Prefabrication and MMC in Canada

Is this a case of missed opportunity?

 

The Origine green condo project in Québec 

 

Canada is a globally significant producer and exporter of wood products. Its main market is the US (61% of forest product exports), but Japan (9%), and China (18%) are important. In 2022 the sector generated 56,120 jobs, CAN$6.4 billion in GDP, $1.9 billion in provincial government revenue, 26% of provincial manufacturing sales and 24% of B.C.’s total commodity export value. Between 2013 and 2022 the value of Veneer, plywood and engineered wood product manufacturing increased from $1.4 billion to $3.2 billion (to 21% of total forest product sales).

 

Canada has policies at both the national and provincial (state) level that have supported increased use of wood products and Modern Methods of Construction (MMC.) The National Building Code was revised in 2009 to allow light frame construction up to 6 stories, and allowance for mass timber use in 7-12 story buildings was added in the 2020 building code. Many case studies of mass timber buildings are now available.

 

Conventional light-frame wood construction makes up the bulk of construction. Typical light-frame construction has repetitive wood framing to form rafters or trusses using standard dimension lumber. Mass timber products are thick, compressed layers of wood that serve as the load-bearing structure of a building. Because these products are lighter than other construction materials, they are used for prefabricated wood building systems. 

 

Although a major producer of wood products a comprehensive 2021 State of Prefabrication in Canada report found: 

There are three primary forms of wood prefabrication here in Canada – Mass Timber, Panels, and Volumetric Modular construction. Of these methods of prefabrication, mass timber is currently receiving significant attention due to the sustainability benefits it offers and the technical and market development efforts to encourage its use. While there are many different types of mass timber, the focus for this study is on cross-laminated timber (CLT) and Glulam structural systems. From a production capacity and market penetration perspective, mass timber in Canada still has a long way to go to reach the maturity of its European counterparts.

 

The report found 20 mass timber manufacturing facilities in Canada: British Columbia had 8 and 40% of total Canadian production; and Quebec had 5 facilities and 25% of overall production. Only two companies are integrated operations that harvest, mill, and offer full engineering, design, and production of mass timber structures; Kalesnikoff Lumber and Nordic Structures both transitioned to mass timber out of their milling operations. Up to 2021, 550 projects had been completed, almost half were institutional and public projects (232), the others commercial (141) and recreational projects (66). Of these 85% were 1-2 storeys, and 10% 3-6 storeys. Only 23 residential projects had been completed with the majority in southern British Columbia.

 

The report then looked at three types of prefabricated panels:

1. Open panels for standard Light Wood Frame construction with or without sheathing;

2. Closed panels with One Side Closed for standard light wood frame construction, with sheathing, exterior cladding, insulation, windows; and 

3. Both Sides Closed for standard light wood frame construction, with sheathing, exterior cladding, insulation, windows, electrical or conduit, plumbing, heating components and interior boarding. 

 

The open panel sector was found to be low-tech but there were several semi-automated panelized companies employing more digitization and automation using 3D modelling, automated nailing machines and conveyors and framing tables. These are used in residential building with 74% of panelized systems used for multi-family and 23% used for single-family buildings.  The adoption of closed panel systems are ‘still in their infancy’, with only two large companies employing full automation in construction closed panels and most of the companies ‘small and are low-tech operations utilizing framing tables and overhead cranes within warehouses.’ Leveraging their experience and technical expertise several European and Japanese companies have entered the market and become established producers of these panels.

 

On modular building, the report found the residential modular market had varied between 10% and 15% of single-family residential starts in Canada, or 11,000 to 17,000 annual starts, and had approximately 30,000 full time jobs with $6bn in total economic activity (direct and indirect activity). The largest regions for demand are Quebec and the Prairies. There were an estimated 26 modular manufacturers, operating in approximately 50 locations that were typically low-tech with little automation.

 

The commercial industry is divided relocatable buildings and permanent modular construction (PMC) and includes industrial, hospitality, education, healthcare and multi-family buildings. It was estimated that there are 100,000 relocatable structures such as job site office trailers, classroom portables, and remote workforce accommodation in use. 

 

Commercial PMC modular manufacturers in Canada build a variety of building types, mainly low-rise buildings under 6 stories using light wood frame volumetric construction. The main markets were portable classrooms for education and public sector multi-family buildings for affordable housing. The report noted ‘Over the past 20 years there have been many regional modular business failures, that have created pockets of reluctance from stakeholders and owners to try modular again after having seen their projects left unfinished or tied up in bankruptcy proceedings. A BC university recently completed two modular projects by two different manufacturers within a year only to see both companies unable to complete their warranty period due to bankruptcy.’ 

 

The State of Prefabrication in Canada report found a low level of automation and little investment in new technology by industry. The barriers of standardisation, acceptance by clients, procurement methods, access to finance and insurance, and the lack of a skilled workforce were identified. The eight recommendations addressed those barriers. 

 

 

Policy Measures

 

The Government of Canada invested $5 million between 2013 and 2017 to support two demonstration projects under the Tall Wood Building Demonstration Initiative, which resulted in the construction of the world’s then tallest hybrid wood building at 18 storeys, the Brock Commons Tallwood House at the University of British Columbia in Vancouver, and the Origine green condo project in Québec (pictured above). 

 

The Green Construction through Wood (GCWood) program was started in 2017 as a 4-year, $40mn program aimed at increasing the use of wood in construction projects and supporting Canada’s commitment to greenhouse gas emissions reduction targets under the Paris Agreement. As of March 2023, this had funded 4 tall wood building projects, 10 low-rise non-residential building projects, and 2 timber bridge projects. GCWood also facilitated the revisions to the 2020 National Building Code of Canada to allow wood buildings up to 12 storeys. 

 

Also at the federal level, the Canada Mortgage and Housing Corporation (CMHC) announced the Rapid Housing Initiative (RHI) in 2020 which funded affordable housing and required the use of prefabricated systems to complete a funded project within 12 months. The RHI started in 2020 with $1 billion in funding, a second round of funding had another $1.5bn for 2021-22 and the third round in 2022-23 added another $1.5bn, for a program total of $4bn that delivered 15,539 units/beds. 

 

Several provinces have a Wood Charter that promotes the use of wood in construction. Québec mandated for wood use in public buildings in 2013, and updated their Wood Charter in 2017. The share of wood-framed non-residential buildings of 4 stories or less increased from 28% to 34% between 2016 and 2020, and there is now a Policy for the Use of Wood in Construction. Alberta also has a Wood Charter, and New Brunswick a Wood First policy for public buildings. Between 2017 and 2020 Ontario had a $4.8mn demonstration program. The provinces also have started setting up training programs for timber construction with an emphasis on digital skills, Design for Manufacture and Assembly (DfMA) and Building Information Modelling (BIM).

 

British Columbia

 

The province of British Columbia (B.C.) has a large forest products industry worth $15bn in 2022, with the sawmill share well over 50% and a growing share of engineered wood products of around 20.  The 2022 review of the Economic State of the British Columbia Forest Sector is here. As a result of the changes to the building code in 2009 and 2020 building code, over 90% of 1-6 storey new residential construction in B.C. is built in wood, a greater share than in any other jurisdiction in the world. In 2011 North America’s first CLT plant opened in B.C, and around 350 mass timber structures have since been built, more than half of all mass timber buildings in Canada. There is now a local cluster of experienced designers and builders that work in both domestic and export markets for mass timber. 

 

An important policy for MMC in B.C. is the Wood First program, which promotes innovation in manufacturing, building design and construction. The Forestry Innovation Investment (FII) agency provides overall management and administration of the program and the focus areas of research, education, marketing and value-added capacity building. The FII 2023-2026 Strategic Plan is here. 

 

Funding comes from the Ministry of Jobs, Economic Recovery and Innovation, but the activities of the Wood First program are delivered primarily by third-party organizations under a cost-sharing framework with contributions from industry. There is an annual call for proposals reviewed by an Advisory Committee, with a focus on sustainability, advanced wood technologies and building systems, and industrialization of construction through prefabrication using DfMA and BIM. As a result the FII has an extensive library of case studies and technical manuals, the current recipients are listed here. 

 

There are two other programs that supported use of MMC. With the Rapid Response to Homelessnessprogram B.C. invested $291mn between 2016 and 2021 to build over 2,000 modular housing units for people who are homeless or at risk of homelessness. And between 2020 and 2023 B.C.’s Mass Timber Demonstration Program invested almost $11 million to help with costs associated with the design and construction of 20 building projects and 8 research projects that demonstrated emerging or new mass timber building systems and construction processes.

 

Ontario

 

The Ontario government started the Accelerated Build Pilot Program in 2020 to address capacity issues in the province’s health and long-term care (LTC) system. Infrastructure Ontario (IO) collaborated with industry to develop an innovative program for rapid procurement and modular construction. IO’s first accelerated build projects were completed in 2022. The Lakeridge Gardens LTC home was completed in February 2022, after 13 months of construction. In September 2022, the Thunder Bay Correctional Centre and Kenora Jail projects were completed. In May 2023, the Humber Meadows LTC was completed and in July 2023 Wellbrook Place with two LTC homes was completed.

 

There is a short documentary from PCL Construction on the Lakeridge Gardens project and the innovation involved, and Bird Construction has a short video  of the Kenora and Thunder Bay correctional facility modular build projects.

 

 

Conclusion

 

Canada has built some of the tallest mass timber buildings in the world and most residential buildings are wood framed. There are eight producers of CLT and Glulam, however they are mainly restricted to the local market and have not developed an export market in the US, where they compete with American and European producers. In 2020 only two companies were integrated operations that harvest and mill wood, and offer full engineering, design, and production of mass timber structures. The growth in mass timber demand has been largely driven by sustainability initiatives and public policy for carbon reduction.

 

Revisions to the building code since 2009 increased the use of wood framing and mass timber for both residential and non-residential building, with its use now required for many publicly funded projects. There is a significant wood truss industry across the country, and light wood framing is used for most residential construction, but the industry is based on traditional trades and not highly automated, with a few exceptions. 

 

The public sector programs by both national and province governments to use prefabricated buildings for housing and education have been important on the demand side, but much of has been low tech panelized construction or simple standardized modular buildings on the supply side. Several European and Japanese companies have entered the market and become established producers of closed panels, based on their experience and technical expertise. There is a well-established residential modular building industry for both relocatable and permanent buildings, but the cyclical nature of construction has led to the failure of many modular building companies, and this has affected private sector commercial and industrial demand.

 

Canada could be a classic example of aligning industry development with competitive advantage. With the natural endowments of climate and space a large and established forest products industry has developed, which exports timber to the US and Asia, and this could have been used to develop an advanced prefabricated building industry based on wood construction, creating a comparative advantage based on R&D and technical expertise. However, on the evidence available this has so far not happened. There have been demonstration projects and provinces have Wood First policies for public buildings, but prefabrication and MMC is not established as an alternative to traditional construction. 

 

 

Australian Manufacturing of Prefabricated Buildings and Construction Products

 The extent of prefabrication used in Australian construction is unknown and unknowable

 

 

The Australian construction industry is supplied by an extensive manufacturing base that includes a wide and varied range of industries, producing machinery and equipment as well as materials like bricks, glass, concrete, steel and wood. In 2021-22 there were 133,216 people employed in construction related manufacturing in Australia.

 

The Australian Bureau of Statistics also includes prefabricated buildings in manufacturing, however, the data is limited to the relatively small number of firms that classify themselves as prefab manufacturers, and misses offsite work by firms that may be classified as building or trade contractors, architectural or engineering practices, or work done inhouse in other industries like tourism and aged care.  

 

Therefore, the actual extent and depth of prefabrication used in Australian construction is unknown, and with the data available is largely unknowable. With offsite manufacturing in general, and prefabrication in particular, seen as important to addressing the industry challenges of sustainability, productivity and skills, the lack of data on how many and what type of prefabricated buildings and components are produced each year in Australia is a significant gap in knowledge and understanding of the industry.

 

This research starts with the ABS Manufacturing industry data. It then looks at their estimates of the number of dwellings on manufactured home estates and the effects of misclassification on those estimates. The next question addressed is the number and type of firms producing prefabricated buildings. 

 

 

Construction Related Manufacturing

 

Australian Manufacturing is divided by the ABS into 19 subdivisions, with the subdivisions made up of groups of firms classified by similarities in their products or processes into classes. The ABS gives an industry class an ANZSIC four digit number, and that level of detail allows an estimate of the employment and output of construction related manufacturing to be made. The data comes from the ABS annual publication Australian Industry.

 

The largest of the relevant classes are for widely used materials like wood, concrete, steel and glass. Other classes include manufactured products like plaster and ventilation systems. Table 1 shows the industry classes identified as directly contributing to new construction, with the number of people employed in June, and in Table 2 their output as Industry value added (IVA) in current dollars. Figure 1 shows the totals.

 

Figure 1. Total employment and output

 

In 2021-22 construction related manufacturing was 16% of total manufacturing IVA and employment, having increased from 15% in 2014-15.

 

Firms self-select the ANZSIC industry code used to classify them into an industry class. Some building companies like Sekisui Australia, Hickory and Hutchinson have offsite facilities but are not manufacturers. A smaller builder that does some modular or offsite construction might be classed as a building contractor or a construction trade such as Carpentry services. Prefabricated buildings produced inhouse by an organisation in an industry like transport, tourism or retirement villages will not be included in manufacturing. 

 

Therefore, there is some give and take as regards to what is included in and excluded from these industries, an outcome of the ANZSIC classification system. Some building products are not included, like floorboards, carpets and insulation, because they belong to larger product groups and can’t be separated in the data. On the other hand, industries included here like Glass products and Paint and coatings supply a range of other industries besides construction.  

 

The four largest manufacturing industries supplying construction add up to nearly 75,000 people employed producing over $8 billion in added value in 2021-22, in Table 3. 

 

Prefabricated Buildings and Concrete

 

There are two industries producing prefabricated buildings, of wood and metal respectively. These have grown significantly since 2014, although the big jump in IVA in 2022 may be revised in next year’s release. Nearly 10,000 people produce wood and steel prefabricated buildings. The ABS does not have data on what types of buildings are produced (i.e. residential, commercial, institutional etc.). Wooden building prefab is a very small industry, in 2021-22 total income was only $688 million and IVA was $251mn, compared to prefab steel building with income of $3.5 billion and an IVA over $1.1bn. 

 

Concrete product manufacturing employed 7,670 people, a substantial industry that produces pots and bricks, but also prefabricated elements and buildings. The precast concrete industry is highly concentrated, with six major firms (ADBRI, Brickworks, CSR, CTC Precast, James Hardie, Holcim) and a large number of small and medium size firms around the country. 

 

The combined total of offsite construction in 2021-22 was over 17,000 people employed and an IVA of $2.4 billion. 

 

 

The share of wood and steel prefabricated buildings in total construction related manufacturing (in Figure 2) increased by nearly half between 2014-15 and 2021-22. This may be the strongest signal in this data of the uptake of modern methods of construction and increasing use of offsite construction. 

 

Figure 2. Wood and steel building’s share of total construction related manufacturing

 

 

How Many Manufactured Homes?

 

The 2021 ABS Housing Census dwelling location data includes manufactured home estates and long term residents in caravan parks, and there were over 10,000 of these manufactured houses in Australia, and another 2,000 townhouses and apartments (Table 5). Unfortunately, the 2016 Census housing data did not include this category. The ABS had a separate category for Retirement villages in the 2021 Census, with over 200,000 dwellings included. An unknown proportion of those retirement villages are manufactured housing. 

 

The ABS website explains their methods:

Dwelling location data was recorded by ABS Address Canvassing Officers in the lead up to the 2016 Census as a once-off part of establishing the Address Register as a mail-out frame for designated areas. Dwelling location was also verified or collected by ABS Field Officers during the 2016 and 2021 Census collection periods.

 

In rare cases, an establishment may fall into more than one category of dwelling location, such as a retirement village that contains manufactured homes, or a residential park that is made up of a mixture of caravans and manufactured homes. However, a dwelling can only be allocated to a single category and in these cases a determination was made during Census processing of the most appropriate category for the dwellings in question. 

 

And therein lies the problem, manufactured homes that are not on an estate but within a retirement village. Research on ABS data on retirement villages and manufactured housing estates (MHEs) by Lois Towart found that compared to the 2016 Census “the 2021 Census is significantly more accurate in identifying and recording retirement villages. The issue is the numbers of caravan parks and MHEs that are recorded as retirement villages. This overstates both the size of the sector and the population.” 

 

In her study of 112 retirement villages and 101 caravan parks and MHEs in the Central Coast, Newcastle and Hunter regions in NSW, individual properties were reconciled with small area (SA1) ABS Census data for the 2021 Census. “These are retiree destinations with large numbers of retirement villages and MHEs operated as retirement living’ and “examination of classification by the ABS demonstrates that for the 2021 Census when the dwelling location for caravan parks, MHEs and retirement villages is combined, then the total population is relatively accurate. The inaccuracy is the recording of caravan parks and MHEs as retirement villages.” 

 

How large is this problem? The Census data in Towart’s research has the total number of people living in retirement villages in 2011, 2016 and 2021 as 154,579, then 205,709, and in 2021 249,262. That increase of almost 100,000 people implies at least another 50,000 dwellings, and probably more than 60,000 given the age of this population. An unknown number of those new dwellings were prefabricated. 

 

Some retirement village operators offer sites for relocatable homes, but these will not be classified as MHEs. The construction methods some others use will be based on prefabricated pods and modules, probably sourced locally from a small company. Much of this offsite production might be done by firms not classified as manufacturing buildings. 

 

 

How Many Producers of Prefabricated Buildings Are There?

 

The membership directory of prefabAus lists 9 companies as ‘end-to-end modular’ builders, and there are a dozen other member companies that produce prefabricated buildings or modules. Adding results from other web searches gives a list of 39 companies:

Anchor Homes

Archiblox 

Arkit

Ausco Modular Construction 

Black Diamond Modular Buildings

Carbonlite

Cubehaus

Ecoshelta

Ecoliv buildings

Ehabitat

Fairweather Homes 

Fleetwood Australia

Harwyn

Hickory Group

Hutchinson Builders

Hunter Valley Modular Homes

Habitech Systems

Intermode

K.L. Modular Systems 

Landmark Products 

Maap House

Marathon Modular

Mode Homes

Modscape

Parkwood

Prebuilt Commercial

Pretect

PT Blink

Shawood by Sekisui House

Spanbilt Pty Limited

Strine Environments 

Strongbuild Manufacturing

Sumitomo Forestry Australia

Swan Hill Engineering

Uniplan Group

Valley Workshop 

Volo Modular

XLam

Zen Architects

 

In this (undoubtedly) incomplete list there are substantial companies like Ausco, Modscape and Prebuilt, but many are small firms. Several are engineering and architectural practices that would not be classified as manufacturers. Included are large building contractors like Hickory and Hutchinson, developers like Sekisui and Parkwood, and corporates like Strongbuild and Sumitomo. XLam manufactures cross laminated timber, PT Blink has a design for manufacture and assembly (DfMA) platform. There are also firms that specialise in prefab school buildings, like Marathon, Pretect and Harwyn.

 

Overall it looks like a fragmented market with a few major firms and a large number of small producers, specialised by type of material and type of building produced. Because of transport costs and marketing reach, many producers would be expected to be local and focus on a region. 

 

The diversity of firms in this list highlights the difficulty the ABS would face in measuring the prefabricated building industry. As well as manufacturing, other ANZSIC industries they come from are construction, professional services and business services. With the ABS moving away from surveys to digital data, this sort of detailed data spread across a number of industries is hard to collect. Then there is the question of defining what is prefab and modular construction, which would be needed to organise any data collected and estimate how much is being produced. 

 

 

Deloitte 2023 Industry Survey 

 

Another piece of information comes from the Deloitte Access Economics 2023 State of Digital Adoption in Construction Report, which found 34% of the 229 firms in their survey used prefab and modular construction. The survey sample was from Australia (132), Singapore (38 firms) and Japan (59 firms), and the firms were from Building and construction (144), Architecture (86), Engineering (79) and Other (65). 

 

The survey ranked 16 digital technologies with BIM, construction management cloud software and drones used by around 40% of firm the leaders, followed by prefab and modular where, of the 229 firms, 34% are using it already and 28% are planning to in the future. The remaining 38% are not intending to use it. 

 

That means 76 of the 229 firms use prefab, and its possible that many of them are in the Building and construction category, which would mean up to half of the 144 firms in that category are using prefab and modular. An unknown proportion of those firms are Japanese and Singaporean, where the use of prefab and modular has been supported by government policy and is more extensive than in Australia. 

 

The report included a few more data points:

·      ‘Larger businesses in the survey used significantly more technologies on average, with businesses that have more than 500 employees using an average of seven different technologies, compared with four technologies for those with fewer than 500 employees.’  

·      Businesses used five of the 16 technologies on average, and about 10% were using more than ten different technologies.

·      Newer businesses are investing in new technologies, with ‘businesses less than 10 years old investing 80% more than those in operation for 20 years or more.’

 

The survey does not allow much beyond reinforcing the generalisation that large companies, particularly building contractors, are more likely to be using prefab and modular construction. 

 

 

Conclusion

 

Construction related manufacturing is a significant part of Australian manufacturing, and its share of total manufacturing employment and IVA has increased from 15% in 2014-15 to 16% in 2021-22. There are 17 ANZSIC industry classes included in construction related manufacturing, using data from the Australian Bureau of Statistics annual publication Australian Industry.  

 

The two industry classes for prefabricated buildings are relatively small, but have had rapid recent growth. The share of the combined wood and metal prefabricated building classes in total construction related manufacturing increased by nearly half between 2014-15 and 2021-22. However, wooden building prefab is a very small industry, employing 1,253 people in 2021-21, compared to prefab metal building with 8,144 people employed. The ABS does not have data on what types of buildings are produced (i.e. residential, commercial, mining, institutional etc.). 

 

The ABS 2021 Housing Census found 10,000 manufactured houses in Australia, and another 2,000 townhouses and apartments . This does not include the 200,000 dwellings ABS has in a separate category for Retirement villages. An unknown proportion of those retirement villages are manufactured housing. 

 

The ABS data also does not include offsite work done by firms classified as building or trade contractors, architectural or engineering practices, or work done inhouse in industries like transport, tourism and aged care. The problem the ABS would have measuring the prefabricated building industry is that the ANZSIC industries firms involved come from include manufacturing, construction, professional services and business services, and this sort of detailed data spread across different industries is hard to collect.

 

A list of 39 firms producing prefab and modular buildings was compiled from prefabAUS members and web pages. This appears to be a market with few major firms and a large number of small local producers, specialised by type of material and type of building produced. The industries they come from include engineering and architectural practices, building contractors, and corporates, and any modules or buildings these firms produce will not be found in the ABS manufacturing statistics. This is not a criticism of the ABS, it is an outcome of the classification system used internationally for industry data. 

 

The extent and scale of prefabrication used in Australian construction is unknown, and currently is unknowable. Based on available evidence it is mainly used in specific sectors like the mining industry, education, low cost housing, aged care and retirement villages. There is no evidence that it is cost competitive with conventional construction methods for the great majority of projects. This may be because prefab is a developing industry, or because economies of scale are not as great as expected. 

 

With offsite manufacturing in general, and prefabrication in particular, being seen as important to addressing the industry challenges of sustainability, productivity and skills, this lack of data is regrettable, and the lack of data on how many and what type of prefabricated buildings and components are produced each year in Australia is a problem if an objective of industry policy is to increase the use of prefab and modular construction.