In California alone, about 180,000 housing units are needed annually to keep pace with population needs, yet only about 80,000 housing units come online. Each year, California falls another 100,000 housing units behind.
In a recent New York Times article, it was reported that the federal government now classifies a family of four earning up to $117,400 as low-income around San Francisco’s Bay Area.
The Housing Crisis Solution Coalition (HCSC) believes the nation has reached a crisis point. HCSC focuses on policies and legislation aimed at bringing a new perspective to the housing policy debate. “For the two decades between 1960 and 1980, 10 million apartments were built in the United States. Volume supply met demand at rental rates affordable to most American renters. By contrast, between 2000 and 2020 less than five million multi-family units will be built; with only 20 percent (or one million units) considered affordable. At the same time, renter household formation exceeded seven million new renters creating a shortfall of six million affordable housing units.”
Perhaps it should come as no surprise that the multi-family sector was the fastest growing for the modular industry in 2018. Total production of multi-family modules more than doubled from 1,136 units in 2017 to 2,314 units in 2018. California, Massachusetts, Florida, New York, Washington, New Jersey, and Colorado were the top seven states (in order) with the most modular multi-family units, based on state labeling data. These states also represented 87 percent of all multi-family modular units manufactured in 2018.
Based on state label information, the multi-family market accounted for about 8.9 percent of all industry production in 2018, up from five percent in 2017. This production still represents less than one percent of all new multi-family developments in 2018, indicating a huge market opportunity for an industry that can deliver on speed to occupancy.
MBI analyzed project data from 17 modular multi-family projects constructed over the past four years. On average, the projects were 33,182 total square feet, with the modular portion constituting 27,261 square feet or 82 percent of the total project. On average, the projects consisted
of approximately 50
Accelerated project timelines are driving greater interest in multi-family. These projects were completed in just 241 days from approval to occupancy.
MBI obtained cost data on four projects in this market. The average value of these projects was $22,816,754 with the modular portion making up 33 percent of
While the cost and value of the projects was comparable to traditional construction methods, the earlier occupancy had a significant impact on cash flow. For example, consider the following project at an initial construction cost of $10,000,000 and assuming the modular project is completed and ready to rent in eight months while the traditional project in ready in 14 months. A complex with 35 units rented at $2,000 / month with an occupancy rate of 90 percent would generate $63,000 in monthly rental income. All other expenses – including taxes, insurance, and maintenance – remaining equal, the modular project would generate an additional $378,000 in revenue for the owner due to earlier occupancy.
This cash flow difference alone is enough to encourage many developers to consider modular construction. The added benefits of cost certainty, quality, and worker safety make this an obvious growth market for the modular industry.
A shorter construction schedule means quicker occupancy for owners, and that means guests checking in months earlier than with conventional construction methods. It should come as no surprise that companies like Marriott Corporation have made modular construction part of their strategic plan. This sector was previously categorized under “multi-family housing” for MBI’s reporting purposes. However, given the explosive interest and tremendous growth opportunities for the hotel and hospitality sector, this arca has been identified as a key market for the industry.
Based on production data obtained, the hospitality sector showed an increase of 16.8 percent in total modules manufactured in 2018 and a 141 percent increase since 2016. However, this market still only represents 5.7 percent of all modules produced in 2018 (1,487 hospitality modules / 26,269 total modules). Projects in California and New York accounted for most of this production in 2018.
This market is expected to show strong gains in the coming years due to initiatives by major hotel brands to encourage modular construction.
MBI analyzed 25 hospitality/lodge projects over the past three years to determine an average size of 45,568 square feet with the modular portion making up an average of 35,579 square feet or 78 percent of the total project.
On average, these projects took 249 days to complete, from approval
MBI obtained cost data on a smaller subset of five hospitality projects, showing an average total value of $45,606,000. The modular portion of these projects constituted 56 percent of
the total value of the project on average.
From single classrooms to complete campuses, modular construction offers public, private, and charter schools what other construction methods cannot: accelerated project timelines, more economical pricing, and less site disruption. Permanent modular schools are indistinguishable from other schools and can be constructed to any architectural and customer specifications. MBI members design and build schools of all types and sizes using traditional building materials such as wood, steel, and concrete.
Virtually any size permanent school can be built, installed, and ready for occupancy in as little as 90 days. Perhaps most importantly, using off-site technology, open construction sites are eliminated while school is in session. Students are safer, and teachers do not have to compete with noises and construction-related disruptions.
Based on production figures, the education market accounted for 23.4 percent of all modules produced in 2018. The industry manufactured about 10 percent more educational units in 2018, from 5,575 in 2017 to 6,127 modules in 2018.
Texas, New York, and California were the top states in terms of utilizing modular construction in 2018, accounting for 25 percent of total production of educational units.
MBI analyzed data on 46 educational projects over the last three years. The total average size of these projects was 23,274 square feet, with the modular portion of the project making up about 13,404 square feet or 57 percent of the total project.
Each project consisted of an average of 22 modules. The average completion for these projects was 155 days from approval to occupancy.
MBI obtained project value data on 12 of these facilities, with an average total cost of $3,351,695 each. The modular portion of the building makes up 57 percent of total square footage and 61 percent of total value.
Many hospitals and healthcare facility contractors are turning to modular, primarily for building components such as bathroom pods and headwalls. However, entire hospitals have been constructed utilizing modular construction techniques. Modular construction offers quiet, safe, and clean applications for medical, surgical, clinical and dental use.
The insight MBI contractors have from designing and building medical facilities has resulted in satisfied healthcare professionals worldwide. If an organization or community needs a new rehabilitation clinic, emergency room, operating room, hospital extension, laboratory, diagnostic center, or other medical facility, modular construction should be considered for custom-built facilities with the tightest budgets while maintaining strict medical and aesthetic specifications. Modular construction also results in much less on-site disturbance during the construction phase.
MBI analyzed data on 22 healthcare projects over the past four years with an average size of 18,190 square feet. The modular portion of these buildings was approximately 17,482 indicating that most of the building footprint was made up of modular components. Most of these projects were labs, clinics, and health and wellness centers as evidenced by the relatively small building size.
MBI obtained cost data for eight of these projects showing an average $4,889,583. The modular portion makes up 96 percent of total square footage of the footprint but only 47 percent of the value of the project.
Office & Administrative
Permanent modular buildings serve as corporate headquarters, satellite offices, institutional and administrative buildings, and offices for all business types. Modern single- and multi-story buildings can be configured in several ways to include independent offices, conference rooms, elegant lobbies, kitchens, restrooms, and large open spaces for cubicles or other partition systems.
MBI members have architectural and engineering designs for workspace planning, storm water management, landscaping, parking, and zoned heating and air conditioning. If it is time to capitalize on company growth, modular construction offers a fast, economical approach.
The business and office market represents the largest building sector for the industry. Nearly half of all modular production in 2018 is attributed to this market.
MBI analyzed 28 office and administrative buildings constructed over the past four years. The average size of the buildings was 17,348 square feet, with the modular portion making up 15,313 square feet or 88 percent of the overall footprint.
The average total cost for the six of the buildings MBI obtained data on was $2,804.099. The modular portion of the building
made up 47 percent of the total cost.
Simply put, quicker occupancy equals quicker return on investment. Modular construction is accelerated construction. Why is this important to banks, restaurants, convenience stores, childcare centers, and other retail establishments? Because earlier occupancy means a customer generates revenue faster. In fact, it’s not uncommon for many modular buildings to be up and running within a week—an important consideration for retailers of all types.
Typical retail applications include but are not limited to restaurants and diners, banks, golf pro shops, convenience stores, gas stations, car washes, and concession stand. MBI contractors provide a full array of services including site, mechanical, and electrical work. Customers can accommodate their emerging business with modular buildings customized to their financial needs, space requirements, and deadlines.
Modular projects in this market made up just about one percent of all production in 2018, or 229 modules, based on state labeling information. About 35 percent of these units went to Texas, New York, and California.
MBI was able to obtain and analyze data on 15 retail projects constructed over the past four years. Not surprisingly, the average size of these buildings was smaller than in other markets at 3,857 square feet. The modular components made up 91 percent of the footprint of the typical retail facility.
MBI obtained cost data for five retail projects, with an average total value of $734,951. The modular portion of these projects averaged 59 percent of the total value.
Institutional & Assembly
This market includes police and fire stations, prisons, and facilities used for assembly such as churches. While not a large market overall, some modular companies specialize in these markets. PMC institutional buildings more than doubled in 2018 to 897 total modules, primarily due to new prison construction in the southeastern United States. South Carolina, Indiana, and Tennessee accounted for 53 percent of total units in this market.
Overall, the institutional and assembly market represents about 3.5 percent of all industry production in 2018.
MBI obtained data on 20 projects in the market built in the last four years. The average size of these buildings was 60,015 square feet, with the modular portion constituting about 39,278 square feet or 65.5 percent of the footprint.
MBI also obtained cost data for four projects in this market, showing an average value of $1,034,372 with the modular portion making up 66 percent of that amount.