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Exploring cross-laminated timber

A risk management perspective

By Justin Anderson | April 25, 2023

Contractors and developers have turned to new materials like cross-laminated timber for their projects but at what risk?
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In today’s construction industry, contractors are routinely looking for ways to enhance their operational efficiency to keep pace with a competitive labor market, building demand, strict project deadlines, and rising material costs.

There have been a myriad of innovations over the last few decades that have enabled the industry to adapt quickly to these ever-changing market factors, such as the advancement in mechanization, robotics, construction modeling, and prefabrication.

Relating to prefabrication, one opportunity for contractors that has been growing in popularity in recent years is the utilization of cross-laminated timber (CLT).

Utilization of CLT can offer a range of benefits:

Efficiency

  • Easier to transport and install on the jobsite.
  • Pre-cut to desired measurements streamlines assembly.
  • Fewer joints are needed for support in buildings compared to other conventional building methods.

Economic

  • Smaller foundations are required to support the building resulting in reduced project costs.
  • Typically requires fewer workers than other conventional building methods.

Environmental

  • Utilization can augment ESG strategy and long- term objectives.
  • Manufacturing CLT is far less carbon-intensive than production of concrete and steel.
  • Reduces heating and cooling costs of a building.
  • The wood used in CLT continues to store carbon after it’s manufactured rather than releasing it to the atmosphere if the tree burns or dies.

Aesthetics

  • Often exposed on interior ceilings and support beams in the building

However, along with the benefits, there are risks associated with utilizing CLT:

Manufacturing capacity

  • There are still relatively few U.S. based CLT manufacturers.
  • A recent bankruptcy of a billion-dollar construction technology startup targeting CLT production, may be concerning for potential investors.
  • Austria is one of the main sources of CLT and was a leader in its development in the 90’s. Overseas
  • distribution has inherent risks and can set project start dates back multiple months in the event of delays.
  • Domestically, a large portion of CLT is supplied from the Pacific Northwest which adds logistical risks to projects in the Eastern U.S.

Novelty of product

  • Considering the immaturity of CLT, manufacturers don’t have the experience to assure long term quality assurance.

Evolving codes and standards

  • State and local building codes are slow to progress. Uncertainty in codes may deter developers and contractors from using CLT.

Despite these risks, many contractors and developers have found the benefits to be too substantial to dismiss. CLT projects often attract positive publicity for stakeholders aiding in the material's increased usage in the U.S.

The insurance market has slowly warmed up to CLT buildings, however many underwriters remain skeptical of the material. There are still few data points and claims references at an underwriters’ disposal to properly assess the exposure and potential costs associated with a loss.

As the product matures, there is a high likelihood that manufacturing will increase, and developers will elect to use the material to cater to the evolving marketplace. The CLT marketplace is projected to grow to $4 billion in the next few years and additional manufacturing facilities are already being built outside the Pacific Northwest.

There are many key considerations that developers and contractors must take into account when deciding whether CLT is the right building material for a project. Request the full report to learn more.

Author


CRIS, Associate Broker - Construction
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