Modular Building Institute
Modular Building Institute

McKinsey & Company Issue New Report Aimed at the Modular Construction Industry

Titled “Modular construction: From projects to products,” the report makes the case for long-term and sustainable growth of the industry. From the report:

For decades, construction has lagged behind other sectors in productivity performance. Now there is an opportunity for a step change: shifting many aspects of building activity away from traditional onsite projects to offsite manufacturing-style production. While modular (or prefabricated) construction is not a new concept, it is attracting a fresh wave of interest and investment on the back of changes in the technological and economic environment.

This research quantifies the potential benefits, explores the challenges, and looks at whether, this time, modular construction will have a more widespread and sustainable impact. Among our findings: As one of the largest sectors globally, a profound shift in construction can have major impact.

Recent modular projects have already established a solid track record of accelerating project timelines by 20–50 percent. The approach also has the potential to yield significant cost savings, although that is still more the exception than the norm today.

Our analysis suggests that leading real estate players that are prepared to make the shift and optimize for scale will be able to realize more than 20 percent in construction cost savings, particularly as everyone involved moves up the learning curve.

Under moderate assumptions of penetration, the market value for modular in new real-estate construction alone could reach $130 billion in Europe and the United States by 2030.

Multiple factors determine whether a given market is likely to embrace modular construction. The two biggest determinants are real estate demand and the availability and relative costs of skilled construction labor. In places such as the US West Coast, the southern part of the United Kingdom, Australia’s East Coast, and Germany’s major cities, labor shortages and large-scale unmet demand for housing intersect, making this model particularly relevant.

In many countries, modular construction is still very much an outlier. But there are strong signs of what could be a genuine broad-scale disruption in the making. It is already drawing in new competitors—and it will most likely create new winners and losers across the entire real estate and construction ecosystem.

Read the full report here >>>

This article originally appeared in the Modular Advantage Magazine - Third Quarter 2019 released in August 2019.

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