The Triple-Bottom-Line Impacts of Choosing Modular, Part 1: Hard Costs

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Geared to the needs of nonprofit owners and developers of affordable multifamily housing, this is the first in a series of posts addressing the financial, social, and environmental impacts of making the shift from onsite to off-site construction.

How will using modular construction affect my project’s hard costs?

Factory-made goods are usually cheaper than their one-off counterparts. So it might be intuitive to think the same rule applies to buildings. But it’s not quite that simple.

Using modular construction can, in fact, cause your project’s hard costs to go up, go down, or stay about the same, compared to using onsite construction. Which way the scale tips will depend on many variables. For instance: How complex is your building’s design, and was it designed to modular standards from the start? How far is your site from the building plant? How hot or cool is your local building market? Even if these variables are known, price outcomes may be hard to predict.

What you can count on is that, if you use modular construction, your project’s hard costs will break down differently than they would if you were using onsite construction.  

  • Simpler construction will drive down labor costs. Modular buildings, when designed to make the best and highest use of the offsite construction process, are simple and repetitive in structure. (Simple modifications can offset the “box” look and create an aesthetic suited to your preferences.) Thus, other things being equal, modular buildings can require fewer labor-hours to complete than comparable site-built structures.

  • Less expensive labor will drive down labor costs. Plant workers are year-round, cross-trained employees. They are rarely kept idle and are often paid less, per hour, than conventionally trained tradespeople. (I’ll come back to the topic of modular construction’s impact on the labor market in a future post.)

  • Sturdier construction will drive up materials costs, and reduced construction waste will drive them back down. Building modules produced offsite need added structure to withstand transport, which can increase material usage relative to onsite construction. But the modular construction process produces less material waste than conventional buildings, which offsets the use of extra materials.

  • Centralized production will create a mix of additional costs and savings. For instance, if you build a multifamily housing structure at a plant, you’ll spend money you wouldn’t otherwise spend to transport finished modules to their final location and position them with a crane. But you’ll save money on things like renting scaffolding for long periods and hauling heavy equipment to the site.

Obviously, these general rules won’t go very far in telling you whether using modular will save you money on a given construction project. In fact, when it comes to comparing modular and onsite construction on the basis of price, you’ll come up against a basic conundrum: developing a cost-efficient modular project starts with designing the building to modular standards—a choice-limiting action that may preclude getting to an apples-to-apples price comparison between the two methods.

And maybe that’s okay. If you are a developer considering hard cost as a factor in your decision about whether to use modular construction, the main thing you need to know is that under current conditions in many markets, modular and onsite construction are roughly price-competitive. Understanding this fact, and doing some research into procurement options in your area, may free you to focus on a more useful and ascertainable question: can I make my project pencil using modular?

Up next: How will using modular construction impact the overall process, timeline, and budget of my project?

Have comments, corrections, or topical suggestions for future blog posts related to modular construction? I’d love to hear from you.

Jenn Sharp is a senior construction project manager at Housing Development Center. You can find her full bio and contact information here.