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Glorified LEGOs? Deconstructing the latest trend in CRE + 4 examples

Nov 13, 2017

iker-urteaga-246955.jpgModular construction could revolutionize the commercial real estate industry. From hotels to highrises, developers are turning to prefabricated buildings to complete projects faster, bypass the construction labor shortage and decrease costs.

While building something one place and assembling it in another is hardly a new idea, there are many misconceptions surrounding modular construction and its role in the industry. But thats beginning to change, and whether its a new Marriott hotel or a multifamily building in Brooklyn, modular construction is here to stay.

How it works

Rather than building from the ground up, modularly constructed buildings are built piece by piece in an off-site factory. Each piece is called a module,and upon completion they are trucked to the construction site where workers put them into place like legos. In a typical modular building, on-site construction workers only build the foundation, help connect the modules and do finishing work, like electrical and plumbing.

That means modular construction bypasses the need for large numbers of skilled construction workers, a major benefit given the labor shortage plaguing the construction industry. And since nearly all of the construction process takes place in a factory, modular construction eliminates weather delays. Additionally, all modules are constructed at the same time, so unlike conventional construction its possible to build the entire building at once. That drastically shortens the construction process and can shave months off a projects deadline.

Modular adopters and challenges

The largest hotel company in the world is embracing modular construction. Marriott International announced earlier this year it expects to sign 50 hotel deals in 2017 that use prefabricated bathrooms or guestrooms. That represents about 13% of the companys North American signings this year.

Modular construction isnt only useful for hotels. Its a viable construction alternative for properties in every sector of CRE, yet the technology tends to be most useful in certain asset classes. Prefabricated construction works best for projects with design redundancies and an overall consistency, making it especially suited for properties like hotels, student housing, hospitals and data centers.

While modular construction has several attractive selling points, its main drawback is a lack of flexibility. Last minute changes are problematic when all modules are already under construction, or worse yet, already completed. With conventional construction its relatively easy to change minor details as the project unfolds, but with modular construction, you need to stick to the original plan.

That makes modular a poor choice for offices and mixed-use properties. Its inevitable tenants in these sectors will eventually require property reconfigurations, and its not easy to reconfigure a property with hundreds of interior load-bearing walls.

Cool Modularly Constructed Buildings

Although modular construction is not the answer for every project, it is an increasingly popular answer for many. From hotels to highrises, here are our favorite modular buildings:

  1. Mini Sky City

Perhaps the tallest modularly constructed building in the world, Mini Sky City stands 57 stories above Changsha, China. More impressive than its height, thanks to modular construction it only took 19 days to assemble the entire building. Thats including all 800 apartments.

And Mini Sky City is just the beginningfounder Zhang Yue said he plans to build Sky Cityusing the same method, except this time he wants to reach 220 floors. That would make it the tallest building in the world.

  1. 461 Dean

The tallest modular building in the U.S., 461 Dean rises 32 floors above Brooklyn and consists of 363 prefabricated apartments. The tower shows whats possible with modular construction, but it also highlights some of the pitfalls. While modular can bring projects to completion faster and at a lower cost than conventional construction, thats not what happened at 461 Dean.

Instead, a lengthy legal fight between the developer and the manufacturer, Forest City and Skanska, delayed the project two years and pushed the costs tens of millions of dollars over budget. 461 Dean shows its especially important for developers and manufacturers to be on the same page during modular projects. After all, once the modules are made, theres no going back.

  1. Folsom Fairfield Inn & Suites

The first Marriott franchise to use modular construction, this 97-room hotel opened in California last December. While half of the first floor was constructed using conventional methods, 52 prefabricated modules completed the rest of the three-story building. It took six weeks to build the modules and only four days for the construction team to install them on-site.

  1. Pullman Courtyard

Marriotts second modularly constructed hotel, the Pullman Courtyard opened on the campus of Washington State University this July. With 122 rooms spread across four floors, this project ambitiously built upon the Folsom Fairfield Inn modular concept. Marriott worked directly with Vandervert Construction and Stonebridge Companies to design the exact room modules and finishes.

Next: 10 examples of stellar office design 

Topics: Industry News

Erik Dolan-Del Vecchio

Written by Erik Dolan-Del Vecchio

Erik writes about the people, the deals and the trends that move the commercial real estate industry.

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