Modular construction's advantages, challenges come to the fore

There are plenty of completed modular projects under the construction industry's collective belt, but there are plenty of owners and developers who have not explored modular as a feasible alternative to traditional construction methods.

Some construction companies are in a unique position as long-time, trusted partners to a developer, but even contractors that are relatively new to a relationship might want to direct the owner toward a method of building that can deliver quality, consistency and time and cost benefits — sometimes.

How should you start that conversation with the owner, and what are the most important aspects of going modular to cover? Here are the key points to convey to owners.

Cost savings reality

It's important to have an early conversation with owners about the potential for cost savings because the reality could be different from their preconceptions.

Modular construction does not always equate to cost savings, according to Justin Stewart, CEO of Synergy Construction and its offshoot Synergy Modular, both based in Seattle. Whether a modular project will save money when compared to traditional, site-built construction often depends on geography, with one location offering significant cost savings and another a premium.

"So it's not as simple as saying that it's definitely going to cost less," Stewart said. "And that shouldn't be people's main driver when they want to look at this. The main upside is that you're getting a higher level of consistency and quality in a much shorter time period."

Some owners, said John Beddow, CEO at modular manufacturer Guerdon, are underwater on their budgets, a situation that can spur the initial investigation into the possibility of going modular.

"They're looking for a life raft," he said.

Where modular can offer some bottom-line relief is when the project is in an area where labor costs are very high, said Michael Johnson, president and CEO of UrbanCore Development, which specializes in public-private, mixed-income residential developments, including the largest modular housing project in Oakland, California, the $56 million Coliseum Connections completed last year.

"In the factory," he said, "the labor rates are lower than they typically are in the field … particularly in an area or for a project where you might have prevailing wage or Davis Bacon requirements because of some government funding being a part of the project."

The reliable benefits

While owners and developers might not realize the savings they thought they would on the construction process, there are many other benefits to modular that they should be excited about, and some translate to cost reductions down the road.

"We will typically start with a conversation about the hidden advantages of modular," Beddow said, noting this includes a tighter and more reliable schedule.

"Right now," he said, "finishing projects is taking longer than in the past."

There aren't enough subcontractors and other site personnel to finish projects on time, Beddow said, so the ability to meet milestones in a timely manner has "an intrinsic value" to both the general contractor and developer. The general contractor realizes a reduction in general conditions costs, and the developer gets to market faster, which cuts the financing time and jump starts the revenue stream.

Another plus with having the bulk of construction taking place in the factory, he said, is that general contractors can use smaller subcontractors or those with limited crew availability to perform the necessary work at the construction site.

The quality and consistency of the finished product are also top-notch, he said, even when having to meet strict standards like those of seismic building codes.

"The modules themselves have already proven, by being lifted by a crane and hauled down the road for 600 miles, that they are structurally sound," Beddow said. "They're going to be more adept, and they've got a floor and a ceiling on every box, on every unit. That gives it a very stable structure."

Well-constructed modular units, he added, also have high sound transmission coefficients, which is important for apartments and hotels where keeping the noise down between units is paramount.

"That's a huge positive," Beddow said.

Financing issues

Learning the ins and outs of the modular process, Stewart said, is a relatively simple task, but financing is probably the biggest challenge.

Because the structure is being built in a factory at the same time that site work is going on, he said, the owner typically cannot secure a loan with real estate because "it's not real estate until it's bolted to the foundation."

In addition, he said, major financial institutions are regulated by underwriting rules, which include ratios for what is allowed as far as offsite stored materials, and modular projects far exceeds those.

"A modular supplier is going to take a unit from scratch to finish," Stewart said, "in about four days. So they have to have every single building material sitting there on hand. There is no ordering as you go… so it's even more upfront money."

Nontraditional lenders have stepped in to help with financing when traditional lenders can't make a construction loan work.

And to make sure that owners are not stuck with an unexpected tax bill, Stewart said, it's important to contract with the modular manufacturer correctly. If the contract is for the purchase of product only, he said, then the entire order could be taxed.

"Our preferred method of contracting is [with] the modular supplier as a subcontractor," Stewart said. Included in that subcontract is also transportation, setting of the modules at the site and touch-ups to the interior of the units.

Right team and upfront collaboration

Whether saving money is the priority or simply getting the desired end result, Johnson said it's important that the owner assemble a solid team — architect, general contractor and modular manufacturer.

"You can blow [any chance at savings] and potentially have extensive change orders if you don't have the right team," he said, "[and run the risk] that you don't execute the project right, that things won't be coordinated between the factory and the site-built conditions and that you have problems you have to try to correct in the field."

The good news, Stewart said, is that there is an increasing number of owners approaching the industry set on using modular, helped along by industry groups, hotel brands and anecdotal information about successful projects that have taken advantage of offsite construction.

The volume of requests has driven Synergy to develop a project feasibility package, which includes a full code study, preliminary schedules and cost estimates, that will help potential customers get an accurate picture of whether modular is a good fit for them.

"In-house people don't have those metrics," he said. "They don't have the way to evaluate this type of construction without going out and finding people that have done this before."

The COVID-19 pandemic has ushered in an uncertain period for many contractors. Some have been forced to shut down projects due to state or local mandates while others have seen their customers scuttle or postpone new projects. Even those construction companies that have not been immediately impacted are wondering what the future holds for their businesses.

So, it is natural for some construction leaders to start thinking about expanding into new lines of work, modular construction included. In fact, early on in the COVID-19 crisis, modular construction got a public relations boost when the world watched China build fully functioning hospitals in just days using prefabrication and modular technology.

"The COVID-19 crisis ... could be a catalyst for wider industry awareness and adoption,” said Michelle Meisels, engineering and construction practice lead at consulting firm Deloitte.

According to a McKinsey & Co. report last year, the combined U.S. and Europe modular industries could reach $130 billion by 2030 and could save the U.S. and Europe $22 billion annually in construction costs. Modular projects, according to McKinsey, also have the potential to reduce schedules by 20% to 50%.

But before general contractors and subcontractors begin exploring a shift to modular, there are several factors they should consider, experts say.

Schedules, budgets and bids

Both general contractors and subcontractors can use modular construction, said John Beddow, CEO of Guerdon LLC, a modular manufacturer in Idaho, but they have to prepare for the sea change in how they schedule and budget for the projects.

“Some GCs get in trouble because they want to drive the schedule the way they've always driven it,” he said, “and it ends up not saving the time they could have saved.”

At the start of a project, there are the same phases of work to complete, like prepping the site, bringing in infrastructure and building the foundation. But, Beddow said, "the minute modular arrives, it changes.”

For onsite crews, he said, most of their time is spent in corridors and the exterior of the building making the necessary connections between modular units and the structure rather than finishing the interior spaces. This also means that general contractors can’t craft the schedule in the way they usually do, instead allotting significant time for the portions of work that will be done in a factory.

Much of a subcontractor’s typical scope of work is also included in the prefabricated modules, so there’s a learning curve as far as bidding, Beddow said. Many subs that have done multifamily or hotels are used to making a certain dollar amount per unit, but, with the reduced scope of a modular project, there’s not as much money in it for them.

“What’s going to happen,” Beddow said, “is the project is going to go over budget because the sub is overcharging for the scope of work it has.”

Therefore, he said, Guerdon spends a lot of time with general contractors and subcontractors to make sure they understand their scopes of work and how those might change during the transition from a traditional project to a modular one.

Jan Mischke, partner at the McKinsey Global Institute, the business and economic research arm of McKinsey & Co., said contractors would do well to take advantage of modular companies that are willing to educate them on the process, as well as associations dedicated to modular construction “to get a better sense of what others are doing and what's out there on the market.”

And the more a contractor can become familiar with the process the better. For example, one of the greatest benefits of using modular is that the units are manufactured in a factory setting according to exact specifications. But that can also be a drawback as there is no opportunity to correct major errors.

Project types

Usually, Mischke said, a high level of repeatability and standardization are what makes a project a good fit for modular, which is why the industry has seen hotel, healthcare and multifamily contractors use the method.

“[If you have] 200, 300 or 500 rooms that are all the same, you have relatively high-value density because all of those rooms come with a bathroom, which is otherwise complex and costly to construct,” he said.  And the unit sizes themselves are manageable enough that they can be put on a truck and transported to the job.

But there are a world of other project types, and Mischke said that it’s possible more owners will turn to a hybrid solution so that they still can customize as needed while taking advantage of modular’s benefits.

For example, a developer of a mixed-use building, he said, could use traditional construction for the foundation, basements and lower-floor retail spaces, which are not typically sized for transport. Modular could then be used for the living units on the upper floors.

“Then they put a custom facade on the outside so that [the structure] has any design and aesthetic quality that you can imagine,” he said.

In fact, Beddow said, there are manufacturers that specialize in producing specific modular elements like bathrooms in order to serve the hybrid approach.

These projects could also be a natural transition point for contractors considering a shift to modular or at least adding it to their portfolio of services, Mischke said, by exposing them to the method on a smaller scale.​

Construction firms, Beddow said, should not discount the influence they have with owners in making a decision to go modular, particularly if the contractor and owner already have a successful relationship.

“We [also] have architects who will influence owners to consider a modular solution for a variety of reasons, schedule being probably the most prominent,” he said. 

Labor issues

To offset the impact of the pandemic, Meisels said, construction companies are likely to move toward modularization and prefabrication of components not only to improve productivity and margins, but to mitigate impacts on the labor force and availability of workers.

Even though the U.S. unemployment rate is at a level not seen since the Great Depression, construction managers are struggling to fill jobs. There are several factors suppressing skilled labor across the country, according to panelists at a recent AGC webinar, including robust unemployment benefits and a fear of infection.

“I think, in general, people are going to have to build modular projects because there's just not going to be the labor to do it otherwise,” Beddow said.

An enhanced focus on safety, cleanliness and social distancing also will help accelerate the industry’s move to offsite construction methods, according to Joe Natarelli, leader of Marcum LLP's national Construction Industry Group​​.

“It reduces the amount of time you’re in the field, and keeping the labor force in a controlled environment is good from a health standpoint, too,” he told Construction Dive. “So maybe now you have a job that because of the pandemic went from six months to nine months and maybe this can shave that to eight months while you’re also promoting social distancing, too.”

Building codes and other industry regulations can help designers better define a project and create a structure that is not only aesthetically pleasing but safe. However, when it comes to the modular industry, the lack of consistency in those codes and regulations can frustrate project teams and perhaps even hinder growth, or at least delay it.

Modular experts say if they had their way, codes would be more amenable to offsite construction methods.

“If I had to say what is utopia, it would be that [jurisdictions] use the most up-to-date building codes; they all use third-party inspectors; and we don't have to worry about local or city officials amending [their modular] programs so that we're having to jump through more hurdles," said Jon Hannah-Spacagna, director of government affairs for the Modular Building Institute.

The first is unlikely, said David Tompos, president and CEO of Indiana-based NTA, a company that specializes in inspecting and certifying modular units and other manufactured structures around the country. NTA was founded in 1976 and later acquired by the International Code Council (ICC).

“It would be absolutely wonderful if we had every state on the same model building codes,” he said, “but that’s never going to happen. I would love to see it, but the states all want to have their own say in what their codes are, so I'm not going to hold my breath for that.”

The ICC publishes model building codes and standards, which are in use in some form in all 50 U.S. states. The 2021 codes address modular building in a way that is expected to bring more consistency to modular regulations in the jurisdictions that adopt them. Currently, according to Hannah-Spacagna, there are 35 states with modular programs, but the states are at different levels of ICC code adoption.

“You may have one state that's on the 2009 codes, one that's on 2015 and some have adopted the 2018 [codes],” he said.

“That’s probably the biggest challenge we find, and that’s where I spend a lot of my time — working with regulatory agencies whether it is to encourage them to adopt new codes or just simply trying to work through efficiencies [with processes such as] plan review or site review," he said.

Varying codes

The key to working in an environment where modular codes and regulations vary from state to state, said Josh Mensinger, vice president at ModularDesign+ in Dallas, is to make early contact with the authority having jurisdiction (AHJ) and find out what its requirements are before design work begins. That starts with having a conversation with the owner.

From day one of the project, he said, engaging the local AHJ is a necessary step in order to ensure that it understands the modular manufacturing process and that the owner understands what the AHJ will or will not accept.

“That lets the owner incorporate whatever modular components that they're going to allow into the construction documents on the front end rather than trying to figure it out on the back end after [they’ve] already submitted for permits,” Mensinger said.

The beginning of a project is also where the third-party inspection piece of Hannah-Spacagna’s modular regulatory utopia comes into play.

Firms like NTA have inspectors all over the country working on behalf of the AHJs as their “eyes and ears,” Tompos said. They inspect and certify modular units in the factory but only after being certified themselves by the state where the modular project will be assembled.

A typical modular project, Mensinger said, will see an inspector spend days in the factory inspecting each unit at certain production milestones like the completion of structural welds and electrical wiring. Inspectors will also perform spot checks, even asking the factory assembly workers why they’re building their piece of the work in the way that they are.

“They do engage them to see their depth of knowledge,” he said.

The role of inspectors

Third-party inspectors do not get involved in design, Tompos said, nor do they perform field inspections but can take a look at the plans in order to help ensure that the manufacturer clears AHJ hurdles. Some states, however, do not allow third-party inspectors to be involved in plan review. In Ohio, for example, building authorities consider it a conflict of interest to allow third-party inspectors to participate in plan review.

In states without modular programs, third-party inspectors work with the modular manufacturer in outreach efforts to AHJs in determining what those agencies will require, which can shave months off the permitting process. Without that advance work, permitting can stretch out for additional months, Mensinger said, if the applicant submits paperwork that ends up being rejected by the AHJ.

Apart from ensuring quality, the use of third-party inspectors can speed up the modular inspection process, said Hannah-Spacagna.

“Most states have limited budgets and so they have limited staff,” he said. “The ones that are extremely busy, the staff can only do as much as they can do when they're required to go out and inspect every single modular facility whereas the third-party inspectors working on their behalf can get it done much more quickly because they have the staff and means to get it done in a faster manner.”

As for the utopian ideal, the last piece dealing with consistency would be easier to achieve if AHJs all had the same modular process regulations ranging from the ability to use third-party inspectors to standardizing the permitting and review process.

It could promote growth in the industry, Tompos said. Owners get used to doing things in one state and know what’s expected. If they then want to pursue projects in another state, they sometimes feel like they have to relearn everything.

“If we could regulate everything the same way across the whole country,” he said, “that would save a lot of time and money and frustration for everybody involved.”

Value engineering, the process of evaluating a project for potential changes that could save money without compromising on performance, typically happens for a few reasons in the realm of traditional construction. The project could be over budget, or the general contractor and owner might simply want to reduce costs or increase efficiency.

For example, the general contractor might go back to the subcontractor that will be installing the doors and ask that it revisit the hardware package and find some less expensive, similar options.

Or a mechanical subcontractor with decades of expertise and knowledge about the practicality and functionality of certain systems in various types of project environments might be able to suggest alternatives to what was specified in the construction documents that, in the long run, make for a better choice.

It’s all about optimizing every aspect of the project.

And, depending on the trade, value engineering efforts can be launched at several points during the project, even after building has begun.

For modular and prefabricated construction, the goals of value engineering are the same as for site-built projects, but when that process takes place is where the biggest difference lies.

“It is not about finding cost savings at some point too late in a project," said Greg Otto, project executive for prefabricated solutions at California prefabricated building systems firm Clark Pacific. "It must start early, at the beginning of the project, and be seen as an additive process, driving value creation.”

Evaluate lead times

So how does the value or value management look for a modular project?

Similar to traditionally built projects, there is an evaluation of lead times on materials and design of systems, spaces and components, with an eye toward lowering costs and increasing efficiency, according to Timothy Barry, director of operations in New York for Consigli Construction Co.

For example, on the large-scale, multivolumetric modular residence hall projects that Consigli has built, Barry said, the firm analyzed floor plans, rooms and corridor layouts for repetitive production in the factory. This not only increased production but also reduced waste and drove down costs.

It’s all part of the Design for Manufacture and Assembly (DFMA) process, said Josh Mensinger, vice president at ModularDesign+ in Dallas. The company is a strategic partner of international architectural firm CannonDesign.

DFMA is different, he said, from a situation in which the general contractor pulls all the subs together and decides they’re going to use prefabrication to deliver their scopes of work.

“When you do prefabrication and modular construction that way,” Mensinger said, “you don’t save on any costs whatsoever. That’s why modular is more expensive. You’re paying for the subcontractors’ time … but also for the logistics of shipping the prefabricated components to the project.”

Unlike the holistic DFMA approach, he said, which sees participants working toward the greatest efficiency, those deciding on modular or prefabrication after the fact are just trying to take advantage of time, not the manufacturing savings that they should be trying to achieve.

With the knowledge and experience of DFMA, he said, ModularDesign+ is able to sometimes advise designers on specifications that can bring more value. “They’re not familiar with potential manufacturing or assembling savings.”  

For example, the company buys many materials at discounted bulk rates. So, if an architect has specified a different material for the project, ModularDesign+ can offer savings that the project would not be able to achieve otherwise, which puts it into the category of value engineering.

Start early

So just how early in the process can modular project teams begin the value engineering process? There really is no such thing as too early when it comes to identifying areas of potential savings. And given the nature of modular construction, much of what can be changed is actually limited to the design phase.

As the design process goes from schematic into the development phase, Barry said, the selection of equipment and material begins, and, then, the modular manufacturer or prefabrication facility will order the components it needs and start fabrication. Ideally, out in the field, excavation and foundation construction begins at about the same time.

“Once the design is well into development and heading into construction documents,” he said, “it becomes more of a scheduling challenge to make changes." Additionally, as the design nears completion, components are generally lining up in the supply chain to prepare for production.

“It’s important to review all options and finalize decisions as early on in the process to take advantage of the modular and prefabrication benefits," he said.

Another major reason that the design of components must be sorted out early on is because of shipping, which must also be figured into the project.

“When you make the step function into shipping,” Otto said, “you want your prefab components and assemblies to be an appropriate size to hit certain cost thresholds.”

When the physical size of the components being moved from the factory to the jobsite goes from a standard shipping dimension to an oversized load, it could mean significantly higher costs, he said.

“That goes back to the design — that you’ve thought about the project in a way that is supportive of a prefabrication strategy,” he said. 

However, Barry said, even when a project is at or near full design, there are still opportunities for value engineering, depending on the project. For instance, the team might be able to change prefabricated items like facade and small assemblies, i.e. MEP (mechanical, electrical and plumbing) racks, headwalls and door hardware.

The trend toward collaboration in the construction industry has made it easier for Consigli to shift to this early value engineering approach, Barry said.

“Generally, it has been an easy shift for us as many clients and design teams are increasingly seeing the benefits it can have on expediting schedules, mitigating risks and labor hours and driving certainty with cost and quality, in addition to the many sustainability benefits,” he added.

Value creation for a modular project, Otto said, requires an integrated design team able to break down silos that are created by the traditional industry fragmentation.

“You are designing a manufacturing process as well as a project,” he said. "There is a leap to be made. The shift requires a change in mindset from project to product.”

The pandemic was supposed to be modular’s moment.

After all, modular construction offers a fast, efficient way to build structures in a controlled factory setting using fewer workers, who can more easily comply with social distancing and personal protective equipment (PPE) protocols than at a traditional commercial construction site.

But something unexpected happened on the way to modular and offsite construction’s sustained COVID-19 surge.

After experiencing a rapid uptick in demand for non-permanent emergency medical facilities and rapid response units when the pandemic started, manufacturers of permanent modular structures — the pods and boxes that go into hospitals, apartment buildings and hotels — say much of what they had on their books going into 2020 has now been put on hold.

According to these observers, permanent modular construction in the healthcare, multifamily and hospitality sectors, three categories where modular had made some of its biggest inroads into commercial construction in the United States, has been significantly impacted.

In addition, as the spring turned to summer, even emergency modules became less in demand. Ryan E. Smith, director and professor of Washington State University’s School of Design and Construction and a long-time modular industry consultant, said the initial flurry of activity in the nonpermanent, emergency healthcare space petered out as priorities shifted.

“Rapid response was very popular as COVID first was happening,” Smith said. “But then, as the summer went along, governments realized they had all these empty buildings because people were at home, so why not just repurpose that space [instead]?"

For example, the U.S. Army Corps of Engineers repurposed the 470,000-square-foot Javits Center in New York City (pictured above) as an alternative care site with a 2,100-bed capacity, and has worked on at least 37 other similar projects at other sites throughout the country since the pandemic began. 

Pivoting in place

The challenges brought on by the COVID-19 crisis have forced modular firms to pivot and rebuild their books, which highlights what modular is supposed to be able to do well — adjust and retool rapidly when the market changes. And on the nonpermanent front, the industry delivered.

“A lot of our members are busier than ever,” reported John McMullen, marketing director for the Charlottesville, Va.-based Modular Building Institute, an industry trade organization. “The industry is proud of the fact that members can pivot so easily from one project to another and really address the needs that are in front of us.” (Disclosure: MBI is the sponsor of this column, but does not influence its content.)

On the permanent side, though, things have now slowed.

A case in point is Philadelphia-based EIR Healthcare, the permanent healthcare pod manufacturer that builds the MedModular “hospital room in a box.” The firm debuted the product in 2018 as a purchase option on Amazon.com to much fanfare, and entered 2020 with a new production facility outside Philadelphia capable of delivering 100,000 square feet of product annually.

But then COVID-19 struck.

Even as hospitals sounded the alarm about being overwhelmed and running out of intensive care unit (ICU) beds, longer-term healthcare projects were being reevaluated due to the revenue hits many hospitals and health centers took when patients canceled routine doctor visits and elective procedures for fear of getting the coronavirus.

The result was often empty hospital wings and emergency rooms outside the ICU, even as those staffs dealt with or prepared for an onslaught of COVID-19 patients.

“A lot of hospitals and healthcare providers are facing significant budget challenges, so that’s been an ongoing issue of finding a way to make things happen,” said Grant Geiger, CEO of EIR Healthcare. “We had some things that got put on hold because hospitals sort of threw their hands up and decided to hit the brakes.”

As an example of a healthcare system on the ropes, he points to Oakland, California-based Kaiser Permanente, which posted a $1.1 billion net loss in Q1, and scrapped its plans to build a $900 million new headquarters in March, although the firm said neither development was related to the COVID-19 pandemic.

“I think a lot of hospital administrators feel like the ground is still shifting underneath their feet, they don't know where things are going, and they're just being more conservative about wanting to pull the trigger,” Geiger said. “We’ve had sort of a sputtering stop and start, and we’re trying to work our way through that.”

While Geiger said his new factory is still booked through the end of 2020, he’s not running full shifts, and doesn’t have so many workers on the floor that he’s had to institute more stringent social distancing criteria to build what is on his books.

“We’re not running a full line at this point, because of the amount of work we’re doing,” Geiger said. 

Multiple sectors impacted

It’s not just in the healthcare space where modular orders have been put on hold, either. Take Menlo Park, California-based Katerra, the flat-pack modular juggernaut that focuses on producing multifamily boxes and grew revenues to $1.7 billion in 2019.

“There’s a bit of a pause on new projects starting, and I think a lot of it has been driven by the slowdown in the capital markets,” said Craig Curtis, Katerra’s chief architect. “People are trying to figure out the change in logistics first for how you build with all the different protocols which are different from state to state.”

Katerra closed its 250,000-square-foot modular component and finish factory in Phoenix in late 2019 before COVID-19 began, and has announced several rounds of layoffs since. But it also opened a 270,000-square-foot cross-laminated timber factory in Spokane Valley, Washington, in addition to its Tracy, California factory, and has targeted modular at one of the most ambitious levels of any U.S. manufacturer.

To accentuate what is going right for modular now, Curtis told Construction Dive he is fielding interest from developers about building apartments in the suburbs, away from the dense urban environments downtown, and that the firm is also developing a product for the emerging institutional single family built-to-rent market.

“There’s a bit of a heightened interest in suburban housing and (people) being spread out a little bit more,” Curtis said.

At Suffern, New York-based Nadler Modular, a dealer of longer-term, nonpermanent modules such as those used for school classrooms and auxiliary space, CEO Jeff Neeman has also experienced some skittishness from customers. 

“Clients and projects that we've signed up from before are moving along, albeit some of them are taking more time now, because people are reviewing their budgets,” said Neeman.

A positive for the firm has been a deal for auxiliary worship space, so that attendees can maintain social distance during religious services. “The high holidays are coming, and they need extra space,” he said.

Big hit to hospitality

Demand for modular in the hospitality sector, where Marriott International provided significant momentum when it announced a major initiative to build its hotels using modules in 2017, has also taken a significant hit, Smith said.

“Hospitality has really dried up on all fronts,” Smith said. “That’s troubling, because the factories that relied on that throughput are now at 20% or 25% capacity.”

But he emphasized that permanent modular construction isn’t alone in seeing a downturn. “A lot of different building types, and construction broadly, have slowed down,” he said.

Going where the demand is

Not all builders that offer modular solutions are experiencing lower production demand, with many, including the Boldt Co., as well as Turner and PCL, celebrating the rapid response and emergency medical pods they’ve been able to contribute to fighting the spread of COVID-19.

While Boldt's rapid response STAAT Mod has generated numerous inquiries from healthcare and government organizations, Zach Lauria, senior project manager, concedes that kind of interest has still been limited to rapid response products.

“The sense we've gotten from our customers is the dust needs to settle a little bit more. The world is still pretty shaky,” Lauria said. “Once things settle down a little bit, I suspect we'll start to see people interested in other areas, but it has been primarily emergency response.”

At Quebec, Canada-based RCM Modular, which sells multifamily modules in Canada and the Northeast U.S., CEO Gilbert Trudeau said that since March, his firm has built three new rapid response hospitals in downtown Montreal, and is planning a fourth.           

That’s helped make up the part of his 2020 book that was initially impacted when COVID-19 first struck. “When I went into the year, we were booked until Christmas,” Trudeau said. “When this started in March, we lost a lot of production, but we eventually gained it back with a lot of hard work.”

His new contracts didn't come cheap, though. "You can find other projects, but nothing's drawn and nothing's organized," Trudeau said. "So the cost associated with actually getting to do that new product is much more expensive, because you're rushing and trying to jam it through. It's just more difficult." 

He was able to hire subcontractors to build the specialized hospital headwalls those units needed, and has even kept two small hotel projects going in upstate New York that were already in motion. He also said he’s still seeing demand for suburban apartments.

“Most of the projects that people started haven’t stopped,” Trudeau said. “But I’m not getting the new guys who want to just get into this business right now.”

DPR Construction prides itself on building "great things" through a focus on quality and innovation. To that end, the general contractor is including a 75,000-square-foot, large-scale research and development space as part of its new office in Research Triangle Park, North Carolina.

The 100,000-square-foot building entered the design phase in August 2020 after being in the planning stages for 12 to 18 months, said Nick Ertmer, business unit leader in the Raleigh-Durham region. DPR broke ground late last month on the new facility, which will also include 25,000 square feet of office space.

The targeted move-in date, he said, is at the end of 2021 or the beginning of 2022.

The new space, said Mark Whitson, a member of DPR’s management team in Raleigh-Durham, will allow the firm to tie together its strategies — improving performance through the use of data, virtual design and construction, self-performance of the work and prefabrication — to change the interface of how the company "designs to build."

Ertmer said that prefabrication is a key pillar in the company's strategy moving forward.

"We absolutely see that as what is going to change the construction industry," he said. "We want to be on the innovative side, the leading edge of that industry change."

That means more integration of prefabrication into the construction process, Ertmer said. And having enough space to facilitate that shift is becoming a necessity, not only to innovate with strategic partners but as a workplace for local projects where clients can view mock-ups of prefab assemblies, for example, or teams can test certain project game plans out before implementing them on a project.

The growth of prefabrication in construction, Whitson said, will be so significant that he envisions contractors will be "assembling buildings in the future, not constructing them."

This industrialization of the construction process, Ertmer said, also includes modularization but kicked up a notch.

"I think when we say prefabrication integration with virtual design and construction, that's a little bit more forward-looking than just what most folks think of traditionally as a modularized construction approach," he said.

Other benefits

The research facility, Whitson said, is also ideal for workforce development in a time when there is an ever-shrinking pool of skilled labor. It is safer to train them in a factory setting and also prepare workers for a future where prefabrication could mean they will be practicing their trades inside rather than on a jobsite.

The new space will also allow for full-scale mockups so that clients can experience their space as a finished product, whether it be a bathroom pod or a complete hotel room.

This isn't the first space of its kind for DPR. Whitson said the company also built a similar facility in Charlotte, North Carolina, with 7,000 square feet for offices and 13,000 square feet for R&D. The company has another 100,000 square feet in Austin, Texas, completely dedicated to R&D.

The innovation that these spaces allow has become critical for the industry, he said.

"Customers want things cheaper and faster," Whitson said, "but they want higher quality and better safety. So how do we deliver that?"