Modular Construction as Industrialization of Construction Industry: "Corporate Self-Help Efforts Must Precede"

Continuous demand creation and overseas market expansion are required for modular construction, which is expected to lead the industrialization of the construction industry. In this process, it has been argued that companies' self-help efforts, such as expanding research and development (R&D) investment to meet fire resistance standards and reviewing costs to ensure profitability, must precede.

On the 2nd, the Korea Research Institute for Construction Industry (KRICI) stated this in the recently published Construction Trend Briefing (No. 913), citing the UK modular construction industry, where bankruptcy cases have occurred due to difficulties in securing adequate profits, as an example.

A view of Yongdeok Gyeonggi Happy Housing in Yongin, the tallest modular housing in Korea (13 floors) constructed by Hyundai Engineering. [Photo provided by Hyundai Engineering]

Modular construction refers to a method where modular units, including major structures and architectural finishes, are first manufactured in a factory and then transported to the site for assembly. Its advantages include rapid construction, minimization of on-site variables, and high quality.

In the UK, modular construction is being promoted under public leadership, but some companies are experiencing financial deterioration due to continuous losses. For example, the UK modular company Legal & General Homes Modular Limited incurred substantial fixed costs for operation and maintenance, while facing ▲difficulty in accurate demand forecasting ▲long-term planning delays ▲impacts of COVID-19, resulting in massive accumulated losses that led to plans for production facility closures and employee layoffs.

KRICI said, "Modular construction requires capital investment for establishing, operating, and maintaining production factories, as well as additional costs for producing more sophisticated products. However, due to low profits and business uncertainties, investment decisions in the industry are not easy."

For reasonable profit generation, factories need to operate close to maximum production capacity, but in the construction industry, accurate demand forecasting is difficult. Therefore, overseas market expansion is inevitable for continuous demand creation. Regarding this, KRICI stated, "It is necessary to have a clear-eyed view of our companies' competitiveness in the global market," adding, "Since large-scale investments and fixed cost expenditures are involved, careful review is required."

They also emphasized that the relaxation of fire resistance standards, considered one of the measures to revitalize modular construction, should be viewed from the perspective of user safety. Under current building laws, buildings over 13 stories must withstand heat for more than three hours in case of fire. Modular housing has not proven such fire resistance performance and has thus been limited to a height of 12 stories.

Recently, however, Hyundai Engineering completed a 13-story Happy Housing project in Yongin, Gyeonggi Province, using the modular method. It is known that fire safety was enhanced by applying an additional layer of fire-resistant gypsum board. GS Construction completed the patent registration for a steel modular 'fire resistance system' in May.

KRICI said, "While we agree on the necessity of regulatory improvements for the introduction of new industries and technologies, it does not seem desirable to relax current standards that can significantly affect user safety," adding, "Self-help efforts at the corporate level should precede, and policy support measures that can induce these efforts are needed."

Meanwhile, the domestic modular construction market size was only 31 billion KRW as of 2021. In response, the Ministry of Land, Infrastructure and Transport launched a policy council last November, jointly participated by industry, academia, research, and government, to foster and develop the modular construction industry.

This content was produced with the assistance of AI translation services.