Real Estate Innovation: Modular Construction

A crane putting a modular piece on a building.

Posted on August 19, 2020


Part of the unique nature of real estate comes from its construction. Typical consumer goods can be manufactured quickly. Real estate, on the other hand, has a gap of months or years between the beginning of construction and market entry. This causes momentum in the real estate industry, which is a big point of friction for developers. There’s no guarantee that the demand you’re building now for will be there when you finish.

Wherever there’s friction in the world, there’s opportunity. Modular construction is an innovation in the real estate industry poised to take advantage of this opportunity.

What is modular construction?

Modular construction is an emerging class of real estate development. Pieces of structures are manufactured in permanent off-site production facilities, rather than on the building site itself. The buildings are then assembled on the site using a crane, which is pictured in the image at the top of this post. This difference in construction provides numerous cost-saving benefits, which I’ll cover throughout this post.

A modular home is NOT a mobile home, although many people confuse the two. Modular homes are permanent, and cannot be moved once they are placed on their foundations at the building site.

Real estate development is a game of money and time, and modular construction provides developers with ways to save both.

What makes modular construction attractive?

The classic/basic joke of the real estate industry is “location, location, location.” A critical difference between traditional and modular construction is that modular construction is done within an off-site facility – a stable location that never changes.

The savings from this difference are considerable. In addition to saving transportation costs for production workers (because the job site never moves), material logistics are simplified. Modular construction makes it possible to purchase raw materials in quantities larger than what an individual project requires, which can benefit the manufacturer due to economies of scale. These savings can be passed through to the final consumer. 

Additionally, because modular structures are constructed indoors, there are virtually no weather delays, which plague traditional construction sites. This is especially important in regions where weather stops construction during the winter months, such as half of the planet. 

Inspection Benefits

Another money-saving aspect of modular construction has to do with inspections. Normally, inspections must occur as a part of the closing of a real estate deal. This can cause closing issues if inadequacies are identified, which may result in extra costs and delays at best and the termination of the deal at worst. With modular construction, inspections are done in the production facility at each stage of the construction process. This saves time, money, and (most importantly) headaches. Who doesn’t want to have fewer headaches?

Environmental Benefits

Modular construction is more environmentally friendly than traditional construction. Because they are built in production facilities to precise specifications, there are fewer wasted materials. According to peeblemag.com, this can reduce construction waste by over 50%. Additionally, modular structures are being increasingly powered by solar panels. Some modular homes also use solar-based water heating systems, furthering energy savings.

Modular construction is the future of real estate construction

Modular construction is poised to dominate the next generation of construction, both for homes and businesses. Remote work is becoming more popular and real estate costs are still rising. As the next generation of people looks to purchase their own homes, they won’t be tied to the steep costs that come with living near a job in a specific area. This next generation of home buyers will also be more environmentally conscious than any that came before. Modular construction combines these three factors together in a cost-effective and customizable way.

Further Reading

10 Basic Facts about Modular Homes

Environmental Benefits of Modular Homes

Major Growth Expected For Prefabrication, Permanent Modular Construction


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