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KAPITOL has tested volumetric modular construction across about $4 billion worth of project opportunities over the past 12 months, with its feasibility work pointing to programme reductions of between 20% and 35% on projects suited to the method. (main image: KAPITOL is positioning volumetric modular construction around an integrated delivery model linking manufacturing, logistics and onsite construction.)
Speaking at the prefabAUS conference, KAPITOL Head of Modular Andrew Morrison said the work had reinforced a broader conclusion: manufacturing capacity alone will not be enough to scale volumetric construction in Australia.
Instead, he argued that a head contractor needs to take responsibility for the complete delivery system, including design, compliance, manufacturing interfaces, logistics, installation and warranties.
Morrison clarified that his argument for tier-one builders to “own” modular delivery did not mean builders needed to own factories.
He said it was about having one party with the balance sheet, project pipeline and delivery capability to take responsibility from design through to completion.
KAPITOL has been developing that approach as it expands into volumetric modular construction with ICD Property and global manufacturer CIMC Modular Building.
Built Offsite reported in August that the group had opened a Sydney showroom and was targeting build-to-rent, purpose-built student accommodation, hotels and affordable housing.
Morrison’s prefabAUS presentation provided more detail on what KAPITOL has found while testing the model against live development opportunities.
Programme rather than price
Across the projects assessed, Morrison said programme savings had generally fallen between 20% and 35%.
The construction-cost difference was narrower, ranging from broadly cost-neutral to around 10% cheaper, with the upper end requiring a highly optimised project.
He cautioned against assuming faster construction automatically meant a substantially cheaper building, arguing that the larger commercial benefit can come from lower financing exposure and bringing revenue-producing assets into operation earlier.
Morrison said the strongest interest was coming from institutional capital and government in sectors including student accommodation, build-to-rent, hotels and larger residential developments, where certainty around completion dates can be as important as headline construction cost.
KAPITOL is targeting build-to-rent, hotels, social and affordable housing, and purpose-built student accommodation for its volumetric modular delivery model. Credit all images KAPITOL.
43-storey Melbourne test
One of KAPITOL’s clearest tests involved a proposed 43-storey tower in Melbourne.
The contractor ran a conventional tender alongside a separate modular solution developed with its consultant team.
Morrison said the modular proposal produced a seven-month programme saving.
For the student accommodation project, that difference was particularly significant because it shifted completion sufficiently to capture an additional academic intake.
The modular scheme also produced around 10% additional accommodation yield through a more efficient structural arrangement and, according to Morrison, came in approximately 10% below the conventionally priced option.
Despite those results, the modular proposal did not proceed.
Morrison said the external project manager recommended the option, but the combination of a different delivery model, changed funding profile and the absence of an Australian precedent for a 43-storey volumetric modular tower proved too large a step at board level.
The same client has subsequently entered further early contractor involvement processes with KAPITOL involving modular construction.
The example illustrates one of the barriers Morrison sees in the Australian market: a project can produce a convincing feasibility result and still fail to proceed because the commercial and risk structures surrounding modular remain unfamiliar.
Modular becomes a procurement strategy
KAPITOL’s studies suggest manufactured modules can account for roughly half of the overall capital cost of a project.
At that point, Morrison argues, modular can no longer be treated simply as another subcontract package.
Moving that proportion of expenditure offsite changes procurement, design sequencing, transport, logistics, financing and risk allocation.
It also increases the importance of resolving design earlier.
Morrison described early design lock-in as both an advantage and disadvantage of volumetric construction. Once production begins at scale, late changes become difficult, providing certainty for construction teams but reducing the flexibility often retained under conventional delivery.
Interface risk
Morrison also argued that many of the larger risks in modular construction occur not in the factory but at the interfaces between organisations.
He identified transport, tolerances, weather protection, installation and commissioning among the areas where problems can emerge.
That becomes particularly difficult under fragmented procurement, where a developer appoints a modular manufacturer and then attempts to integrate a builder and consultants around that supplier.
KAPITOL’s answer is a contractor-led model in which the head contractor becomes the single point of accountability and carries the project warranties.
Offshore capacity as a transition
The presentation also addressed the role of offshore manufacturing.
Morrison argued that Australia does not currently have enough capacity to respond easily to very large modular orders within short production windows without drawing heavily on existing local suppliers.
Offshore manufacturing could therefore provide transitional capacity while developers, financiers and contractors establish a stronger project pipeline.
His proposed sequence was straightforward: accountability creates confidence, confidence creates pipeline, pipeline supports investment and investment creates local manufacturing capacity.
“Offshore capacity can help us prove that system now,” Morrison said, with a proven pipeline then helping support local investment.
For KAPITOL, the central question is therefore shifting away from whether volumetric construction can work technically.
The larger issue is who takes responsibility for assembling manufacturing, design, finance, logistics and construction into a delivery system that developers and investors are prepared to back.
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