Modular Buildings and the Circular Economy

Coauthored by William Hughes

Construction companies have been showing renewed interest in modular building solutions, likely due to turmoil in the global economy and local real estate markets. Modular buildings are 70% to 80% prefabricated at the factory and only need to be assembled during onsite construction. Modern assembly techniques yield modular buildings that are quicker to build at a high level of quality and ultimately easier to demolish than concrete construction.

The Growing Modular Building Business

In South Korea, large construction companies such as GS Engineering & Construction (GS E&C) are showing interest in the overseas modular housing business amid a domestic downturn in the apartment construction market. Since 2020, GS E&C has taken actions to enter the European modular building business by acquiring two companies—Elements Europe, a UK-based mid and high rise steel modular company, and Danwood S.A., a wooden modular housing company located in Poland. At the end of July 2023, Elements Europe announced it had been awarded the Camp Hill project to construct rental housing and commercial facilities using a steel module method in Birmingham, UK.

From the manufacturer’s point of view, modular housing projects can be a way to foster new business. South Korean electronics manufacturer LG Electronics, in partnership with GS E&C, is considering the modular housing business with its Smart Cottage concept. LG is reviewing the development of a business model that combines high efficiency products such as heat pumps and induction electric ranges with modular housing and is looking into future business opportunities for replacing old houses in the countryside with Smart Cottages.

The architecture, engineering, and construction industry has also been at the forefront of modular buildings for healthcare, responding rapidly to unprecedented hospital bed demand during the COVID-19 pandemic by building modular and prefabricated hospitals for hard-hit communities. In China, modular solutions and building information modeling have been used to reduce the time it typically takes to build a hospital from 3 years to 13 days. Module technology, which has the advantage of quick construction, has also helped secure hospital beds in Mexico and the UK.

Challenges and Opportunities

As the previous examples show, interest in the modular construction business has been increasing, but modular buildings still have a long way to go to achieve a meaningful market size compared with the current concrete construction market. The use of video analysis during construction has improved quality and reduced excessive time required onsite to assemble modules that do not fit properly; however, there is still room for improvement. Also, local governments need to update the laws and regulations related to modular buildings.

A key area of opportunity is the use of building materials designed to facilitate standardized recycling. Rather than having the demolition of each building be a highly customized event, buildings can be designed for deconstruction and circularity. Contributing to the circular economy may help modular buildings secure their place in the future of construction.