt whole heartedly the merits of MMC, let alone job creation. We have failed miserably with modern day apprenticeships and now is time to change that. We have huge potential with a hardworking British nation.
  • Contractors, architects and costs consultants not all aware of the current condition of the OSM market, what’s available and in particular production capacity. The key issue is that most overseas OSM’s are very nervous of the UK and can make more profit working in Norway & Sweden etc. We convinced some to come to the UK but it’s a case of creating mutual trust and embracing UK delivery partners such as Modular Connexions.
  • Modular construction is predominantly no cheaper that traditional construction, time saved with prelims is where the cost efficiencies can improve ROI by saving time. Wild statements from some OSM’s claiming time savings of 50% are totally misleading, possibly products from leaving the factory to delivery on site counts as 50% but generally the time you can shave off is closer to around 25% in reality. That to an investor is very attractive let alone far better quality built in warm factory conditions not cold and wet, and also Health & Safety is a major issue.
  • Lenders out of touch, albeit it appears pockets of self education have improved the past year slowly. Lack of published information hasn’t helped on the basis of little use of MMC in the UK. Below’s article gives us hope for mass improvement and some very interesting yet shocking statistics.

The solution

  • More investment (in the right places) not just from government but investors creating more OSM facilities in the UK, consideration for expansion from overseas firms to part produce in Britain where possible. We questions decisions made by Homes England previously.
  • Collaboration with overseas OSM’s utilising highly experienced European trained UK delivery partners – working together utilising each others strengths.
  • Consideration for many techniques using MMC, blended solutions from panels, light gauge steel frame to 3D Volumetric.
  • Readily available factual information for all, including addressing lender concerns and promoting training, including visits to UK and overseas OSM’s.
  • Open minds, collaborative and honest approach to providing best solutions for housing.
  • Adopt highest measures of Health & Safety ensuring best quality conditions for workers.

“The greater the level of detailed information available on MMC homes, the greater the confidence we can have in them as valuers, addressing any lender concerns. In time, as MMC becomes more accepted, MMC homes will be able to play their full part in boosting affordable housing delivery” reports Catherine Smith, Director at Savills

“There has been significant progress in recent weeks regarding the use of homes built using modern methods of construction (MMC) as loan security. Does this mean greater financial capacity is being unlocked in housing associations? Potentially. So, what is going on here and what valuation pointers are there for housing providers keen to increase the number of MMC homes they build?

She points out that “MMC homes to allow more affordable homes to be built more quickly and cost-effectively, the total number of MMC homes built each year remains relatively low.

“around 15,000 factory-built homes completed in the UK each year. This is around 7-8% of the roughly 200,000 homes that are built annual in the UK”

See our MMC Procurement Solution Executive Summary. For the full version inbox me.

The positives of a drastic Pandemic – there is light at the end of the tunnel

There is a unique opportunity to solve our housing crisis only via adversity it seems, an acute focus by UK government, in words at least, to build our way out of recession but only with significant investment from outside.

Entrepreneur, Philanthropist John Caudwell (who I admire greatly & have met at least a couple of times in the most random places including ‘Animal Flower Cave’ near our home in Barbados) urging government to invest heavily “intelligently” towards £1 Trillion and personally predicts up to 4 million unemployment….I have economist/investment friends insisting potentially a lot more. With 2 adult daughters myself out of work for a period both had to think fast on their feet, one leaving the movie business (amazing top job she worked damm hard to get with a world leader in prosthetics responsible for Harry Potter & any other movie you could think of) and re-training herself in local poorly paid healthcare for the time being whilst also running her new business at weekends/evenings. My fear is for our young population, some of which have absolutely no idea what is to come.

Boris Johnson our Prime Minister, along with shocking multiple U-Turn’s has finally pledged to “Build Build Build” which can only be good news for society. But what are the show stoppers? Only us! Modern Methods of Construction (MMC) is the answer.

No alt text provided for this image

Winston Churchill, hero to some including me, had a similar pledge to re-house our nation back in the 1940’s, the solution was pre-fabrication via off-site manufacturing (OSM), homes built to last for 10 years, some of which still standing today. Pre-fabrication became a very dirty word for the UK based on poor insulation and quality in general, then we had the 1960’s Soviet style concrete monstrosities (designed by so called Architects) also still standing and riddled with danger to this day. The problem is a large proportion of the construction sector doesn’t really understand the capabilities of modern day OSM indeed ‘some’ protective of their outdated position. Similar to the invention of Apple Mac’s back in the day in the print world (our business) near 30 years back we experienced the demise of similar ‘dinosaurs’ sticking to their guns and to their peril I am afraid.

We can put the UK back on the map, easily, it’s the 21st Century, huge demand for housing and a mass pool of incredible British talent no doubt – but support from overseas collaboration is critical with huge investment & ‘off-site manufacturing armoury’. Of course not all the build needs to be 3D volumetric (often referred to as Modular built 95% off-site/completed homes) it will consist of a healthy mix of panellised solutions (nothing new to the UK) and latest hybrid product technology, including bathroom pods for example. The UK has many quality homegrown solutions and a hard working ethic, granted, but not to the level needed to build millions of homes. We cannot do this alone and the government could have easily avoided this decades ago investing in our industry following the likes of the Baltic’s, Germany and other MMC world leaders.

Let’s invest heavily & intelligently as Mr Caudwell says – build our way robustly through this storm utilising state of the art modern methods:- built to last

Our outdated construction industry must open up its eyes and genuinely embrace MMC finally – lenders have dragged their heels and are partly responsible for holding back our country surely? – they need to be held to account but more importantly educate themselves with MMC. We need homes for the people not even more luxury apartments which developers preferred to build for obvious reason, with distinct recent changes in planning long over due we hope that delivery will happen with genuine support from planning departments.

Questions: how many of these lenders have actually been to an off-site manufacture? And not just in the UK (who are tiny in comparison to the Baltic’s alone)? Have they toured extensively worldwide state of the art facilities? Have they visited completed projects and asked the tenants what the living experience is like? Investors are also winning with better ROI and sustainable product. What is their specific knowledge of our sector? Are they qualified?? Why has it taken so long? Fit for purpose? They caused us major problems now will they fix them?

Inbox me for our solution for Affordable Housing aimed at creating joint ventures with local authorities, housing associations, investors, MMC and local delivery partners. Our longer term goal is to establish academies for young people to learn with more emphasis on apprenticeship experienced based learning. We have many investors poised to add value to our great nation.

No alt text provided for this image

It’s not just political turmoil causing a stir

With very little production capacity in the UK collaboration with overseas OSM’s is helping towards solving our dreaded housing crisis. But only a turnkey solution under one entity taking risk & ensuring total protection is being demanded by clients including developers, investors & some contractors. It seems still far too often never the twain shall meet between highly experienced construction professionals & Off-Site Manufacturers – this has to change, our current antiquated construction industry needs to move to the 21st Century collaborating with overseas OSM’s where practicably possible. Investors are most definitely losing patience wanting faster & higher quality build which is creating positive friction. And whilst the country isn’t really ready for Volumetric let’s face it, Hybrid solutions are being utilised rapidly merging traditional build with various pods & elements partly produced offsite & some assembled on site where possible aiming to avoid standardisation. OSM’s fast losing patience with UK tyre kickers/time-wasters who don’t understand the process is no cheaper but the benefits are developments can be built far quicker so therefore better value and increased IRR, less problems on site, higher quality and not affected by adverse weather conditions.

It’s not rocket science but the biggest problem we endure is the serious lack of knowledge in the main, the fact that the UK doesn’t have appropriate experience still after much bravado in the press where factories are promised but still not yet in production and constrained by lack of scaleability and skill-set. Aside of 20 factories in the UK whose net profit ranges from a huge loss of 2400% to a positive of a mere 13% – collaboration makes so much sense, going it alone is a high risk strategy and cash flow is king not unless our government steps in to support those suffering factories who are likely to go out of business. Winding up orders being considered to many that are simply not paying the bills to suppliers we have experienced of late, debts going back 18 months or more. Of 35 factories we have visited across 6 countries we have 5 preferred key suppliers, all heavily backed financially, oodles of capacity, opportunity to add on more factory space, decades of sheer experience and willing to joint venture with the UK, some taking risk of participating financially which makes sense to developers.

Call me for a turnkey low risk solution, capable of delivery.

A Rumble in the Jungle: a UK Off-Site revolution

 

He who is not courageous enough to take risks will accomplish nothing in life.” Muhammad Ali

At present, the use of MMC in housebuilding is low and the government will need to act quickly if it is to make an impact in meeting housebuilding targets. Supply chain capacity will need to be increased, and greater focus placed on ensuring the workforce has the required skillset for developing technologies. The government should work with Homes England and training centres, such as the Advanced Manufacturing Research Centre, to develop targeted programmes targeted for use in the manufacture of MMC homes, says the committee.

Initial work to develop centres of excellence, bringing together businesses and academia to support innovation, is welcome but could be strengthened by coordinating with the Transforming Construction Programme and Construction Innovation Hub. These networks could form an ideal arena for testing and standardisation of MMC processes and components, as well as ensuring they comply with building regulations. The government will also need to improve data collection and sharing if it is to overcome reluctance to utilise MMC among lenders, insurers and home buyers. To gain the confidence of the industry as a whole, as well as consumers, the committee has said they must establish a database of MMC homes to demonstrate the long-term value and durability of MMC.

The committee backs the creation of an ‘MMC Scheme’, setting out a single set of standards for warranty providers, to provide greater certainty. Expansion of MMC faces many additional challenges including difficulties accessing land to build on, opaque and confusing building regulations and high upfront costs. The government should investigate the specific impact of the current regulatory systems and access to funding on MMC, and consider options for measures designed to overcome existing barriers.

See below our partners project in Slough, 9 apartments over 3 storeys, consisting of 21 modules, GLA 750m2

Chair of the housing, communities and local government committee, Clive Betts, said: “If the government is to have any chance of meeting its target of 300,000 new homes a year it cannot simply rely on traditional methods of construction. They must make a serious effort to support the use of new and emerging technologies that have the potential to have a transformative impact on the speed, cost and quality of home building. This is not simply about shifting production away from the building site and into factories. It is about seizing opportunities that modern technologies allow, whether it be precision manufacturing, use of new materials or digital working. First and foremost they must create the conditions to improve investor and consumer confidence. Reluctance is understandable. The perception is that the building innovations of the sixties created homes that failed to survive half a century, while rows of Victorian terraces are still standing. Proving quality and longevity will be key. That is why we have called on the government to collect and publish the data that prove new building methods work, and also show if they have failed. The government will also need to support the industry to grow the capacity needed for MMC to play a greater role in national housebuilding. They will need to ensure that the right training schemes and apprenticeships are in place so that we have the skilled workforce that can utilise MMC techniques. They must also work with the industry to support the development of robust supply chains and support innovative businesses develop. The housing system is in urgent need of a major boost and if the government is to have any chance of meeting its ambitious target it must grasp every opportunity new technologies allow. But they must act fast and act now.”

The Real European Vote?

There is more than one vote taking place, right now a radical much favoured sway in the UK towards Off-Site Manufacturing (OSM). Considering up to an estimated 340,000 new homes are needed to be built per year homes built by Local Authorities have fallen since the 1970’s when we are at our most needy time to house our population despite Housing Associations building more.

ACE Modular Construction have witnessed the past few months in particular tangible genuine interest in OSM, larger UK contractors wishing to be more competitive in their tenders reducing build time and improving quality. But those that are ‘tyre kicking’ developers & contractors unfortunately won’t be entertained by European or other OSM’s, without serious substance. Successful, proven cash rich & ready for serious financially led expansion overseas factories can afford to be selective who to engage with, carrying out detailed due diligence on each potential property development partner with suitable & sustainable pipeline. The fact is I am afraid to say that UK OSM’s do not have capacity anywhere near for large scale developments yet despite growth and yet lagging behind the rest of the world. Collaboration with worldwide supply chain is the key working with professional UK delivery partners sharing risk & profit.

          “UK contractors & developers are beginning to ‘walk the talk’ when it comes to Off-Site Construction”          

  • Height Limitations:- with limited production capacity worldwide, for the creation of towers, London in particular with little space available, there is only one way to go…..and that is obviously upwards. The hunt is on for worldwide for OSM’s that successfully deliver multiple storeys and above working closely with experienced structural engineers, the additional critical part of the process. The majority of Baltic OSM’s have not built really much over 8-10 storeys but things are changing. In addition to these factories, most, if not all worthy facade companies are booked production capacity-wise for 4-5 years. Facade engineers such as our friends Staticus from Lithuania have made incredible progress the past few years expanding in to the UK, and other countries at a rapid rate.

“property developers will struggle to source capacity if they don’t approach OSM’s with a collaborative approach.”

  • UK Modular Factories are mostly small in comparison to the Baltics’, Poland, Germany, Spain, Turkey, America, China etc. In particular aside of existing successful competent mid-side OSM’s, new factories, thinking perhaps it was easier, are either seriously delayed towards full production, some up to double over budget but ultimately not able to commit to sufficient production capacity to make a serious contribution to the housing crisis. Time is passing fast, competition moving quicker than ever with Scandinavian & American investment amongst others entering the UK market. The key issue is when even built the UK factories (aside of the likes of Tide Construction, Elements Europe & Caledonian) do not have the experience compared to overseas for production roll-out for significant number of homes to be built with sustainable quality. Without suitable relations in place, as yet overseas, some contractors & developers naturally default to traditional build which is deemed less risky and sometimes understandable based on their experience. Those new larger handful of UK OSM’s that are making progress are still realistically 18-36 months away from creating over & above prototypes.
  • The Baltics’ alone have been producing modular homes for many decades to very high standards purposely for ‘high quality demanding’ Scandinavia and now more than ever deciding to consider the UK for export opportunities. Despite less attractive profit margins they are now appreciating sustainable growth makes more sense even taking in to consideration BREXIT. The UK construction sector is driven much by cost but realising fast the speed of build program combined with quality factory built modules is worth exploring further keeping clients & investors happy. Clear instructions now coming from the top so middle management downwards are set to fulfil their duty to act accordingly to adopt modern methods of construction (MMC) and on a major scale.

Guts, Vision and Sheer Momentum for 2019

Knap Hill

“The UK construction industry is one of the last to embrace modernisation, while we are all using smartphones, construction is still pretty much the same as it was during Roman times.” Mark Farmer, Cast Consultancy  

Momentum will clearly continue to grow in 2019 in Off-Site Manufacturing (OSM). With most UK housebuilders delivering at least one development with an element of modular construction. As the annual number of new modular homes is only standing at 15,000 it is difficult to see how we will reach the government’s target of 100,000 by 2020 without significant overseas support chasing the most suitable OSM’s.

Considering a shortfall of 4m homes it is time now surely accelerate not only our build methods technically but to encourage more property development debt providers to enter the market. As far as mortgages, over 25 High Street lenders are participating, coupled with Housing Associations & Local Authorities under increasing pressure to house people.

Modular is not suitable for all development projects but the use of state of the art Hybrid systems combined even with traditional build are proving to be more popular 

Challenges to overcome for overseas OSM’s;

  • Clients fear based on a bad experience or perhaps more like pre-conceived ideas (going back to War Torn Britain in the 1950’s) with existing strong relations in place with suitable supply chain which I consider the real problem here. Taking in to consideration rapid growth the UK’s OSM’s can possibly provide no more than 4% of the UK’s housing requirement. It is a ‘cottage industry’ albeit 4 relatively large (in UK terms) reputable volumetric firms and one large bathroom pod facility with capability for 20,000 units per year. So despite concerns from very few UK clients there is evidently huge potential for overseas OSM’s to prove themselves with expansion on the basis of sheer production capacity & absolutely decades of experience
  • OSM’s lack of investment – albeit high successful in their own territory they are not always in a position to fund cashflow to support projects over a certain financial level. With a weak ‘balance sheet’ in place, lack of experience locally without UK delivery partners it will be challenging. As the old saying goes “Nobody got fired for hiring IBM” so clients take the easy and somewhat sensible option to stick to far more financially robust proven OSM providers or revert back to traditional build
  • Upper hand being taken either by the client or the OSM, either which one considering themselves to be more important than the other, and not collaborating as necessary creating strong long-lasting partnerships – it’s all about collaboration!
  • Development funding issues due the nature of being ‘Off-Site’ until delivered on site Debt lenders slow coming to the table.

Swan Housing invested £100m regenerating Basildon’s former 1960s Craylands Estate, which the provider is delivering in partnership with Basildon Borough Council and the Homes & Communities Agency (HCA). They say their factory will be capable of producing around 300 homes per annum using cross laminated timber (CLT) when at full capacity. Swan has a development pipeline of 3,500 homes.

I’ve produced a series of blogs on OSM on LinkedIn, see one of my last of 2018

The Earth Is Round, Pigs Don’t Smell……And Why The Word’ Prefab’ Is Still A Barrier To Off-Site Construction

The Earth Is Round, Pigs Don’t Smell

We didn’t always know that the earth is round, and pigs didn’t smell. But in the UK, we do know the word ‘Prefab’ has brought instant negativity for decades, reminiscent of the deliverance plan to address the UK’s post-Second World War housing shortage, some made of wood, some made of pre-cast reinforced concrete and poorly built, resembling perhaps your Grandfathers old shed, to last just 10 years in operation. Yes, just 10 years, they were never built to last folks albeit we have some of the greatest engineers that ever existed.

Ladies and Gents, please let me speed up to the 21st Century.

Could I even be bold enough to suggest we drop the description as Prefab in the United Kingdom, and replace with OFF-SITE instead? Where often these modern methods are guaranteed for circa 60 years and built to exceptional high standards. The Baltics, Scandinavia, Japan and the USA have all mastered in differing ways what seems some Brit’s are still struggling to comprehend is a viable option to build on ‘mass scale’. The positives are obvious from quality, speed of build, to prevention of trades tripping up over each other on site and allows consistency in time and cost parameters established at the outset therefore greater control and less maintenance. Investors desire the fact that completion of the project is up to 50% quicker and more control over quality, after all its a factory-controlled environment, the traditionalist ‘Red Brick Brigade’ don’t wish to even think about all the modern methods available throughout the world which clearly work. At our last event, with our good ‘innovation led’ friends Mace Group, we conquered a few myths on Modular Construction joined by our forward thinking British based property developers, contractors, project managers, investors and architects guests. Our next event will focus on which mortgage companies are happy with modern-day Off-Site Construction and indeed the issue over attaining investors to invest in the first place to provide development finance (Equity&Debt). See here a project our UK Delivery Partner created that attracted 6 separate well known mortgage companies for 9 apartments. If the cost of money funding the project is good, combined with investors taking modular seriously, and lenders accepting homes to be mortgageable then we have a winner.

There are many solutions for faster quality build, all of which need to be considered very carefully including Volumetric and Panel Modular.

Residential and Office Tower Blocks in Modular are being built here in the UK up to 29 storeys, and growing, using different Off-Site methods available. One example by the developer Pocket Living click here is a truly ground-breaking project for the UK. Some projects may not suit modular if designed for traditional build already but where there is a will there is a way combined with starting the process far earlier with Modular in mind. We are currently tendering for thousands of Bathroom Pods, the remainder of each project is using other Off-Site Solutions and some traditional build even but purchasing pods to add value to the process. With one less big thing to worry about, the prevention of various trades tripping up over each other on a very busy complex construction site. For full Volumetric modular, where facade solutions go up more or less the same time as the modules this will save months alone when building, all suppliers including MEP, Groundworks etc suitably organised naturally.

And whilst a small handful of UK companies including an Insurance Company promising to “revolutionise housing” by investing in factory-built homes the exact completion time for the majority of these factories are yet to be revealed despite ‘bravado’ in the construction news and at conferences, still not proven nor able to deliver huge numbers of homes – they are well behind schedule that’s for sure and no homes completed as yet the UK is well behind. Modular will not solve the UK housing crisis alone, it needs much more serious investment, help from outside of our quaint well established Island and significant training to correct our dire skills shortage. Most homes are built by the big house builders who have their own preferred way of working with proven sub-contractors for many years which is understandable in a sense but where is the innovation? The solution is not only huge investment in factories and production lines, it’s a change of British mindset totally which requires confidence that future demand will be at least steady, which in the booming-and-busting British housing market is hard to find. Outsourcing outside the UK is evidently a faster robust solution where best quality proven Off-Site has been available for decades. We all welcome credible UK Modular Factories, there is plenty of room and we have already met 2 that are part of our key strategy moving forwards, we just wish there were a lot more significant serious players in the market that have facilities in full production now.

Our rough maths equates it would need 30+ mega factories to hit the governments ridiculous unachievable targets to build 1 million new homes by 2020 to help towards solving our Housing Crisis.

When I quote ‘mega’ I mean not British size factories as they are currently, they are dwarfed by what is available in the Baltics alone, we know at least 10 firms that can produce 80,000 square meters of homes each per annum. What is viable is working with our UK Delivery Partners to work seamlessly providing mass housing solutions working in collaboration, utilising our great British workforce, complimented with a foreign product which adapts to UK construction standards. The majority of enquiries we are currently getting the past 2 months are in India, Uganda, Georgia, Uzbekistan and Sweden, reliant on local partners, building absolute thousands of houses between them utilising our Off-Site Supply Chain predominantly in lightweight steel frame, and including an integrated structural system that is seismic resistant, thermally and acoustically insulated, and is based on a set of structural panels. Each element is made of a 3D structure in high resistance steel, defined by two flat meshes robustly interconnected by multiple perpendicular bars. The insulation plate is in the space between the steel meshes and has the specifications that are suitable for the project needs. This system is put together on site by means of the application of two layers of micro concrete of a pre-determined thickness, either by pneumatic spraying or by pouring it into the formwork.

We encourage our worldwide supply chain to collaborate to provide solutions inc; Shower Enclosures & TraysCustomised Ergonomic FurnitureResidential and Industrial Garage Doors, even ICT Solutions and Smart Water Meters.

We commend, amongst others, our Nordic cousins for expanding our thinking on ways of providing alternative build methods, that so we now have a dedicated section on our website #modular #off-site construction #scandinavia #houses #dwellings #efficiency #investment http://www.lithuaniagb.com/off-site-construction/scandinavian-client-section-off-site-construction/

7 key initial key steps ACE Funding consider introducing Small & Mid-Tier UK Property Developers to our Funders

Mitigating risk when considering introducing a Property Developer to our Funder connections includes;

  1. The Developers we work with are absolute experts at what they do. This may sound obvious but it is concerning the amount of people out there that think they are professional property developers and don’t have the experience to deliver a project for a variety of reasons a. limited experience b. ‘real money’ to contribute (circa 10%+ of the Equity requirement) c. lack of a robust sales strategy (exit). d. an ‘attitude’ that will upset experienced real estate funders – the ability to adapt to different cultures and to stay calm. Think long term and don’t upset people that don’t require upsetting. We know our funders, their likes and dis-likes, but all of us need to work together in a partnership to achieve our mutual goals and work as a team. With a contract in place KPI’s have to be stuck to or else penalties arise but both of course parties have to deliver their end of the bargain. Everyone’s reputation is at stake here.
  1. They know their markets and locations inside out. Again obvious but the Developer must know their area they are developing like the back of their hand and also have necessary contacts in place with planning departments, contractors etc. Live it, breath, eat and love the area they are developing, it’s all about being passionate about what the developer is creating and to be able to sell the dream. Anybody can spot a development site, the real work is securing that site at the right price with sufficient potential, adding value and achieving the best possible outcome for all.
  2. They have an excellent track record of delivery and generating profit for investors and well respected. If not then we don’t stand a chance of getting them funded. They need to be realistic with their Exit/Sale of the asset(s) and not aim to break world record sale prices in that area, that is one sure way to lose a potential funder and what if the market changes/dips? Be prepared to inject your own ‘real money’ sweat equity does not cut it, funders will expect you to feel pain also and it get’s you the Developer a better deal on the profit split arrangement.
  3. They also know the exit (or exits) before they even start. A critical factor but not every developer considers an Exit, they just build and pray the assets will sell – not the way to go! ROI, Delivery, Exit model….hold or sell? ‘Burn rate’ on the capital?
  4. They also take the right steps to minimise planning risk. Risk mitigation is key, the more experience the Developers have with planning departments the better, it is a specialist skill set which can only be learnt after many years experience creating value added when it comes to the final product. Some Developers get it wrong, thinking they are unique in their approach for example ‘spacial planning’, building something which they like and are convinced is the best thing since sliced bread but the general public won’t appreciate, wrong town, wrong area, not fit for purpose and do not take in to consideration who the end buyer will be, are they elderly, young, with children, close to public transport, noise issues and will the property be in keeping with the area and stand out like a sore thumb which they think looks cool but is clearly so wrong? We all know and hear of Developers out there with assets that just won’t sell in what has become a sticky market of late, several price revisions going downwards……OUCH desperate times, therefore credibility lost in the market place is a disaster and word spreads quickly in this day and age of social media etc.
  5. The Developer needs to position him or herself appropriately presentation wise. Just one example is leave the flash car at home when arriving to meet the funder (or park it up the road where it cannot be seen), be low key and ever so humble, monitor your social media promoting your lifestyle if you are aiming to put in as less as possible as a contribution. Again word travels quick and checks can be carried out, promote your success but take it easy don’t flaunt it and by being humble you will probably get a better deal for yourself most likely (at least half of our funders are self made and came from nothing). Funders are most impressed by Developers that plough profits back in to their company’s and indeed get the financial appraisal right from day one not making amends to make the funder happy which are unrealistic to achieve. Make the funder feel special, again think long term with this joint venture and give the funder value, try to embrace their ideas that make sense, work closely, become one and revolutionise your life and your families for years to come. Keep ‘grounded’ always and consider ‘their culture’ and way of working not just your own.
  6. We want to work, as do our funders, with genuine, hardworking, honest, loyal people with standards, morals and ethics. This is a partnership and life is too short as they say so work with people we like is our motto.

As I say just some of the things we consider when working with Developers.

richard@acefunding.org www.acefunding.org