Modular construction ramps up as integrated firms earn higher margins

Modular construction surges as studies show margins rise for integrated players and cities push zero‑emission goals

The concept of modular construction means making significant parts of a structure in a factory and then assembling them on a site. A recent, wide‑ranging study analyzed more than 700 modular firms across more than 50 countries, covering 3D volumetric modules, 2D panels, and bathroom pods. It explicitly excludes prefabricated or precut materials and focuses mainly on permanent buildings, with some notes on temporary, rental modules. The takeaway is clear: the market remains highly fragmented, with a small group of larger players and a long tail of firms earning less than €50 million in revenue. Only a minority tops €500 million in revenue, and the majority are smaller firms.

Among the firms with 2023 financials in the dataset, the average EBITDA for modular projects aimed at permanent buildings sits near 7%. But margins can improve significantly when a company controls multiple steps of the value chain. Firms that both manufacture modules and assemble them on site report much higher profitability, with EBITDA values commonly in the 15–20% range. When a company operates mainly as a manufacturer without on‑site assembly, margins tend to be lower, around 5%. These dynamics help explain why vertically integrated players and those that combine manufacturing with hands‑on on‑site work tend to outperform peers.

Several archetypes emerge from the study: integrated modular developers, contractors with modular capabilities, module manufacturers, and specialized modular firms such as technology providers or pod manufacturers. The level of control over the value chain and the scope of the project strongly influence margins. In practice, firms with a broader scope—manufacturing plus assembly—benefit from more standardized processes, trained teams, and less leakage of costs to subcontractors.

In terms of the building type, around six in ten firms work in the single‑family homes segment, but profitability tends to be higher in specialized assets like hotels or healthcare facilities. Hospitality projects show the strongest profitability, with EBITDA near 19% in some cases, while multiunit and single‑family housing categories hover around 8% each. Structural material choices also matter: roughly 42% of firms focus on steel, 38% on timber, and about 11% on concrete. The most profitable players typically concentrate on a single primary material to enable standardized manufacturing and procurement at scale.

Product types are split between 2D panels and 3D volumetric modules, with the latter showing slightly higher average margins (around 8% vs about 6% for 2D panels). The industry’s complexity varies as well: just over half of firms operate on low‑to‑medium complexity projects, which correlates with higher margins—roughly 19% EBITDA for low complexity. Medium complexity projects yield around 14%, while high complexity projects may see margins dip to around 5% as the design and build requirements become more demanding.

Two main commercial models exist: a project‑based sales model for permanent construction, and rental models where companies own and operate fleets of modules for temporary use. Most players favor the project‑based approach, but firms that blend sales and rental often report higher factory utilization and stronger EBITDA thanks to steadier production and better capacity planning.

Beyond company structure, the study notes that globalization is shifting. Historically, modular work traveled best when local, but standardization of codes and broader cross‑border collaboration are enabling cross‑market operations. Today, more than 60% of firms still operate in localized markets, but 20–25% have regional footprints, and roughly 15% operate globally. Digital tools and standardized processes are positioned as key enablers for scale across borders.

In the broader sustainability conversation, modular design aligns with ideas of reuse, demountable construction, and circularity. Circular strategies emphasize reuse, controlled dismantling, and transforming materials into new value streams. Digital “material passports,” modular design with reversible joints, and standardized components help planners know what can be reused in future projects. In Nordic cities, modular and prefabrication approaches are common in winter periods to reduce field time, while building data and BIM‑driven configurators support customization without sacrificing efficiency.

Alongside these trends, practical pilots and real projects illustrate the shift toward cleaner construction. A notable urban pilot in Oslo demonstrated the world’s first zero‑emission urban construction site, where electric machinery replaced diesel. The project cut diesel use and CO2 emissions dramatically and showcased how city procurement can favor zero‑emission equipment across multiple public works. Oslo’s goals are ambitious: zero emission on municipal sites by 2025 and zero emission across all construction work, public and private, by 2030. Cities across Norway, along with other Nordic capitals, are pursuing similar paths, highlighting a growing alignment between modular building methods and sustainability targets.

In Oslo, a high‑profile net‑zero vision for a mixed‑use project called Vertikal Nydalen demonstrates how geothermal heating, on‑site PV, natural ventilation, and smart façade design can sharply reduce energy use and carbon emissions. The project’s emphasis on natural ventilation, visible concrete cores for thermal mass, and timber cladding reflects a broader trend toward lightweight, efficient, and adaptable city buildings—an idea that dovetails with modular manufacturing’s push for standardized, repeatable processes across markets.

In sum, the modular construction landscape is characterized by a mix of narrow and broad business models, ongoing experimentation with materials and assembly methods, and a steady move toward cross‑border operations supported by digital tools and clearer building systems. The path to profitability for many players lies in combining a solid building system, tight value‑chain control, and disciplined scaling, while embracing sustainability as a core design and execution principle.

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