From on-site construction and concrete to modular construction and timber

February 8, 2023

The use of new technologies and methods in construction and engineering is to play a critical role in transitioning the industry towards a more resilient, predictable, profitable and innovative. As more flexible and sustainable timber buildings and construction structures prefabricated off-site are quickly starting to gain on popularity among customers, developers, and regulators in many places of the globe, in others their potential remains still untapped or not fully discovered. The latest edition of ULI Poland’s ‘Places + Spaces’ event, which took place in Warsaw at the start of February, addressed the swelling issue of how to build better today and adapt to the needs of forward-thinking clients.

*Misha Nikulin, managing director, Deloitte Consulting, (Virginia, US)*

The future of construction: 2023 industry outlook overview

2023 is set to see lots of uncertainties, market dynamics, but also innovations and new opportunities in the construction and engineering sector worldwide. As presented by Misha Nikulin, managing director, Deloitte Consulting, (Virginia, US), in an introductory session and Deloitte’s 2023 trends and outlook report, main challenges for the sector are likely to include rising inflation and interest rates, ongoing supply chains constraints, project delays, margin pressures, high costs, and labour shortages.

“As the industry becomes more competitive in 2023 it is important to define where companies invest, how they approach project delivery, and how they differentiate themselves in the market. (…) Companies should focus on better control over their leverage and credit, creating buffer through cost savings, paying attention to changing expectations of the workforce, increasing the use of new technologies and emerging methods to improve efficiency and visibility,” he said.

Investing in and adopting new and emerging technologies will accelerate in 2023. The adoption of new technologies, incl. AI and digital delivery, should however focus on practical value: ROI, positive impact on cost, schedule, safety, quality, predictability, change management, productivity and utilization.

“We are seeing an increase in the use of new methods such as prefabrication and modular construction. The next few years will bring more opportunities for companies to advance and enhance their technology options, often with support from local governments and cooperations across sub-sectors,” he added. The headwinds and disruptions of 2023 might push companies towards thinking about new ways of making business and innovative solutions. ESG-driven corporate efforts will bring more sustainability to firms, turning their ESG strategies into more meaningful, tangible actions. As consumers, shareholders and regulators are becoming savvier and more inquisitive about sustainability matters, developers and contractors will continue to remain under pressure to measure and reduce carbon footprint. Digitalization will help businesses deal with growing ESG expectations and also capitalize on new, local and governmental incentives and opportunities that are becoming available.

*Marco Huter, managing director, KLH Massivholz*

How building with prefabricated CLT elements can make a difference

It is increasingly common to go into the construction and expansion of even high-rise buildings with non-traditional construction methods, technologies and materials. Cross laminated timber (CLT), which is lighter to transport, faster to build with, and requires less workforce and restraints on the construction site, is structurally stable enough to perform well in a range of heights, material combinations, geographies and surroundings. Merging cross laminated timber with steel, concrete, and glass can prove to be very effective when applied in the right way. Innovations and progress in CLT and modular, prefabricated technologies come in a time when the world needs to find a way to address the challenge of securing affordable and quickly delivered dwellings for its ever growing population.

This goal could be partly reached through both vertical and horizontal wooden modular extensions to existing, traditional buildings in cities and towns – the so-called urban densification.

“In the long term, cities are to remain the big magnets for population as they will continue to be centres of social and economic lives. There are however some limits to their expansion. Traditional, on-site construction methods and materials come with many constraints in the process of extending existing buildings. Modular construction provides better risk management and control, as everything gets delivered and done faster, and with better flexibility. All that without using up scarce materials and generating that much GHG emissions in the process,” Marco Huter, managing director, KLH Massivholz, (Teufenbach-Katsch, Austria) explained in a presentation.

*Przemysław Borek, President of the Board, Pekabex Bet*

Constructing cities: modern technologies

Building prefabrication is undeniably the technology of the future. And one that could display both fast and lucrative growth levels in the coming years.

“We aim to be amongst Europe’s top 5 prefabrication companies and deliver beautiful, sustainable buildings,” Przemysław Borek, President of the Board, Pekabex Bet (Poznan, Poland), told the conference during a short presentation. The company engages in cleaner production processes than those seen in traditional, on-site construction processes, and aspires to reach the zero waste, green manufacturing path, while delivering its modular products with zero material waste, lower energy and utility consumption, and 3-4 times lower levels of demand for workforce.

(from the left) Szymon Wojciechowski, Architect, Co-owner, President of the Board, APA Wojciechowski; Katarzyna Chwalbińska-Kusek, Head of ESG & Sustainability, Savills; Marco Huter, Managing Director, KLH Massivholz; Przemysław Borek, President of the Board, Pekabex Bet

Future-proof construction and engineering – discussion

Moderated by John Banka, senior director, ARC Capital Markets, the panel discussion session attempted to confront invited seasoned professionals of the construction, engineering, architecture, real estate and consulting sectors with some intriguing hot-button topics, including the budgeting, business and operational realities of the CLT and modular projects, globally rising shipping costs and supply chain issues. Would a designer of the late Zaha Hadid’s grandeur use modular technologies in their design? Would it improve or boost their work and reputation? Are traditional and CLT building projects and materials comparable at all? What are the forecasts for the new markets’ growth and near future in Europe? How much will they rely on new, more favourable political and regulatory will, and how much on their own invention and sustainable business models?

Marco Huter, managing director, KLH Massivholz, pointed out that a healthy, optimal share of cross-laminated timber buildings among all the new buildings would stand at 30% on average in a given market, although achieving such levels would require a substantial enlargement in capacity and timber sourcing in the future as compared to today’s levels. Meanwhile, public buildings and infrastructure account for on average 30% of all TLC projects realized by his company.

“Nowadays, the most developed massive timber construction markets in terms of quantity exist in France, Austria, Germany and Switzerland. France is a place where all the biggest construction companies go to,” he said. While as much as 100% of all timber sourced by KLH gets certified as supplied from sustainable forests, it also generates higher cost, which seems necessary. “We need to count this cost in, because the threat to the next generations is real. We can talk about cost, and differences in percentages, and it is important, but the reason all governments and big construction companies get involved in climate actions is that there is no way around it,” Marco Huter summed up. Transport and shipping’s environmental footprint, which adds up to the overall footprint of CLT project, is already more and more important for and scrutinized by consumers in certain geographies.

“If we are to survive, we need to start applying new technologies and solutions because we simply can’t go on with the current way of doing things,” explained Katarzyna Chwalbińska-Kusek.

*(from the left) Katarzyna Chwalbińska-Kusek, Head of ESG & Sustainability, Savills; Marco Huter, Managing Director, KLH Massivholz; Przemysław Borek, President of the Board, Pekabex Bet*

In the future, Polish-based construction companies on the other hand will likely face higher costs related to labour shortages. “Once the war in Ukraine is over and the country’s recovery draws Ukrainian workers back to their country, companies might encounter expansion difficulties,” explains Przemysław Borek, president of the board, Pekabex Bet . This could force local companies to significantly slow down or re-evaluate their development plans.

Katarzyna Chwalbińska-Kusek, head of ESG & sustainability, Savills addressed the already changed ESG regulatory landscape that impacts the way sustainable building constructions and transactions are being assessed by buying or lending financial institutions, including funds. With a handful of new and obligatory sustainability reporting regulations, CFOs already know that there is a particular financial cost of constructing buildings more sustainably and flexibly, and there is also a cost of not doing it this way, she said. For example, according to the rules of the EU environmental taxonomy, buildings must be assessed and reported on in terms of their “E” performance and impacts but also future adaptability. The latter factor could give an edge to prefabricated structures. “It is worth posing a question on whether we can really afford continuing to raise buildings in traditional ways.” Sustainability is about weighting risks and opportunities. But it is also about counteracting the existential threat of the climate change and biodiversity loss.

Szymon Wojciechowski, architect, co-owner and president of the board at APA Wojciechowski said that two years ago his company tried and designed a small, cross laminated timber office building in Poland, and conducted a comparative pricing analysis against more traditional construction technologies. At limited floorplan, it turned out that a small cross laminated timber project would cost 5-6% more.

“In the future we will learn new ways of designing, we will pick up this new language. We will get used to the new ways of doing things, as to anything else. There are a lot of threats that we are facing, including the climate change and the war in Ukraine, but the lack of innovative designing is certainly not one of them,” he assured.

„Today we talked about use of new technologies and methods in construction. As we have heard investing in new and emerging technologies will accelerate so companies and regulators need to be braver in adopting them. This can help us face the challenges of the future”, added Soren Rodian Olsen, Chair of ULI Poland.

Thank you to all ULI Poland Partners of the Places + Spaces series partners and guests!