A Bird's Eye View of the Middle Eastern Modular Construction Market w/ MMY Global [podcast transcript]

John McMullen

Welcome, everyone. My name is John McMullen. I'm the Marketing Director here at MBI. Today I'm talking with Robin Bartram Brown, Managing Director at London-based MMY Global. As well as with Dr. Anas Bataw, Managing Director at the Centre of Excellence and Smart Construction. Robin and Anas are here to talk about the development and construction of modular building mega projects around the world with a focus on the Middle East.

Robin, Anas, thanks for being here. Robin, why don't you kick this off. Tell me about yourself and about MMY.

Robin Bartram Brown

So MMY Global, we're based in the UK, in London, we also have a subsidiary in the US. We advise clients, developers, governments funds on the use of modern methods of construction within their supply chain.

John McMullen

Very good and Anas, introduce yourself, please and tell me about yourself.

Dr. Anas Bataw

Thanks. So, as you mentioned, Director of the Centre of Excellence and Smart Construction. So, within the Center, we work with what we call the triple helix, where government, industry and academia work together for a better construction industry. We obviously focus quite a lot on sustainability, productivity performance and obviously offsite manufacturing and modular construction plays a big role within that.

John McMullen

How did you guys meet and what's the nature of your work together?

Dr. Anas Bataw

So, we originally met in a number of projects that we had engaged together on in Saudi Arabia. Within Saudi Arabia there's a lot of growth when it comes to construction. The need for new methods of construction because of the timeframes that we have, but also the costs and the quality that's required. Therefore, there's a lot of requirements when it comes to offsite manufacturing and therefore modular. This is where Robin and MMY played a big role in some of the work that we're doing. To help us with a number of things mainly to do with procurements of modular construction, suppliers, and also looking at the different methodologies of how to approach modular on these projects.

John McMullen

Gotcha. So, Robin, how would you describe the demand differences between the US, Europe, and Middle East? What industries are prominent?

Robin Bartram Brown

It's a good question. The UK is obviously flying at the moment with modular so there's a lot of buy-to-own high-rise projects that are becoming extremely successful. I'd say that that's where the UK is moving to at the moment. In the States, it's predominantly been hospitality and that's performed very well. I think now the industry is advanced, and it's starting to get to cost parity against traditional construction. I think you're going to see a push towards affordable housing now. In America, low rise, four story, that kind of walk-up affordable housing schemes, 200 units, that seems to be really starting to come to the forefront.

In the Middle East, it's very new. I think predominantly, there certainly won't be any timber, because culturally, timber is just not used in the Middle East. It mainly will be steel for hospitality and concrete is very popular in the Middle East because they're good at using concrete. They've used precast for a lot of years, and they've got an established ecosystem for that type of material. So very different to the UK, very different to the US, quite similar to the Singapore model where they use a lot of volumetric concrete mods.

John McMullen

You preempted my next question. I was going to ask about the differences in systems, but you mentioned the predominant use of concrete in the Middle East. Why is that?

Robin Bartram Brown

So, there's a plentiful supply of dredged material. So base material for concrete. Concrete traditionally required a lower skill base to use successfully. It's used throughout the Middle East, Asia, you know, an awful lot. It's used everywhere, but more so in these countries. In the Middle East and Saudi in particular have become very, very good at using concrete and precast. So, it's like anything, you use what you know and people don't like change. We work for development companies, funds and the government. If the people that we're working with have experience in precast and concrete, then that's naturally what they're going to be led towards because it's what they’re used to. Actually Singapore, have used that very, very successfully on some serious high-rise projects.

John McMullen

Anas, I move to you. Can you speak to the wider Middle East North Africa region? Is demand increasing there? If so, what are some of the factors driving that trend?

Dr. Anas Bataw

Absolutely. So, the demand is definitely increasing. It started off I think, about 10 years ago. This was the move from precast manufacturers. They wanted to move on to modular. A lot of them flew to Singapore to see the developments happening in Singapore. The reason why is because they're very close to what they're doing in terms of concrete rather than steel as Robin mentioned. The drivers mainly, and we've seen this across the giga projects or the mega projects across the past 10 years where we have housing projects, we had major development projects, such as the Expo 2024 for Dubai, as well as the World Cup in Qatar, and the major developments that are happening in Saudi Arabia now with the 2030 vision. There was a time where the word modular or the word preassembly or pre manufacturing was not on the table unless you have a time issue. Not so much in terms of sustainability and waste management to start with.

So, it had a lot to do with time. If you have a time issue, let's bring in this conversation. That's the way it was led. In many cases, it was a lot more costly to bring in modular to start off with, and that was okay. In Expo, we did a lot of off-site manufacturing on the cuff we did a lot as well. In Saudi Arabia, as I mentioned earlier, we started to see it quite a lot, but mainly for the projects that are time driven. Slowly but surely, the other conversations are coming in, which are basically, let's drive mass production, which ultimately will drive the cost down. Let's drive it from a sustainability perspective, just in time deliveries and all these kind of things that will come in as well. We don't see that yet. We have seen it in such as Expo, for example, because sustainability was a big element in the Expo. The fact that things had to be there for a certain time period. So, it had to be reassembled, and etc. That takes a lot of boxes, but as I said, mainly it's to do with time.

Robin Bartram Brown

So, in the UK, very developed modular market. In the US, very developed modular, off-site, volumetric, whatever want to call it market. We've reached now, finally, cost parity. It's taken time, it's taken lots of mistakes, it's taken lots of money and some false starts for some very, very big businesses. We've reached cost parity, the difference with the Middle East is there's not really an established manufacturing base, they're localized. So, you've always got to add shipping and logistics. That always makes the cost more per square foot per square meter.

The difference in the last couple of years is because of the shocks from the pandemic, the pricing, the increases in pricing, the lack of labor, all the good stuff that we talk about in this industry all the time. The lack of GCs, lack of skills, lack of experience because labor rates have gotten so expensive. We've made some advances in automation and we can make the mods a little bit cheaper. It's almost there in Saudi without localization and manufacturing. Once that manufacturing actually starts, then there's that parity. At that point, the conversations become so much easier with developers. Not that you're just going to get it quicker, the quality is going to be better, you've got less people onsite, but it's the same that you'd pay building it traditionally. That's when you start getting the really big wins.

John McMullen

With all the work that's gone into bringing sort of the Middle East up to speed with where the US is where the Europe is, certainly they're leading the way in many respects. I was wondering if you could give maybe some examples of modular construction projects that you guys have worked on in the Middle East and maybe share how they've contributed to the overall development of the region.

Dr. Anas Bataw

So, there's a lot of projects that we see happening. I mentioned the Expo. So, there was a lot of off-site manufacturing within Expo for several reasons. So that definitely did tik a lot of boxes. We saw the birth of a modular company within Dubai or Middle East because of the Expo.

John McMullen

For those who are not familiar with the Expo, what was that event? What was it about?

Dr. Anas Bataw

It's a World Exhibition that happens every four years in a country and Dubai hosted in 2020, or actually 2021, due to the pandemic. When countries had locations or plots to design and build a building for themselves, the ultimate purpose of this is to showcase the country and traditions during the duration of six months within the exhibition. So therefore, there's a lot of countries that wanted to do something that they can reassemble, disassemble and move it after the Expo has finished. That was one element, why modular was used. Steel was one of the major ones and as I mentioned because of that, a lot of contractors locally because they were involved in these projects. Although they were commissioned internationally and they were commissioned by organizations outside of UAE, they saw the deeds or the benefits of modular.

Some of them have heard about it before, some of them haven't. A lot of them have experienced it because there was a requirement by the lot of the clients on Expo. Therefore, they saw the benefits. They saw how easier it is than they expected because a lot of people thought it was complicated. I remember when I was at Expo, a lot of contractors were quite worried with the fact that we requested for modular or off-site manufacturing. That was a lesson learned for everyone. It did have a great impact and not only within Expo, we saw this outside. We saw the birth of many, many off-site manufacturing companies. Mainly concrete to be honest in the region, as Robin mentioned, for the right reasons. This is what people are familiar with, but also we had a few steel manufacturing as well in the region. Not that they all had a very smooth experience to expand and grow, but they definitely had the opportunity to at least initiate within the region.

John McMullen

Well, it sounds like there's a tremendous amount of excitement in the region for modular construction, industrialized construction of all kinds. I was wondering, and we deal a lot with these issues being based in North America, there's a lot of 50 states 50 different state building codes. What's the regulatory landscape in the Middle East, Saudi Arabia in particular. What rules do modular construction companies in Saudi Arabia in the Middle East have to follow?

Dr. Anas Bataw

So, when it comes to modular there isn't. Especially within Saudi Arabia, there isn't anything in terms of building regs that was mentioned specifically anything to do with modular. In fact, in some cases, it could be a little bit against it because of the requirements. Especially the steel manufacturer and manufacturing of steel modules, due to the fire-resistant requirements, due to the soundproofing. So, there are a lot of things that could go against modular. With that said, there is a lot of work that's happening. I know a lot of ex-colleagues that are working towards enhancing the building regulations and building requirements. This is happening from a ministerial level, and also happening from the private sector as well, there's a lot of push towards that. I think it's just a matter of getting things up and running. It's definitely not the issue that we have in the US. We're not going to end up with 50 different regulations.

Robin Bartram Brown

Yeah, and that's the struggle John. In the US, you've said it, it's 50 Different states, 50 different codes, 50 different codes inside those 50 different codes. You go and install a mod in Kentucky and you need to have a plumber in the factory to sign off the plumbing. Then you go and install a mod five miles away in Indiana and you don't need to. Or you might be putting one in New York that has to have some kind of plastic pipe in it. I mean, it's just really challenging in the US. That's something that certainly needs to go over here.

John McMullen

So, one of the things I know the US market is big on, Europe has been for a long time is sustainability. How to build greener, how to build with less waste? What are some of the initiatives that are happening in the Middle East region to promote sustainable construction? How does modular construction contribute to those goals?

Robin Bartram Brown

I'm going to have to give this one to Anas because he's literally the regional expert on sustainability.

Dr. Anas Bataw

Well, when it comes to sustainability, we've had a lot of improvements in the past 10-15 years in the Middle East when it comes to sustainability, especially in the construction industry. Maybe Cop 28 being hosted in UAE this year helps a lot. Maybe the 2030 vision of Saudi Arabia and the green Saudi initiatives helps with that as well. Also, the Qatar building. Green building initiatives in Qatar is what helps with it. So, there are a lot of improvements when it comes to them. There is a lot of push towards sustainability. Are we there yet? I don't believe so.

I think that there's a lot to be done, especially when it comes to construction. But we are ticking all the right boxes at the moment when it comes to waste management, carbon emissions during construction and when it comes to renewable energy, especially when it comes to manufacturing. There's a very huge manufacturing base here in the region. I'm talking about manufacturing in general, obviously, oil and gas being one of them. So, there is a lot of push for the industrial side of things to be a lot more sustainable. That would help modular construction once this picks up. There are a lot of developments when it comes to sustainability, but also there's a lot of room for improvement.

John McMullen

So, Robin, I'll move back to you for a moment. Besides the push for sustainability, we're also seeing a lot of new modular, high-rise buildings. We just had a 44-story in London, I think it was then they followed with a 50, which was amazing. How does high rise change the dynamic for modular buildings?

Robin Bartram Brown

It's a great question. High-rise is great. They're doing some amazing things. The architects at Vision and the crew over in the UK are really doing some incredible stuff with the high-rise that they're building. High-rise is great, but it doesn't particularly rate really to affordable housing. It's going to be more low rise. I think it's great to get some signature projects out there. I don't think it's going to be predominantly high-rise in KSA and in the region. I don't think that's where it's moving towards, but the projects that we're seeing are fantastic. What's different? Well, the connections between the mods and that can be very challenging. It's something that they've made a lot of progress on in the last five years, MEP. You have to be so much more organized with your MEP when you're going up vertically.

You've got a little bit more room for error when you're doing low rise sort of lateral stuff. I don't see high-rise as the solution for KSA. It's certainly the solution for London, New York, Singapore, where developers need to get mass and need to go vertical to get it to pay really. I think that predominantly in KSA, the market is going to be more 18 stories less. What's really interesting with high rise that we've seen in the last couple of years are these new systems now where they're starting to look towards going vertical without concrete stair cores and concrete cores. I think that's really interesting where we can start getting staircases and elevators into the mods. You literally just stack off your podium. I think that's probably where it's going to move towards, but I think we're a few years away from that really starting to develop.

John McMullen

If I understood correctly, you said it was 18 stories and lower is probably the solution for KSA.

Robin Bartram Brown

I think most of the buildings will be sub 20.

John McMullen

Just in general or are you talking about affordable housing in particular?

Robin Bartram Brown

I don't think you'll see modular in affordable housing anytime soon in KSA. I think predominantly the first type of real modular construction will be in the hospitality sector. Then that will, I think then develop out into some of the really large affordable housing projects that are looking to put out within the region.

Dr. Anas Bataw

I was going to say what helps with this really, is that you don't have to build high. A lot of the mandates, a lot of the projects that are happening in the Middle East, especially within Saudi, they build things in 1000s and millions. So, there's 1000s, 10s of 1000s of units being built by different developers so they don't have to build up. They can build across the land that they have. So, they definitely don't have to worry about, and they don't have to complicate things per se. They can just build within the projects that they have. I echo what Robin had mentioned. We don't see this conversation. I think in the past four or five years, maybe one high rise developer was playing with the idea, but they very quickly realized that this is not the option that they should go ahead with. Where a lot of the low rise, medium rise developers are taking this as a very serious option at the moment, especially within hospitality.

Robin Bartram Brown

That doesn't take away the incredible and I'll say it again, that's happening in Singapore. As well as Singapore and the UK are absolutely smashing it with high rise module at the moment. So, it's great for the industry.

John McMullen

You mentioned the scope of the work in KSA in the Middle East, which is just mind boggling in many respects how many buildings are being built, how many buildings are being planned. A question for both of you, where do you see the industry going in the Middle East and KSA in the next 10, 20, 50 years? What can we expect in terms of development? What kind of projects can we look forward to in the region?

Robin Bartram Brown

I'll start and then I'm sure Anas will finish; I think it's exciting. I think it's going to take time; I don't think that you're going to see the take up with modular happen super quickly. I think in the next five years, you'll see a couple of the major players set up factories. To do that, they need offtake agreements and then they need orders. There are some huge projects. The numbers are staggering. I think the pipelines are 200 billion, just for the next four years. I think they have enough general contractors traditionally to build 20-25% of that in country. So, they literally have to look at industrialization to deliver this, but it's going to take time. KSA doesn't move as quickly as things do in the UK or do in the US. It takes time. I see that there will be a lot of modular construction in the future. I think, as I said earlier, to start with predominantly will be the hospitality sector.

Dr. Anas Bataw

This is what we know of now. I mean, there's projects being launched every week in this region. Giga projects, not even small-scale projects. As we know from now, there's this lot of potential, there’s a lot of demand that's coming in. Yes, the supply chain is nowhere near to deliver what's on the table at the moment. Hence why we see there's a lot of discussions and a lot of effort that's been pushed towards many other methods of construction, not just modular. Modular has taken a big lead on this because of the benefits it does bring into the market.

John McMullen

Before I let you guys go, I have one last question for you. If I'm a manufacturer listening to this podcast, and developing or building or getting my product into the Middle East, piques my interest, is there any words of advice, things that a company might need to know before starting any sort of development or building project in the Middle East? Any best practices that you can think of?

Robin Bartram Brown

So, for me, I would advise that you reach out to your local government connections, your trade departments that work with those countries. Most importantly, I would reach out to make local connections with local general contractors or local suppliers or manufacturers because it's really based on relationships out there. It's all about relationships with other businesses locally. Then, explore the options, but certainly if people want introductions into projects, I'm more than happy to connect people. We all want to see it progress out there. So, you can reach out to MMY, and we will hopefully connect you with the right people that you need to speak to if you're a manufacturer that's interested. To be fair, most of them we talk to anyway, but any that haven't happened, feel free to hit our website and reach out.

Dr. Anas Bataw

To add to this, I'd say just do a lot more listening and understand the market before. It does sound very exciting, but there is a lot of things that need to be learned. It's not the same market. There's a lot of things that need to be considered. Not to scare anyone away, but there's a lot of things that need to be considered before you get into the market. A lot of listening, collaboration, get in touch with experts, such as MMY. Make sure that when you do come into the market, that you have the ultimate solution rather than just looking at it from one angle, which is manufacturing. There's a lot of players within the projects that you need to make sure that you have on board, such as the main contractor. Make sure that you have a long-term plan, where ultimately you end up setting up in the country because one of the main requirements for 2030 vision within Saudi Arabia. That's a mandate for a lot of the PIF entities is the localization. So ultimately, you need to look into ways that you can be in the long term or medium term, localized setting up in Saudi Arabia, in order to continue. It's not just a short-term involvement.

Robin Bartram Brown

Just to add and clarify. The PIF, the Public Investment Fund is the sovereign wealth fund of Saudi Arabia. You've got the wealth fund, they then feed down to some development companies they own, and you may know some of these projects. The Line, Neon, all these names that people will have seen in the press, but it's linked in. So, the PIF is a sovereign wealth fund. Then they have some very large development companies that are starting to do these incredible projects throughout the region.

John McMullen

Well, thank you both Robin and Anas. I really appreciate your time today. It's been a pleasure to speak with you. I can't wait to hear more about all the projects that are being developed in the Middle East and again, I just really appreciate your time today.

My name is John McMullen, and this has been another episode of Inside Modular: The Podcast of Commercial Modular Construction. Until next time.