Is a Modular “Disruption” on the Horizon?
Fri, February 15, 2019 - 12:00am
“Disruption” is something we’ve seen happen to a lot of industries over the past decade or so. Video rental chains got disrupted by Netflix. Taxi companies got disrupted by Uber and Lyft. Newspapers got disrupted by the internet and blogs (like the one you’re reading right now). What’s the next industry ripe for disruption? How about the typical, site-built building and construction model? Could it already be happening?
Recently, I’ve been keeping my eye on some emerging trends and new players in modular construction. Modular construction—broadly, a construction technique where entire sections of a home or building are made in a factory and then moved to the site and put together—isn’t exactly new. The Modular Building Institute, for instance, was formed in the 1980s. But it could be on the rise.
Construction Dive predicts that modular construction will be one of the big new trends to watch; the market for it is projected to grow from $112 billion today to $157 billion by 2023. Historically, modular construction has been more or less limited to residential and multifamily projects, but that could be changing. Construction Dive notes the modular construction company Prescient: “Continual refinement of its technology allows the company to now erect buildings up to 18 stories.”
New players and new trends are also shaking things up. SoftBank, a Japanese conglomerate and startup investor that has poured millions of dollars into ideas like robotic pizza delivery services, last year led a massive new round of funding for a construction startup called Katerra. Katerra aims to integrate the entire building and construction process—they’ll design and engineer a new structure, source the materials, assemble them modularly in their factories, and install the new building on site.
There are a few reasons why this could be a potentially attractive model. The first that came to my mind is, of course, the labor shortage. Finding skilled tradesmen for traditional construction has been an ongoing challenge. One company bringing it all in-house could alleviate that somewhat. Secondly, assembling modules in a factory means weather-related delays would be less of a concern and could speed up overall construction timelines. Finally, if you’re a developer, dealing with a single supplier for every part of the construction process could be attractive.
My sense is that Katerra will likely become a significant player in the building and construction industry. But will a similar model revolutionize the entire market? Maybe not. It’s a very capital-intensive way to do business, for one thing. So, it’s difficult to imagine numerous other players suddenly moving into building construction with the same business model.
Still, I’ll be keeping my eye on modular construction. If the technology continues to improve, and if more and more landowners continue to become interested in the option, it could become a major trend that window and door professionals need to be a part of.
What do you think? I’d love to hear your thoughts at Eric.Thompson@Quanex.com.