McKinsey & Company, the international corporate consulting firm, has issued a new research study, “Modular construction: From projects to products.” Written by an international team, it discusses a wide range of building sectors, but its main focus is multifamily.
The authors claim that modular construction could claim $45 billion of the total $277 billion new-build multifamily market by 2030 in the U.S. and Europe at moderate penetration and save $6 billion a year in costs.
Assuming the U.S. represents at least half of the market (probably more like 60-70%), those would seem to be very attractive numbers for apartment, student housing, and senior living construction, where modular construction works best.
SEE ALSO: Almost everything you wanted to know about industrial construction
But I have some problems with the McKinsey findings. To start with, I wonder where they got the $277 billion figure for multifamily construction in the U.S. and Europe by 2030. That looks really high to me. It would be a godsend if the U.S. could be producing half of that, say, $130 billion or more of apartments and other forms of multifamily—we sure could use them. But with the U.S. producing at best $60-70 billion in multifamily construction, it’s hard to see a doubling of that rate of construction in the next decade.
The McKinsey numbers may also be weighted toward the rest of the world, less so toward the U.S. One of the charts I found most intriguing (page 22 of the report, if you’re keeping score) had to do with the current offsite share of housing by country, i.e., how much “factory-produced” housing construction is going on in various countries.
The global leader turns out to be the trifecta of Finland-Norway-Sweden, where 45% of housing construction is produced off site, followed by Japan (15%), Germany (10%), China (6%), and Australia and the U.K. (each 5%). The U.S.? Three percent.
It’s not all doom and gloom for the U.S. Modular, prefab, or “industrial construction” is starting to catch on, particularly in student housing and the low- to mid-rise apartment sector. One reason for this is the pervasive adoption of Revit and other 3D modeling tools, which make it relatively easy to transfer data from the designer’s desktop directly to the offsite factory.
Another reason why we’ll see more industrial construction in multifamily is the dire shortage of skilled labor. As the McKinsey experts note, shifting to offsite manufacture is cheaper—and “it may even attract new people into the workforce who do not wish to move from one construction site to another following projects.” Or who’d rather be in a nice cozy factory than freezing their butts on a job site in the middle of a Minnesota winter.
But don’t expect huge savings in initial costs. The most important benefit of offsite construction, when done right, is reliability—the assurance that a wall system or an entire room module can and will be delivered on time and to high level of specification.
Related Stories
Sponsored | MFPRO+ Course | Oct 30, 2023
For the Multifamily Sector, Product Innovations Boost Design and Construction Success
This course covers emerging trends in exterior design and products/systems selection in the low- and mid-rise market-rate and luxury multifamily rental market. Topics include facade design, cladding material trends, fenestration trends/innovations, indoor/outdoor connection, and rooftop spaces.
MFPRO+ Special Reports | Oct 27, 2023
Download the 2023 Multifamily Annual Report
Welcome to Building Design+Construction and Multifamily Pro+’s first Multifamily Annual Report. This 76-page special report is our first-ever “state of the state” update on the $110 billion multifamily housing construction sector.
Mass Timber | Oct 27, 2023
Five winners selected for $2 million Mass Timber Competition
Five winners were selected to share a $2 million prize in the 2023 Mass Timber Competition: Building to Net-Zero Carbon. The competition was co-sponsored by the Softwood Lumber Board and USDA Forest Service (USDA) with the intent “to demonstrate mass timber’s applications in architectural design and highlight its significant role in reducing the carbon footprint of the built environment.”
Sponsored | MFPRO+ Blog | Oct 26, 2023
Unlock New Potential—Can Multifamily Pop-Up Hotel Concepts Transform Lease-Ups?
Dive into the new trend of multifamily pop-up hotels! Learn how they're changing the game in lease-ups, creating vibrant communities, and offering property managers a lucrative new revenue stream. Join the conversation on the future of multifamily living spaces.
Giants 400 | Oct 23, 2023
Top 115 Multifamily Construction Firms for 2023
Clark Group, Suffolk Construction, Summit Contracting Group, Whiting-Turner Contracting, and McShane Companies top the ranking of the nation's largest multifamily housing sector contractors and construction management (CM) firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report. Note: This ranking factors revenue for all multifamily buildings work, including apartments, condominiums, student housing facilities, and senior living facilities.
Giants 400 | Oct 23, 2023
Top 75 Multifamily Engineering Firms for 2023
Kimley-Horn, WSP, Tetra Tech, Olsson, and Langan head the ranking of the nation's largest multifamily housing sector engineering and engineering/architecture (EA) firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report. Note: This ranking factors revenue for all multifamily buildings work, including apartments, condominiums, student housing facilities, and senior living facilities.
Giants 400 | Oct 23, 2023
Top 190 Multifamily Architecture Firms for 2023
Humphreys and Partners, Gensler, Solomon Cordwell Buenz, Niles Bolton Associates, and AO top the ranking of the nation's largest multifamily housing sector architecture and architecture/engineering (AE) firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report. Note: This ranking factors revenue for all multifamily buildings work, including apartments, condominiums, student housing facilities, and senior living facilities.
Senior Living Design | Oct 19, 2023
Senior living construction poised for steady recovery
Senior housing demand, as measured by the change in occupied units, continued to outpace new supply in the third quarter, according to NIC MAP Vision. It was the ninth consecutive quarter of growth with a net absorption gain. On the supply side, construction starts continued to be limited compared with pre-pandemic levels.
MFPRO+ News | Oct 6, 2023
Announcing MultifamilyPro+
BD+C has served the multifamily design and construction sector for more than 60 years, and now we're introducing a central hub within BDCnetwork.com for all things multifamily.
Sponsored | Multifamily Housing | Sep 29, 2023
Win-Win Scenarios for Residents and Property Managers
Discover how proptech is opening open new paths to revenue for owners and property managers, while bringing desirable amenities and conveniences for renters. Check out my thoughts on profitable, resident-centric proptech.