The construction sector, both globally and in the Czech Republic, has been slow to adopt new methods and techniques. But in order to satisfy demand, ameliorate labour shortages and increase the supply of housing within reasonable timeframes, the industry needs to become more innovative in the way it constructs buildings over the coming decade.
Article published in Development News, 07/2020
Sweden is the global leader of MMC
The annual Savills Impacts research programme, released on 19th May, notes that in many parts of the world, homes are still being built in the same way they were 100 years ago. But change is coming in the shape of Modern Methods of Construction. MMC is a broad term covering a range of alternative offsite manufacturing and onsite techniques that are used to build homes and other structures like build-to-rent, student housing, hostels, classroom blocks, laboratories, and sports halls more quickly and efficiently. Techniques include timber and steel frames, wall panels, volumetric modules manufactured in factories, and lean construction.
The use of MMC varies significantly from country to country. The global leader has historically been Sweden, with up to 45% of new homes built using MMC, while the countries of Central Europe like the Czech Republic and Poland are only now starting to explore the trend, with less than 5% of new homes built using such methods. “The Czech nation is strongly tied to traditional building methods, since it is in our nature to want to have thick masonry or concrete walls to create our own ‘fortress’. As such, it has been hard to get much traction on MMC, as was already evident when wooden buildings first came onto the Czech market and people worried about their durability, useful life span and quality of construction that local contractors can offer,” says Jan Jurčíček, Head of Building and Project Consulting at Savills, the international real estate consultancy.
However, the main drivers of MMC – the cost and availability of labour, supply shortages and regulatory/governmental intervention – are all present here, indicating that these new methods and techniques could be more widely adopted in the future. “MMC offer significant advantages in the quality of construction, sustainability and its speed, and ever stricter legislation on energy efficiency is obviously forcing us to use materials such as wood. After several years the market has got used to this and construction companies are now good at using those materials,” says Jurčíček.
Construction Skill Shortages
In many markets like the Czech Republic, the cost of adopting MMC has been higher than traditional construction, reducing the incentive to change. However, labour shortages have driven up construction costs substantially – Savills estimates they have risen roughly 40% since 2011 in the Czech Republic – making adoption of MMC, which improves productivity and reduces the need for onsite labour, a more attractive option.
The main reason for the surge in construction costs in the Czech Republic is the fast diminishing pool of available workers. About 7,500 construction workers retire from the sector every year, yet most are not being replaced. With so many construction workers from Ukraine and other neighbouring countries returning home during the Covid-19 pandemic, this situation is set to get worse before it gets better. However, some hope that a rise in unemployment from today’s record low levels might tempt more Czechs to seek a career in construction.
This surge in costs is impacting supply, with access to housing in Prague already among the worst in Europe. A recent survey of 40 prominent developers conducted by CEEC Research in cooperation with KPMG, projected that residential demand in Prague is set to rise by 3.4% in 2020 even as the number of new properties increases by only 1.4%, and in 2021 demand is seen rising 3.1% against growth in supply of just 0.8%. Increasing MMC, alongside traditional techniques, is one of the ways that this imbalance between demand and supply can be bridged, with manufacturing being able to take place somewhat in parallel to the long drawn-out planning and permitting processes that the Czech Republic still suffers from.
Stuart Jordan, managing director of Savills comments: “Lead-in time for development is horribly long due to the various layers of bureaucracy that exist in the planning and permitting system. MMC allows the ‘build’ stage to be shortened so that the end phase of physical construction can be executed in a shorter time period. Also, the somewhat uniformity of design is more easily controlled and gives authorities more comfort in how developers will actually execute.”
Building the Future
The need to improve energy efficiency and reduce the environmental impact of housing and housebuilding are further drivers of change. To promote the decarbonising of construction and reduction of the industry’s greenhouse gas emissions, the EU introduced the Energy Performance of Buildings Regulations 2019, which requires all new builds and “major renovations” to be 70% more energy efficient than the performance requirements in 2005.
Compliance with the regulations in the short term will impose an additional cost burden on those seeking to buy houses and renovate, at a time where the housing market is already under significant pressure. Using traditional building techniques means it is difficult to achieve similarly high levels of energy efficiency without extraordinarily high costs, and studies show substantial material wastage. However, under MMC, homes can be built in factory-controlled conditions, which allows much tighter tolerances to be met, improving energy efficiency and generating significantly less wastage.
“The number of residential projects in the Czech Republic using some form of MMC is rising, with the main driver of this development coming from end users not the industry necessarily, ” says Mgr. Peter Višňovský, CEO of the real estate agency LEXXUS.
In the short term, the confluence of labour shortages and the need to increase housing supply will be the main drivers for the increased adoption of MMC in markets like the Czech Republic. However, over the medium to long term, the need and regulatory requirement to tackle construction’s negative environmental impacts will force a much wider adoption of MMC.