Modularity, Transforming the Delivery of Real Estate

June 5, 2018
Written by: Courtney Ryan, CREW Denver
461 Dean — a 32-story, 363-unit apartment tower in Brooklyn, NY composed of prefabricated, modular parts. Photo by Inhabitat.

Have you been plugged into the transformative changes happening within commercial real estate? If not, you might be shocked to find how fast the modular revolution will be influencing your business.

What could be so big that it is termed a revolution? How about holding your next business meeting in a 3D printed office, or pulling into your apartment garage that was simply a dirt lot 30 days ago? Or, checking into your hotel room that was built more than 500 miles away? What if you could supercharge this dream and make the construction truly sustainable, or reduce the construction traffic in overly congested cities, or simply provide affordable housing to communities? I am not referencing some futuristic science fiction movie, but something that might already exist in your city.

Modular building comes in many forms. You have likely heard about the use of 3D models in projects and how that quickly translates to prefabricating components of the work offsite and installing the finished products on-site. Common examples are in complex and congested overhead work, such as mechanical and electrical racks, being built and inspected in a climate-controlled warehouse and shipped to the project site for simple installation.

In the last few years, modularity has moved beyond this low-hanging fruit to larger endeavors such as Forest City’s 32-story modular development in Brooklyn, N.Y. This apartment building consists of 930 modules that fit together like a puzzle. Roughly 80 percent of the modules were constructed off-site and included full finishes from plumbing and drywall to countertops and appliances.

Are these types of buildings desired by investors? Absolutely! The Brooklyn modular high-rise sold in the first quarter of 2018 at a 4.5 percent cap rate with more than half of the units renting well below market rates.

In 2017, Marriott International announced that it would incorporate prefabricated guestrooms or bathrooms into 50 hotel deals that year, representing over 10 percent of the Select Brand signings for North America. Marriott’s first hotel using this method, the Folsom Fairfield Inn & Suites in Folsom, Calif., opened two months early, enabling the owner to generate revenues sooner than expected. The early opening showcased one of the most significant drivers for going modular—quicker delivery.

Lendlease, the U.S. Army, and InterContinental Hotels Group have teamed up to expand their hotels across military bases utilizing Cross Laminated Timber (CLT), an ultra-sustainable modular structural system. CLT is manufactured 2x6 lumber from trees harvested from sustainably managed forests, keeping the carbon sequestered that the trees collected during their lifetime.

The 92-room Redstone Arsenal Candlewood Suites in Huntsville, Ala., took an 11-person crew just 10 working weeks to erect the building. This equated to a 40 percent reduction in crew size and work hours, and delivery 37 percent faster than conventional framing materials and methods, even in a rainy Alabama winter.

The University of British Columbia in Vancouver Brock Commons student residential tower
University of British Columbia Brock Commons

The University of British Columbia in Vancouver opened the 18-story Brock Commons student residential tower in 2017 using CLT modular construction. The university was able to erect this building in a little under 10 weeks with a nine-person crew, including the exterior siding. Imagine if you could get your high-rise building erected and dried-in in less than three months. In regards to sustainability, by using CLT at Brock Commons rather than other construction materials, the impact was a reduction of 5.4 million lbs. of carbon dioxide, equivalent to taking more than 500 cars off the road for a year.

What lies ahead for modularity? Some firms have big plans to disrupt an industry that has built the same way for well over 200 years. Bringing a perspective from Silicon Valley, Katerra is a three-year-old firm that is a self-described technology company optimizing every aspect of building development, design and construction.

Katerra is focused on reducing by 50 percent the time and cost to construct a building, while also reducing the carbon footprint by 50 percent. Another of the company’s objectives is to deliver a three-story apartment complex 30 days from slab-on-grade placement. Katerra aims to become a fully integrated team—design, engineering, materials, manufacturing, construction, technology, labor, and logistics—with a global supply chain. The company has also spent the last couple of years becoming one of the largest research and development entities in the commercial real estate industry.

If you could reduce your construction timelines up to 50 percent, and create a higher quality and sustainable building that still has engaging architectural features, would you take the leap into the modular revolution?

Courtney RyanCourtney Ryan, Principal and Founder of iola Consulting, Inc., helps the commercial real estate industry build smart through innovation, planning, and optimization. As a full-service owner’s representative firm, iola provides services from front-end strategic planning, due diligence management and team selection, to project, budget and schedule management. Stemming from her passion for building smarter, she also founded the CLT Collaborative, a resource for developers, designers, and contractors to gain knowledge about this disruptive material, with the goal of making it a mainstream sustainable building product. A CREW Denver member, Courtney also frequently speaks on various industry topics and specialties.

Twitter – @CourtneyRyan007
Connect with Courtney on LinkedIn

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