Once experimental, modular construction could lower costs, meet tight schedules and reduce waste. Planned flagship projects—such as the AC Hotel New York NoMad in New York (the world’s tallest at 21 modular floors)—illustrate where owners and builders want the construction industry to go. Not every future building may be modularly built, but many will feature modular or prefabricated construction elements.
In “Modular Construction: From Projects to Products,” a report produced by global consultant McKinsey & Company, researchers estimated modular construction could grow to a $130 billion market by 2030 in the United States and Europe, providing annual cost savings of $22 billion while cutting project times up to 50%. In “2019 Modular Construction Update” produced by Chicago-based Skender Construction and BuiltWorlds, 79% of surveyed BuiltWorlds members anticipated modular building to advance faster over the next five years. Authors concluded, “It has become clear that the industry is ready for modularization.” BuiltWorlds represents 213 companies pursuing innovation in building construction and infrastructure.
Tom Hardiman, executive director of the 35-year-old, Modular Building Institute (MBI), Charlottesville, Va., makes a distinction between modular and prefabrication.
“All modular projects are ‘prefab,’ but not all prefab projects are modular,” he said. “Prefab is a more general, overarching term to include all forms of off-site construction processes.”
Developing electrical components within one’s own shop is an example of prefab. Prefab components in modular construction include mechanicals, precast concrete, walls, finishes and other items.
“When [MBI says] ‘modular,’ we are referring to volumetric six-sided boxes or modules that are constructed at an off-site location, transported to the final building site and assembled or configured on site to make the final completed building,” Hardiman said.
Hardiman said that modular construction represents just over 4% of market share in the United States and continues to grow. He advises to not discount its significance and importance.
“[Modular] represents about 75% of all homes built in Sweden. China has a goal of 30% of all structures to be built this way. Japan is about 15% and Germany about 10%. It is not uncommon for a building component to be 80% completed in the factory with carpentry, electrical, plumbing, drywall and tile work completed.”
Modular construction is not new. What has changed is the broader acceptance and practice. Hardiman said that the modular industry historically was somewhat isolated from the overall construction industry, but lines have blurred.
“There are over 200 modular manufacturers across North America, building everything from single-family homes to temporary buildings to multistory projects like hotels. Within the last five years or so we are seeing many more ‘hybrid’ projects that utilize a mix of site built, modular and other processes. One trend is more traditional general contractors creating their own modular divisions,” he said.
Chicago-based Skender Construction began its modular division this spring. Firm management hopes modular construction will represent 20 to 30% of its business in a few years, adding gross margin to the general contracting firm.
“This [modular] is new way to build,” said Pete Murray, president of manufacturing for Skender. “The paradigm is shifting. [Owner Mark Skender] was frustrated by the waste in traditional construction delivery. After a lot of thought and research, he decided we should enter the modular-construction space. My background is in technology manufacturing, not construction. This skill set helped us develop a manufacturing or factory floor for modular construction. It’s not all we do, but modular makes us a fully fledged construction firm.”
Murray’s firm now looks at options for its clients that could include modular.
Markets for modular
The multifamily market is the fastest growing sector with 9% of all modular industry production in 2018, double from the prior year.
“We do expect [multifamily] to be a huge growth opportunity, not only because of the (design) repeatability, but mainly due to the shorter construction schedules and quicker occupancy,” Hardiman said. “It’s simply too big of an advantage for developers to overlook. It’s the same reason many hotel developers are jumping on board.”
Marriott International, of which AC Hotel New York NoMad will be part, is the largest hotel company in the world; Marriot has committed to modular construction. Hardiman said Marriott intends to build as much as 40% of its hotels this way. In other verticals, the McKinsey report shared that investors from SoftBank, Google parent company Alphabet, and Amazon involved in prefab home developments and modular construction builders. Modular is also being used as a solution for low-income and affordable housing.
The Skender/BuiltWorlds report rated markets best positioned for modular: multifamily (48%), hospitality (21%), single-family residential (12%), and healthcare (10%). Retail and office came in at 2% and “other” at 5%.
Finding your fit
Skender/BuildWorlds sees the benefits of modular as shortened project schedule, improved safety and higher quality of manufactured product. McKinsey also cites better designed energy performance and seismic sustainability. There are reduced costs through less waste, less labor, less design time and on-site equipment.
These pluses are certainly something an owner would love but does it mean contractors end up billing less on a modular project? Murray says “no,” but you must be more than just an installer.
“Every building needs electricity. The modular structure or modules need power not just for lighting but to support necessary mechanical and plumbing systems. You are doing your work differently by incorporating prefab into your shop,” he said.
Jolen Electric, South Chicago Heights, Ill., has been an electrical contractor for Skender for 10 years and has been involved in every Skender modular project to date. Tim Wilocki, Jolen project manager/estimator, was initially skeptical of modular construction. He isn’t now.
“We have been prefabbing electrical for years now. In the case of modular projects, instead of sending our prefab items to the worksite, we take them to Skender and assemble them into a complete modular room that is then shipped to the worksite. Our electricians in turn go to the work site to connect the electric,” Wilocki said.
Wilocki finds this design and assembly approach is changing construction.
“We now assemble module project kits. One kit may include ready-made components, such as pipe and conduit and assemblies; another will contain backs, connectors, rings and other loose parts for some assembly. Everything is labeled along with an image of the room indicating where everything goes, which helps us at Skender. This modular approach is clean, precise and avoids excess materials on job that you might find on a traditional build work site. What is especially efficient is when the module makes it to the worksite. If it’s for an upper floor, you place the room on a skiff and send it up for placement and install.”
Wilocki feels Jolen’s work in prefab helped prepare it for modular construction.
Steven Witz, vice president of Continental Electrical Construction Co. in Oak Brook, Ill., found the same advantage.
“Prefabrication is a friend in construction and ultimately a money saver. More importantly, it engenders safety and allows us to meet customer projects that have tighter and tighter schedules,” he said.
Continental committed to prefab 10 years ago and has doubled the size of its warehouse to 45,000 square feet to accommodate its prefabrication work.
Jim Buhmann, preconstruction manager for Continental, said there are several advantages to manufacturing and assembly within a controlled environment.
“We can do things at the warehouse that would be more difficult at the work site. For instance, at the warehouse, we weld parts in our assembles versus using bolts that we would use at the work site. Prefab gives us a secure build. It’s adding a refined process to building projects.”
Witz said not being beholden to weather is another advantage to doing work inside.
“I do think we will see more fully assembled rooms built in a warehouse or manufacturing space that can be delivered and dropped into a building construction,” he said. “We have collaborated with other subs and mechanical contractors to design modular rooms together. Our prefab shop has really helped tee us up for this work.”
The role of BIM
Building information modeling (BIM) can be an important tool in modular construction, including in room design detailing, layout and fabrication, and parts prefabrication. Ron King is the mechanical estimating segment manager for Trimble MEP.
“In my opinion, contractors may be left behind if they don’t get involved in prefab. GCs are looking for progressive contractors who have solutions to meet shorter schedules yet maintain the quality of the project. Prefab and modularized construction may be a solution,” King said.
Both Jolen and Continental use BIM in their prefabrication of electrical parts and assemblies and to collaborate with project partners.
While there still isn’t a high level of BIM adoption in U.S. modular factories, MBI’s Hardiman feels greater use of BIM can and should exponentially increase productivity.
“You want to make sure what is being designed in the BIM model is buildable,” Witt said. “You need coordination with your engineers and your prefab construction.”
As interest builds, modular construction may be here to stay. Gauging where it makes sense will be important. Prepare to educate your workforce and your customers.