The Commercial Modular Market Remains Strong

In 2005, the commercial modular market experienced remarkable growth, but Hurricane Katrina played a significant role in that development by greatly increasing the need for temporary modular structures. A year later, the commercial modular industry is still strong, but this time the industry's record growth is due to three strong—and getting stronger—market segments: education, general office, and healthcare.

During the past three years, commercial modular manufacturers have seen a growing percentage of their modular production targeting the education market. Relocatable classrooms (and, more recently, modular classrooms) account for almost half (46%) of all commercial modular business, with $1.63 billion in annual sales. What's driving this trend?

• School district class size reduction initiatives
• Growing K-12 student populations
• Increasing costs per square foot of site-built school construction
• Growth of the overall educational construction market

Currently, more than 40 states have class size reduction initiatives in place, but many are struggling to find the additional classroom space that meets their ideal student-to-teacher ratio. Some administrators have needs so immediate that they can't wait out the time necessary to build a new school or expand an existing one. Other school districts don't have the necessary funding for new site-built construction. Add to that the need to keep students in class while additional space is added, and it's clear why education has become such a significant commercial modular market segment.

In years past, school districts relied on relocatable or temporary classroom buildings, but more education projects are now utilizing permanent modular classroom buildings. These buildings are factory-built—many utilize steel or concrete frames, rather than wood—and are delivered to the site and installed on permanent foundations. California, Florida, and Texas are the country's top three markets for relocatable and modular classroom buildings.

Costs are also a big factor in the growing modular school market. Rather than reducing square footage or removing features when faced with budget overruns, many school districts are opting for modular units. While modular is not always the least expensive alternative, many school districts are reporting savings in the 10-15% range versus site-built construction.

Commercial retail space and general office facilities annually comprise more than half a billion dollars ($612 million) worth of new modular construction, accounting for 17% of the market. The reduced time frame is the driving factor for this market because speed-to-occupancy translates into profitability. Most applications for modular construction in this arena include corporate headquarters, administrative offices, and sales centers.

The healthcare industry is another growing modular market, accounting for $180 million in annual sales and claiming 5% of the commercial modular market. An aging population is causing hospitals and outpatient care clinics to expand services, but with space at a premium, many facilities don't have the additional space needed to house those services.

The demographic change is being felt in urban, suburban, and rural areas, with applications for modular buildings often coming from outpatient clinics, physician offices, administrative offices, and rural healthcare clinics. Some modular construction providers are even building entire additions to existing hospitals.