prefabrication & modularization:prefabrication & … building institute annual conference...

Modular Building Institute Annual Conference Las Vegas NVMarch 14, 2011

Prefabrication & Modularization:Prefabrication & Modularization:Impact on Productivity in the Construction Industry

Harvey M. Bernstein, F.ASCE, LEED APyVice President,Industry Insights & Alliances

Agenda

St d B k d

g

Study Background Building Type Preference & Industry Outlook Areas of Prefabrication/ Modularization Use Respondent Profile and Levels of Use Non-User Opinions User Player Insights & Preferencesy g Study Highlights: Productivity and Business Benefits Key Takeaways Key Takeaways

22 McGraw-Hill Construction Confidential. All information presented © McGraw-Hill Construction, 2011. All rights reserved.

Study BackgroundStudy Background


Research OverviewUsers vs. Non-Users

(Total = 809)684

800684

400

600

125200

400

0

Non-User User

Contractors(Total = 518)

Engineers (T t l 190)

Architects (Total = 101)(Total = 518)

16%84%

(Total = 190)

10%90%

(Total = 101)

24%

76%


Users (436)

Non-Users (82)

Users (171)

Non-Users (19)

Users (77)

Non-Users (24)

Industry Trends Building Information Modeling

(BIM): Green Building:

These trends are dramaticallyare dramatically

impacting industry

processes!processes!


Industry Trend Convergencey gImpact on Prefab/Modularization

Green and BIM have a direct impact onindustry productivity & business benefits!


industry productivity & business benefits!

Building Type Preference forBuilding Type Preference for Prefabrication/Modularization & Industry Outlook


Prefabrication / Modularization CurrentlyPrefabrication / Modularization Currently Being Used on Many Types of Projects

Industry Sectors In Which Over One Third of Respondents Used Prefabrication /

M d l i tiModularization

49%Healthcare FacilitiesRespondents reported the least use on these project

42%

42%

Manufacturing Buildings

College Buildings & Dormitories

jtypes:

• Transportation Buildings (14%)

40%

40%

Public Buildings

Offices Low Rise (1-4)• Garages & Service

Stations (14%)• Restaurants, fast

food, convenience

36%

37%

Schools K-12

Commercial Warehousesood, co e e ce

stores (16%)


Broad Range of Sectors Offer gOpportunities for the Future

Top Sectors Ranked # 1 for Use of Prefabrication/Modularization in Future

10%

12%

Commercial Warehouses

Healthcare Facilities

7%

10%

Manufacturing Buildings

Hotels & Motels

6%

7%

Schools K-12

Offices High Rise (5+)

6%

6%

6%

M ltif il

Offices Low Rise (1-4)

Schools K 12


6%Multifamily

Players Preferences of Building T f F t O t itiTypes for Future Opportunities

Architects: Top 3 Future Opportunites

11%Multifamily

Only Category in the top 3 for more than one player: Hotels and MotelsHotels and Motels

11%

11%

Hotels &M l

Schools K-12than one player: Hotels and MotelsHotels and Motels

Engineers: Top 2 Future OpportunitiesContractors: Top 3 Future Opportunities

11%Motels

15%CommercialWarehouses

11%

16%

Hotels & Motels

HealthcareFacilities

13%ManufacturingBuildings

9%

11%

Offices High Rise(5+)

Hotels & Motels

“Other” selected by 17% of “Other” selected by 17% of


Engineers, who cited data centers, Engineers, who cited data centers, industrial facilities, churchesindustrial facilities, churches

U.S. Total Construction Starts for 2011FORECASTHISTORYBillions of Dollars 2007 2008 2009 2010 2011 2012

Total Construction 641.3 555.7 421.7 416.6 438.8 543.6-7% -13% -24% -1% +5% +24%

FORECASTHISTORY

-7% -13% -24% -1% +5% +24%

Single Family Housing 201.2 122.4 94.3 99.9 120.2 184.6-26% -39% -23% +6% +20% +54%

M ltifamil Ho sing 60 6 38 6 17 5 19 9 24 6 35 7Multifamily Housing 60.6 38.6 17.5 19.9 24.6 35.7-13% -36% -55% +14 +24% +45%

Commercial Bldgs. 100.9 81.6 46.8 39.9 45.7 61.6+9% 19% 43% 15% +15% +35%+9% -19% -43% -15% +15% +35%

Institutional Bldgs. 117.7 130.6 111.5 106.9 105.2 118.3+6% +11% -15% -4% -2% +12%

Manufacturing Bldgs 20 8 30 0 9 7 8 5 9 9 11 8Manufacturing Bldgs. 20.8 30.0 9.7 8.5 9.9 11.8+54 +44% -68% -12% +17% +18%

Healthcare 24.4 29.9 20.2 22.8 24.6 28.5+1% +23% 33% +13% +8% +16%+1% +23% -33% +13% +8% +16%

Education 53.2 58.1 48.2 45.7 44.6 50.8+7% +9% -17% -5% -2% +14%

Office 32 7 27 7 20 1 15 6 17 3 23 0


Office 32.7 27.7 20.1 15.6 17.3 23.0 +7% -15% -28% -22% +11% +33%

2015 Offers Significant Opportunity for g pp yGreen Building in New Non-Residential

= NonresidentialMarket

$239= Green Market

$239 billion

$154 billion

$302billion

$182 billion

$3 billion2% of

k t

$54 billion35% of market



2005 2008 2010 20152005 2008 2010 2015

market market


Source: Green Market Size: 2011 Green Outlook Report, McGraw-Hill Construction; base value of construction market from McGraw-Hill Construction Market Forecasting Service, as of September, 2010

Opportunity: Office SectorU.S. Commercial Bldgs. -- Offices

Overall Office Construction plunged downward in 2008-2010 but on upward trend 2011 2012

Green Office Construction remains strong despite downturnbut on upward trend 2011-2012

25

30 Office

Green Share

$27 billion

g p

Office Buildings M illions of Square Feet

15

20

bill

ions

$15 billion

200

250

300

350

0

5

10

$30% of market

$8 billion

$8 billion

50% of market

50

100

150

200

0

2008 2010086 88 90 92 94 96 98 00 02 04 06 08 10 12


Opportunity: Education SectorU.S. Institutional -- Educational Bldgs.

Overall Education Construction continues to lose momentum in 2011 but growth in 2012

Green Education Construction gains market share & opportunity

50

60 EducationGreen Share

$58 billion

$44 billion

2011, but growth in 2012Education Buildings M illions of Square Feet

30

40

$ bi

llion

s

billion

200

250

300

0

10

20

$15% of market

$16 billion$9

billion

36% of market

50

100

150

2008 2010086 88 90 92 94 96 98 00 02 04 06 08 10 12


Opportunity: Healthcare SectorU.S. Institutional -- Healthcare Buildings

Overall Healthcare Construction fell sharply in 2009,

Green Healthcare Construction shows strongest growth

stabilized in 2010

$30billion

between 2008 and 2010Healthcare Buildings M illions of Square Feet

20

25

30 Health CareGreen Share

billion

$22 billion

80

100

120

10

15

$ bi

llion

s

$9 40% of20

40

60

0

5

2008 2010

13% of market

$9 billion$4

billion

40% of market

0

20

86 88 90 92 94 96 98 00 02 04 06 08 10 12


M lti F il H iOpportunity: Other Major Sectors

Multi-Family HousingMillions of Square Feet

1,000.0

HotelM illions of Square Feet

100.0

400.0

600.0

800.0

40 0

60.0

80.0

0.0

200.0

85 87 89 91 93 95 97 99 01 03 05 07 09 110.0

20.0

40.0

85 87 89 91 93 95 97 99 01 03 05 07 09 110.085 87 89 91 93 95 97 99 01 03 05 07 09 11

ManufacturingMillions of Square Feet

WarehouseMillions of Square Feet

200.0

250.0

210 0

280.0

350.0

50.0

100.0

150.0

70.0

140.0

210.0


0.085 87 89 91 93 95 97 99 01 03 05 07 09 11

0.085 87 89 91 93 95 97 99 01 03 05 07 09 11

Areas ofAreas of Prefabrication/Modularization Use


Prefabricated/Modular Building Elements Used by Largest Percentage of Respondents

48%Exterior Walls

pArchitects – 68%

44%

48%

Building

MEP BuildingSystems

Nearly 50% of total

respondentsContractors – 62%

Engineers 71%

34%

44%

RoofConstruction

Superstructure Engineers – 71%

29%

29%

Interior Room

FloorConstruction

9%

29%

Other

Modules


Elements Ranked Highest in gUse by Individual Respondents

27%

MEP Building

BuildingSuperstructure

#1 Architects – 30%

#1 Engineers – 39%

20%

21%

Exterior Walls

MEP BuildingSystems #1 Contractors – 34%

8%

17%

Interior Room

Roof Construction

Prefabrication and modularization

4%

8%

Floor Construction

Modules Prefabrication and modularization is relatively evenly distributed among the top four building

components

4%Other


Job Condition DriversJob conditions are an important driver for

prefabrication and modularization:prefabrication and modularization:

58%Job site accessibility Biggest influence

53%

58%

Number of stories

Job site accessibilityfor contractors –62%

52%Type of buildingexterior

Biggest influence for engineers – 61%

35%Layout of buildinginterior

exterior

Biggest influence for architects - 52% compared to

g

27% for contractors


Respondent Profile and Levels of UseLevels of Use


Usage by Firm SizeCurrent Usage by Firm Size

Usage by Firm Size

76%

87%94%Firm size based on:

– Firm type (A/E vs 76%Firm type (A/E vs. Contractor)

– Firm annual billings (A/E) or annual revenueor annual revenue (Contractor)

Small Medium Large

Contractor Firm Size by Revenue (Total = 501)

126

Small Medium Large

A/E Firms Size by Billings (Total = 220)

48

235

Small: Less than $25M

Medium: $25M to less than $100M

Large: Greater than $100M

102

Small: Less than $500K

Medium: $500K to less than $5M


140


70


Player Usagey g2009 vs. 2013 In two years,

nearly all players Percentage of Respondents Using

Prefabrication/Modularization on Projects

y p ywill be users of

prefab/ modularization on Projects

2009 vs. 2013

98% 99%98%

on some projects!

84%76%

90%98% 99%98%

60%

80%

100%

20%

40%

60%

0%

Contractors Architects Engineers


User 2009 User 2013

Levels of Use Increasing Over Time for C t U

2009: 37% used prefab & 2013: 45% reporting expected

Current Usersp

modular building processes on more than 50% of commercial projects

% p g puse on over 50% of projects—a 22% growth over 4 years

Percentage of Prefabrication Use for Current Users2009 vs. 2013

39%

2009 2013

24%

15%

22%27% 27%

19%

26%

Low (1% to 25% of Medium (26% to 50% of High (51% to 75% of Very High (>75% of


(projects)

(projects)

g (projects)

y g (projects)

Among Contractors UsersMechanical Contractors Fabricators & Design Builders are Leading the Way!Mechanical Contractors, Fabricators & Design Builders are Leading the Way!

39%50%

60%

45%44%50%

60%

50%

60%

24%

31%27%

39%

19%

27%21%

13%10%

20%

30%

40%

3%

21%

30%

9%5%

26%

16%

10%

20%

30%

40%

32%

21%18%

36%32%

16%23%23%

10%

20%

30%

40%

0%

None Low Medium High Very High

Mechanical Contractors

0%

None Low Medium High Very High 0%


Fabricators Design-Builders

60% 55%60%60%

2009 2013

52%

30%

19%20%

34%

30%

40%

50%43%

28%

55%

29%30%

40%

50%

52%

34%

19% 18%21%

28%30%

40%

50%

2%

19%17%

10%

20%16%

0%0%

10%

20%


3%

16%12%10%

5%

0%

10%

20%


19% 18%21%

13% 13%

0%

10%

20%



General Contractors Construction ManagersElectrical Contractors

N U O i iNon-User Opinions


Expected Usage on P f b i ti /M d l ti ti P j t bPrefabrication/Modulatization Projects by Non-Users in 2013

Percentage of Future Prefabrication Use for Current Nonusers(by Industry Player)

87.2% of respondent

83% 84%

Architect Engineer Contractor

Contractors

respondent non-users

expect to use f b i ti /

62%will have higher levels of activity

prefabrication/ modularization

by 2013!

23%

y

8% 8%11%5%

15%


Never Low (1% to 25% ofprojects)

Medium to High (26% to100%)

Current Reasons by Non-Users for N t U i P f b/M d l i ti

A hit t did 't d i f b i t j t

Not Using Prefab/Modularization

34%

46%

Types of projects we do are not applicable for prefab

Architect didn't design prefab into project

34%Not familiar with process of prefab and/or manufacturers

20%

26%

Availability of prefab shop locally

Owner doesn't want prefabricated modular elements

13%

20%

Concern about quality of prefab components/structure

Availability of prefab shop locally

11%Availability of trained workforce to install Prefab


10%Costs too much

Non-User Drivers for Future UseNon-User Drivers for Future Use

66%

77%

S ti

Save money All respondents think that saving time and money is important driver

66%

66%

Owner demand

Save time Owner demand (83%)

and better quality control (75%) is especially important

65%

66%

Competitive advantage in themarketplace

Owner demand especially important to architects

Competitive advantage (76%) is particularly important

60%Better quality control

marketplace particularly important to contractors

50%A & E Firm Demand


Non-User Productivity ExpectationsP j t S h d l & C tProject Schedule & Cost

Project Schedule Project Cost

4%16%5%

27%

68%

80%68%

No impactLow/Medium impactHigh/Very High impact


Non-User Productivity ExpectationsQuality & Reducing Onsite ResourcesQuality & Reducing Onsite Resources

Project Quality Reduced Onsite Resources

2%6%15%

38%

60%

No impact79% Low/Medium impact

High impact


User Player Insights & Preferences:User Player Insights & Preferences:• Owners

C t t• Contractors• Engineers

Architects• Architects


Anecdotal Owner Insightsg Helps fill skilled labor gapsp g p

Less disruption of existing business operations

Significant competitive advantage from project cost savings as small as 2-5%

Cost and Schedule are bigger drivers than ROI

Higher quality building components

Just-in-time delivery of prefabrication components


Users Current Business Drivers

68%70%

92%Improveproductivity

60%85%To be

competitive in52%

70%Generate

our marketplaceContractor

Engineer

Architect

40%43%

Generategreater ROI

Architect

35%51%

31%Owner/Clientdemand


Users Current Reasons for Not Using

14%44%

48%Architect didn't design prefab intoproject

24%33%Types of projects we do are not

applicable for prefab32%

21%

applicable for prefab Contractor

Engineer

Architect

39%35%

21%Owner doesn't want prefabricatedmodular elements

34%28%

22%Availability of prefab shop locally


34%

User Drivers for Future Use

90%83%79% 82%

73%85% 86%

58%70%

50%63% 66%65%

73% 71%

30%

Measurableimprovement in

Cheaper laborcosts



Decreaseconstructionimprovement in

project safetycosts improvement in

project qualityimprovement in

projectschedule

constructioncosts




Model-Driven Prefabrication Current Usage

50%

40% 42%

24%

35%39%40% 42%

13%7% 6%

12%

4%

11%8%

3%8%

3%

None Low (1% to 25% ofprojects)

Medium (26% to50% of projects)

High (51% to 75%of projects)

Very High (>75% ofprojects)

Low(1% to 25% of

projects)

Medium(26% to 50% of

projects)

None High (51% to 75% of

projects)

Very High(> 75% of projects)

Contractor Engineer Architect


Model-Driven Prefabrication Estimated Future Usage in 2013Future Usage in 2013

40%39%

40%

35%

40%

45%

28%

23%

31%

25%

30%

35%

14% 13%14% 13%11%

17%

10%

15%

20%

5% 5% 6%

0%

5%

10%

N L (1% t 25% M di (26% t Hi h (51% t 75% V Hi h (>75%Low MediumNone High Very HighNone Low (1% to 25%of projects)

Medium (26% to50% of projects)

High (51% to 75%of projects)

Very High (>75%of projects)

Low(1% to 25% of projects)

Medium(26% to 50% of projects)

None High (51% to 75% of projects)

Very High(> 75% of projects)


Contractor Engineer Architect

Key Takeaways from PlayersFuture implementation will be driven

based on player perceptions:Owners need to better

understand productivity benefits

based on player perceptions:

understand productivity benefitsArchitects need Owner demandEngineers & Contractors needEngineers & Contractors need

Architects to specifySome specialty contractors need

Prefabrication & Modular Building Future?

Some specialty contractors need to continue to take lead in use on projects:– Mechanical Engineers– Fabricators

D i B ild


– Design-Builders

Study Highlights:Study Highlights:Productivity and Business Benefitsy


Productivity & Business Benefits:yDecreases Project Schedule

66% f U R t th t P j t S h d l i D d66% of Users Report that Project Schedule is Decreased

6%35%

40%

28%

14%20%

30%

66%: Schedule Decreased By

66%7%

10%

0%

10%

Decreased Stayed the Same Increased

1 Week 2 Weeks 3 Weeks 4 Weeks ormore


ProductivityI t P j t S h d l

Increase by 1 week or more

St d th

Impact on Project ScheduleContractorContractor

6%

22%37%

Stayed the same

Decreased by 1 week

Contractor

8%

Decreased by 2 weeks

Decreased by 3 weeks

Engineer

15%12% Decreased by 4 weeks or more

Architect4%

40%

31%

Engineer3%

40%

31%

Architect

8%

40%


7%12%5%10%

9%

Productivity & Business Benefits:Decreases Project Budget

65% of Users Report that Project Budget is Decreased

8%24%

19%20%

30%

27% 17%

5%10%

20%

65%: Budget Decreased By

65% 5%

0%Decreasedby 1 to 5%

Decreasedby 6-10%

Decreasedby 10-20%

Decreasedby more than

20%

Decreased Stayed the same Increased20%


ProductivityProject Budget

Increase by 1% or more

Project Budget

6%19%18%

5%Stayed the same

Decreased by 1 to 5%

Decreased by 6 10%

Contractor

%

Decreased by 6-10%

Decrease 10-20%

Decreased by more than 20%

30%21%

y

Engineer Architect

10%16%

6% 4%9% 5%

Engineer Architect

%12%


39%

15%

15% 55%16%

Productivity & Business Benefits:yLower Purchase/Installation Price for Materials

N l 50% fi d th t f b i t d/ d l t tiNearly 50% users find that prefabricated/modular construction decreases the purchase & installation price for materials

18% 17%18%

20%

47%47%: Purchase/Installation Price Decreased By

12%

10%

35%0%

Lower Purchase/Installation CostAbout the SameGreater Purchase/Installation Cost

Less by 1 to 5% Less by 6-10% Less by 10% ormore


ProductivityP rchase Price Materials/InstallationPurchase Price Materials/Installation

12%Less by 10% or9%

13%

16%

19%Less by 6-10%

Less by 10% ormore

18%

18%

16%

%

17%Less by 1 to 5%

Less by 6 10%

ContractorE i

44%

18%

35%35%

About the same

EngineerArchitect

4%8%

5%

9%Greater by 1 to5%

6%

2%

10%

4%

5%

Greater by more

Greater by 6-10%


2%y

than 10%

Opinion on Green BenefitsAmount of Materials Used on Project

Increase by 1% or moreContractor

Amount of Materials Used on Project

2%

32%22%

7%y

Stayed the same

Decreased by <5%

37%

y

Decreased by 5 to 15%

Decreased by >15%

Engineer

y

Architect

1%

38%14%

9%8%19%

4%

40%

30%


38%30%

Productivity & Business Benefits:ySite Safety

O O Thi d f U R t th t Sit S f t i I dOver One-Third of Users Report that Site Safety is Increased

10%

34%34%

ReducedStayed the same

56%

Improved

56%


ProductivityySite Safety

77%80%

90%Reduced Stayed the same Improved

62%

51%57%60%

70%

51%

32%37%

34%40%

50%

12%

21%

32%

20%

30%

3%6%

12% 10%

0%

10%


Architect Engineer Contractor Total

Productivity & Business Benefits:yGreen Benefits Contribute to Cost Savings Sa gs 77% report that site waste is

reduced 62% report that they have

reduced the materials used

40%35%40%

Reduction of Site Waste Reduction of Material Use

32% 31%30%

35%

21%

30%

13%

10%

20%21%

6%10%

20%

0%Decreased by

<5%Decreased by

5 to 15%Decreased by

>15%

6%

0%Decreased by

<5%Decreased by

5 to 15%Decreased by

>15%


<5% 5 to 15% >15% <5% 5 to 15% >15%

Opinion on Green BenefitsAmount of Construction Site WasteAmount of Construction Site Waste

17%12%13%Decreased

by >15%

26%22%

36%Decreasedby 5 to 15%

25%33%33%Decreased

by <5%ContractorEngineerArchitect

31%32%

16%Stayed thesame

1%2%

0%Increasedby 1% or

More


Study Summary HighlightsPrefabrication/Modularization Is Improving Productivity

% of firms % of firms reporting reporting benefitbenefit

Level of Level of BenefitBenefit

Decreases in Project Schedule: 66%66%

benefitbenefit35% report decreases of 4 35% report decreases of 4 weeks or moreweeks or more

BenefitBenefit

Decreases in Project Cost: 65%65%

Lower Materials Purchase Price: 47% 47%

22% report decreases of 22% report decreases of over 10%over 10%

30% report decreases of 6% 30% report decreases of 6% or moreor more

Improved Site Safety: 34%34%

D d W 77%77%

or moreor more

Site Safety also noted by Site Safety also noted by OwnersOwners

44% report decreases of 5%44% report decreases of 5% Decreased Waste: 77%77%

Decreased Use of Materials 62%62%




Key Takeaways


What We Learned From the DataWhat We Learned From the Data

All Players – Prefabrication/Modularization are:– Improving productivity and competitiveness in market

place and are key business drivers

– Decreasing construction costs and improving project h d l hi h t t d b fitschedule which are top rated benefits

– Reducing site waste and decreasing materials which is a important recogni ed green benefitimportant recognized green benefit


What We Learned From the DataWhat We Learned From the DataContractors:

– Architect needs to spec prefab/modularization to drive usage– Subcontractors, especially Mechanical, Fabricators, & Design-Build

are driving prefab/modularization adoptionare driving prefab/modularization adoption– Model-driven prefab is having an important and growing impact on

contractor projects

Architects:– Owner demand and availability of quality prefab components are key

drivers to usagedrivers to usage– Green benefits of prefab/modularization are particularly important to

architects

Engineers:– Owner demand is key driver


– Architect needs to spec prefab/modularization to drive usage

Market Opportunities Identified from the DataMarket Opportunities Identified from the Data

Healthcare Is the Strongest Market—both in current and future activity– Starts valued at $53.1 billion over next two years

Hotels seen as a growth areaHotels seen as a growth area– Relatively lower starts value

For engineers, warehouses and manufacturing buildings largest use areas– With starts increasing in these sectors, strong

future activity for prefabrication/modularization


Recommendations

Educate owners on the productivity and businessEducate owners on the productivity and business benefits of prefabrication & modularization– Encourage them to demand use on their projects

Develop BIM objects for your products to make it easier for architects to specify in designs– BIM is a key industry trend impacting construction processes

Understand and promote the green benefits of prefabrication & modularizationprefabrication & modularization– Green is a key industry trend impacting construction processes


Thank You!

MHC Reso rce Websites

Thank You!

MHC Resource Websites: construction.comconstruction.com analytics construction comanalytics construction com analytics.construction.comanalytics.construction.com greensource.construction.comgreensource.construction.com construction.com/market_researchconstruction.com/market_research bim.construction.combim.construction.com archrecord.comarchrecord.com enr.comenr.com


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