Modular Building Institute

Discussion Forum

The Sky is NOT Falling

Original Comment:
Based on MBI’s most recent analysis for year-end 2020, the modular construction industry continues to gain in market share in North America. In fact, market share has more than doubled over the past five years. We have seen tremendous growth in the housing and hospitality sectors while traditional markets like education and office space continue to remain strong. During this period, we saw many new start-ups and a few companies go under, including such well-funded companies like Katerra.

Construction is Evolving…

Like any evolving industry, the construction sector is likely to continue to see many more successes and failures. I’m reminded of the famous quote by Thomas Edison: “I have not failed. I’ve just found 10,000 ways that won’t work.” Every construction company has its own recipe for success, whether its site-built, panelized, containerized, tiny homes, or full volumetric. Add in variables with labor, location, building codes and regulations, budgets, and customer demands, and you literally have thousands of possible variations of how a project might work.

Here's what we know for sure:

•The number of skilled traditional construction workers is shrinking and will continue to do so over the next five years, and

•The demand for construction services for housing and other infrastructure is high and continues to climb each year we delay investing in it.

If that is ALL we know, we know enough to realize that the supply of traditional labor is not sufficient to meet the demand for construction services. That causes price increases when we already struggle with affordable housing.

We MUST move towards a more industrialized construction process similar to what our peers in other parts of the world have embraced. If we do not, it’s not a win for domestic traditional GCs, but a gain for foreign companies shipping building components into the U.S.

The secret is out, and developers are keenly aware that modular construction has more cost and schedule certainty, is a safer method and generates far less waste. They will seek out these solutions where they exist.

…But Not Overnight

I think the biggest mistake Katerra made was underestimating the resistance to change from the construction industry at large. One hundred years of status quo thinking is hard to overcome in a short amount of time, even with $2 billion in funding. They tried to eat the elephant in one bite! The U.S. construction market is not one homogenous and endless opportunity as it may appear to outside investors. It’s actually 50 — or more accurately 1,000 smaller regional opportunities— each with their own codes, regulations, opportunities, and obstacles.

Why MBI?

One of the biggest benefits of membership in MBI is that we know this landscape well and can help new companies navigate it. The cost of membership—which includes critical industry contacts, resources, and data —is a whole lot less expensive than the cost of hiring a consultant who understands 35 different state program requirements and trying to navigate these waters alone.
Started on June 2, 2021 by Tom Hardiman
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Additional Comments:
Hi Tom, I hear you on the industry resistance - but if katerra was selling direct to end users (which I understood they were, but i could be mistaken) and had a product to sell that met end user / client needs at a price point, quality and build time that the end user / client wanted, what difference does it make if the industry didn't come on board? Maybe I'm over-simplifying:) The way I heard it, they got sucked into their own vision, got over-funded (a bad situation if you can't remain focused - see wework for another example) and went out buying up a lot of extraneous companies instead of just delivering product. Did I hear wrong?
Updated on June 8, 2021 by Dennis McMahon

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