There is nothing outwardly special about the Hammer Band apartment complex in the southern Stockholm (Sweden) suburb of Bandhegan.

Granted, the 36 apartments are modern and bright, with south-facing patios, which allows them to get more sun in Sweden. Residents do enjoy a park and a play area around the complex and access to large green areas. Beyond that, this a standard building.

Equally standard is how it was built offsite. Indeed, Sweden has constructed houses in factories since the 1940s. In detached housing, more than 80 per cent of its dwellings are built this way.

Prefabrication has also caught on in Japan, where around 15 per cent of the nearly one million homes and apartments built during 2016 were made in factories.

Elsewhere, take-up has been slower. In the United Kingdom, a report by Pinsent Masons published last year indicated that around 15,000 dwellings are constructed using prefabrication each year. Given that around 217,350 homes were built in 2016/17, this implies a penetration rate of around seven per cent. In the US, Census Bureau data suggests that offsite construction accounts for only one per cent of single-family houses which are completed for sale (though no doubt many ‘on-site’ builds contain modular components.). In Australia, PrefabAUS puts the portion of homes constructed using offsite manufacturing at around three per cent.

That raises questions about what Australia can learn from countries who are leading the prefabrication charge. Last year, industry group PrefabAUS took 26 delegates on a study trip to that Sweden. In May, a similar delegation will head to the US.

PrefabAUS chief executive officer Warren McGregor says the most important thing is to reflect upon what makes sense in an Australian context. In Sweden, he said offsite manufacturing driven by harsh climate conditions and associated limitations on time spent onsite (for several months of the year, on-site work is not possible). Sweden also has a timber-based mindset (ideal for prefab). Moreover, with prefab being entrenched, he says the technology and skill sets are advanced and the market understands what it expects and how this will be delivered.

By contrast, McGregor says drivers in the US revolved more around capital raising. He points to the example of construction services firm and materials supplier Katerra, whose chair and co-founder Michael Marks recently raised $865 million with a vision to reshape the building sector in that country. This, McGregor says, was a classic American example of a high-profile individual raising a lot of money and making things happen.

Australia, McGregor says, has neither the weather constraints of Sweden nor the capex drivers of the US. Accordingly, drivers of offsite manufacturing here will differ from those in these countries.

A more applicable lesson, he said, could be derived from the United Kingdom, where the government is looking to create a pipeline of work for offsite manufacturers by mandating prefabrication as a portion of procurement on public sector projects. Australia, he said, could look at something similar.

Indeed, McGregor says the heart of the challenge in Australia revolves around volume and the need to develop a robust supply chain.

Therein lies a catch-22. On one hand, suppliers and manufacturers need confidence about order volumes to justify investment in plant and equipment. Builders and designers, however, are unlikely to change practices to support prefabrication unless they can see a sufficient depth of viable and reliable suppliers.

Underlying this, McGregor says models associated with prefabrication differ from those in traditional construction. Under on-site builds, contractors are able to scale operations (and thus costs) up or down as needed by engaging more or fewer subcontractors. Offsite manufacturers, however, have ongoing overhead costs and need consistent volumes to cover these.

In addition, McGregor says the building sector is generally resistant to change – a phenomenon he attributes in part to tight margins and associated constraints on experimentation.

As for how Australia approaches prefab, McGregor says decisions need to be made in a local context.

“The analogy that makes sense to me is to look at a merry-go round,” he said. “You might be standing on the outside and saying, ‘I want to be up on that big white horse’. But the guys already on there riding the horse (Sweden) have been on it for 50 years. They don’t remember how they got on.

“This thing is going past us. We’ve got to decide from an Australian perspective where we get on, what we buy, do just start doing it in a factory. How much do we invest? Do we do three steps? Do we do one step? Do we do medium size? Do we do high-volume?

“They are all the questions that we need to look at here. We need to answer them in the context of ‘what are the drivers here’?”

Construction industry advisor David Chandler offers a different perspective, saying the offsite sector has yet to demonstrate any capacity to drive major inroads into reducing building costs.

According to Chandler, the prefabrication sector in Australia focused too heavily upon individual pieces of the construction puzzle rather than holistic changes in the way building is delivered. He says we need to learn from Europe and move away from a ‘widget’ mentality toward a more holistic ‘enterprise’ perspective. Modern construction, he says, must extend beyond merely supplying old and dated business models with new toys.

“The Australian and NZ Prefab Construction narrative is about the pieces and parts of construction, not the whole of a project,” he said.

“We have a lot of noise from component providers who see a temporary or imagined niche in off-site that has little evidence by way of a business case. These bits claim to be faster, or better quality, et cetera, but they make no real difference to turning the industry’s chronic underperformance around. Clients will not be the guinea pigs for untested claims about the parts until they show up as evidence-based improvements to the whole.”

One question surrounding prefabrication is the degree to which (if at all) it delivers savings in costs.

For several reasons, McGregor says it is difficult to say.

First, prefabrication is an emerging phenomenon and we have little in the way of current data which is reliable and comparable. For one thing, offsite fabrication can be performed in several ways – each of which differ from a cost perspective. These can extend from having ordinary tradespeople simply bringing what they are doing onsite now into a controlled factory environment through to fully-blown automation and 3D printing. Genuinely comparative data between high and low prefabrication countries, as well, is scarce.

Second, straightforward ‘build’ cost comparisons are misleading as these fail to account for time benefits associated with getting new stock to market sooner through faster construction. When building a hotel, for example, the case for prefab may not be compelling if you look only at build costs. Rather, the real benefit might instead manifest itself through shorter construction times which enable doors to be opened and bookings to be received earlier than would otherwise be the case.

Finally, the true extent of any cost reductions associated with prefabrication can be realised only when the sector is generating volume and scale. Until this happens, reliable estimates of potential reductions will be hard to come by.

Despite the challenges, McGregor is upbeat. Across the US and UK, he says, momentum is growing as supportive technologies come together and skill sets needed to make it happen become more widespread.

Given that we don’t make cars in driveways or mobile phones in offices, he says, it is only sensible that we would make building systems and components in factories rather than onsite.

“We are not sure how its going to happen or how quick the take up is going to be,” he said, referring to offsite manufacturing. “But it is hard to argue that we are not going to go down that path.”