Dive Brief:

• A new report from McKinsey & Co. says that modular building could be the next big shift in construction, driving the industry to start looking at projects as products instead. Modular, the research company said, could give the construction industry the "productivity boost it needs," along with $22 billion in annual savings in the U.S. and Europe combined.
• Advantages to modular construction, McKinsey wrote, are that it can deliver projects 20% to 50% faster than traditional methods; a potential for cost savings of up to 20%, although there is a risk of up to a 10% loss if delivery or material costs become an issue; and a ripe market around the world ready for this kind of disruption. 
• In order to realize all of modular's benefits, the report said, developers and contractors must select the right materials; choose the right design; overcome challenges in design, manufacturing, technology, logistics and assembly; and take advantage of locations where they can achieve scale and repetition. And public owners and regulatory agencies are in a position to push the industry toward modular construction.  ​

Dive Insight:

Also contributing to the decision by owners and developers to pick modular construction is the tight labor market. By taking the building process inside, a steady group of workers become experts in niche aspects of construction like window installation, framing and wiring, which reportedly is easier to achieve consistency in quality.

It is also easier to monitor workers in a factory setting, which has construction take place at a lower level — reducing the risk of falls — without having to worry about the dangers of heavy equipment, vehicles or inclement weather.  

Modular manufacturers are getting a lot of attention lately as demand for their services increases, creating more opportunities in the space. For instance, Skender, which also offers traditional construction services, opened a new modular manufacturing facility in Chicago earlier this month on the heels of an announcement that it would partner with Z Modular to build multifamily housing components using Z Modular’s proprietary VectorBloc system. Skender will build those modules at the Chicago facility. 

And, as McKinsey mentioned in its report, support for modular is coming from at least one public agency — the New York City Department of Preservation and Housing. As part of the department's Housing New York 2.0 initiative, it will use modular construction to help build or preserve 200,000 affordable homes by 2022 and 300,000 homes by 2026.