The future of the prefabricated construction market looks attractive with opportunities in both residential and commercial construction. According to a recent release by Report Buyer, the prefabricated housing market is expected to reach $19.3 billion by 2024 with a CAGR of 4.6% from 2019 to 2024. The major drivers for this market are increasing construction activities, and eco-friendly practices.
“There is a definite cost benefit to building pre-fab or modular structures that can be assembled very quickly,” says real estate developer Howard Rudzki. “Modular buildings offer a range of options that give builders increased flexibility when it comes to costs and aesthetics. Although modular building is not right for every residential or commercial building application, when they can be used, this type of construction can save developers money and time.”
With modular structures, the majority of construction is completed off-site, so it takes very few actual workers to put a building together. In most cases, the materials cost less when erecting prefabricated buildings and significantly less labor is needed. Additionally, in many cases, modular construction can accelerate development timelines by up to 50 percent, because various parts of a project are undertaken simultaneously, such as the site is being prepped for construction, while the actual building and inspections are taking place offsite.
According to Tom Haridman, executive director of the Modular Building Institute which is a non-profit trade association based in Charlottesville, Virginia, “There are about 225 modular manufacturers in North America, including the companies that do single family modular homes. And the sector is still growing.” Hardiman says, adding that about 50 manufacturers act as their own contractors on projects, while the rest provide building modules to contractors.
In the residential market today prefabricated building manufacturers offer a wide range of different models to choose from. If environmental impact is a concern, a large number of prefabricated buildings are designed to be earth-friendly.
As nice as it is to have an extensive selection of options when it comes to design elements of a property’s structures, it is also beneficial to have a selection of many different price-points to choose from. Prefabricated buildings allow for significant versatility during the construction process.
However, commercial development is more challenging. According to Carlos Serra, managing director of JLL’s Project & Development Services, “Modular buildings require standardization in design.
They have to be boiler plate, which limits the level of customization.” Serra cautions “It has to be driven more by repetition than by one-off projects,” he says. “It works best when a developer can say ‘here’s a mock up, now push out hundreds or thousands of these in standard finishes.’ That’s where we will see the savings. But developers may be getting something that is less architecturally or aesthetically pleasing.”
As a result, certain real estate development asset classes may have more opportunities to leverage modular, construction than others. Hotel companies, in particular, have found benefits to working in such ways.
“They like the quality control aspect,” says Bruce Greenfield, a principal at California-based Architects Orange. “Factories know how to build to a hotel brand’s standards, and that saves training a new crew of field people every time.”