The modular construction industry in North America is enjoying a surge of popularity, with rising housing starts, a big regulatory victory, and growing public acceptance. “The industry around the world is really taking off. It’s not just in North America; everything is firing on all cylinders,” says Marketing Director of the Modular Building Institute (MBI), John McMullen.
The MBI, headquartered in Charlottesville, Virginia, is an international non-profit group that represents the modular construction industry. Since we last featured the organization, the institute has launched a new fundraising initiative while continuing to lobby politicians, set building standards, and pursue workforce development programs.
Last year, modular buildings accounted for 6.64 percent of new construction starts in North America, up from 6.03 percent in 2022, and way up from 2.14 percent in 2015, according to the institute’s 2024 Permanent Modular Construction Report. Total project value for modular construction came to $14.6 billion in 2023, a huge increase from 2015 when the value was $3.71 billion. Approximately 255 companies are engaged in modular manufacturing in North America, added the report.
In a conventional build, floors, frames, walls, ceilings, and other structural elements are all assembled and erected on-site, and the building gradually takes shape from the ground up. Modular buildings, by contrast, consist of a handful of large, factory-built segments or modules that are transported to the construction site and then fitted together like pieces in a mammoth jigsaw puzzle.
This method means that modular buildings generate less waste during construction, cost less money, and can be erected in a faster, safer fashion than conventionally built structures, say advocates. The modules are made in controlled factory environments, drastically reducing the risk of construction-site accidents.
Modular construction comes in two main varieties: permanent and re-locatable. Permanent modular construction includes hotels, healthcare facilities, quick-serve restaurants, multi-family residences, and other structures that are intended to remain in place. Re-locatable modular construction consists of school portables, temporary housing for disaster victims or workers, and other structures of a more transient nature.
While most MBI member companies work in permanent modular construction, McMullen says that re-locatable buildings “are critical to help our country function. We need re-locatable workforce housing; we need temporary office space; we need disaster relief, and the companies providing those are doing a great job. They’re going to be around, and they’re going to do well forever.”
Multi-family housing is the most popular form of commercial modular construction, accounting for 20 percent of construction in 2023, according to the MBI’s annual report. This is followed by office buildings/government facilities at 18 percent, educational buildings at 15 percent, retail at 11 percent and healthcare at six percent. Permanent modular is also becoming a popular option for quick-serve restaurants like Chick-fil-A, Burger King, and Starbucks, McMullen explains. “The quick-serve industry is coming to realize, ‘Hey, we can get these new stores online in a fraction of the time,’” he shares.
The main materials used in modular construction are wood frames, steel frames, and concrete, adds the report. Wood frames account for half of these builds, followed by 42.9 percent of builds having a steel frame and 7.1 percent having a concrete frame.
In 2023, the MBI launched the Modular Advocacy Program (MAP) to raise funds and public awareness. MAP money will be used to fund advocacy, create new opportunities for business, attract new employees to the sector, and expand outreach to architects, developers, and officials responsible for building codes. As part of its commitment to workforce development, the MBI also hired a new director last year to organize workforce development initiatives.
When we spoke last year, the Institute expressed reservations about a proposed expansion of the Davis-Bacon Act. Under the Act, which was passed by the U.S. Congress during the Great Depression, mechanics and laborers on government-funded public works projects must be paid local prevailing wages. The Act was expanded in the 1940s to include military-related construction projects. In 2022, the U.S. Department of Labor announced a plan to tweak the legislation to include modular construction, a move that would have drastic implications, according to McMullen.
“One of the key benefits of modular construction is that it’s not on-site work; it’s off-site work. This would have really hampered our industry from being competitive on projects that benefit the government,” he notes.
State governments might have responded to any regulatory changes by introducing their own versions of the Davis-Bacon Act. This would have “brought state prevailing wages into factories for even more types of projects. It would have kneecapped our industry to a large degree,” he continues.
Thanks in part to intensive lobbying from the MBI, the Department of Labor eventually decided not to modify the Act with regards to modular construction. The Institute and the companies it represents were greatly relieved.
The MBI has also been focused on educational efforts and international outreach. Years ago, it helped develop a print textbook called The Introduction to Commercial Modular Construction in conjunction with Clemson University of South Carolina. Now, the MBI is in the process of digitizing the textbook with the intent of using it for an online certification course.
North of the border, the MBI has worked with Canada Mortgage and Housing Corporation (CMHC), a Canadian government agency responsible for housing issues, since 2018. The Institute strongly supports the CMHC’s Rapid Housing Initiative, which was established to address housing affordability in Canada. The CMHC in turn has provided extensive funding for new construction, including modular builds.
“In Canada, the Rapid Housing Initiative continues to flourish,” McMullen tells us. “The Canada Mortgage and Housing Corporation pumped billions and billions of dollars into modular construction to solve their affordable housing crisis. We’re thrilled with that. We were instrumental in getting that going.”
Roughly 40 manufacturers are involved in modular construction in Canada, according to MBI estimates, and the Canadian modular market is worth approximately CDN $2.5 billion.
The institute’s European branch, meanwhile, is hosting a World of Modular trade show and conference in Brussels, Belgium in October of this year, a reflection of the growing popularity of modular construction in Europe. “North America is really behind a lot of Europe in terms of acceptance. They’re doing a lot more over there than we are,” McMullen states.
Globally, the MBI has been working with the International Code Council (ICC) to implement construction standards for the modular industry. The ICC is the self-described “leading global source of model codes and standards and building safety solutions,” and recently issued a new standard, ICC/MBI 1210-2023, regarding mechanical, electrical, and plumbing systems in off-site construction. This comes on the heels of two previous standards, ICC/MBI 1200-2021 and ICC/MBI 1205-2021, which concerned off-site construction planning, design, fabrication and assembly, and off-site construction inspection and regulatory compliance, respectively.
“We’re working with states across the U.S. to adopt our industry standards. Virginia and Utah have adopted [our three] standards. We’re very close with other states as well,” says McMullen.
The institute continues to reach out to young people as well, inviting trade school students to attend its 2023 World of Modular event in Las Vegas and 2024 World of Modular show in Orlando, Florida. Students were given the opportunity to tour the exhibition floor, hear presentations by MBI officials and other speakers, and get information about career opportunities in the sector.
At last year’s World of Modular event, the MBI arranged for a video crew to interview industry figures for further insights. Some of these videos have been posted on social media platforms such as LinkedIn.
The MBI also maintains a close relationship with the American Institute of Architecture Students and the University of New Brunswick, which maintains an Off-Site Construction Research Centre. In August of this year, Tom Hardiman, Executive Director of the MBI, judged an MBI-sponsored student design contest at the Centre “and waved the MBI flag,” adds McMullen.
The institute has ties with other post-secondary institutions nationwide, including Marshall University in West Virginia—Hardiman’s alma mater. Marshall University has turned to MBI for guidance on how to expand its modular construction apprenticeship/training program. And given its mission to support workforce development, the institute is happy to oblige.
“We’re working with them on fine-tuning that program, making it available to our members. We’re also working with other colleges and universities around the country to sort of mirror that program,” says McMullen, noting that the Institute will “bring our resources to them.”
If regulatory issues, exemplified by the battle over the Davis-Bacon Act, represent an ongoing challenge, so too does public education. Even as modular grows in popularity, some people are unclear on the concept, a situation the MBI strives to ameliorate.
Still, McMullen is bullish about the future of modular construction, particularly when it comes to permanent builds. “It’s the permanent side where people are discovering the potential for modular. I think it will continue to take off, with multi-family housing probably leading the way for quite some time.”
That said, he offers a positive forecast for the entire industry: “If history is any indication, the market share for modular construction is only going to grow. It has grown every year since we’ve started tracking it,” he says. “The potential for this industry really is unlimited.”
