Many in the U.S. construction industry have long dreamed of achieving a scaled-up modular building system, which is more common in Europe and Japan. Modular construction for housing offers clear benefits, but numerous challenges like varied building codes and local factory shortages have hindered its widespread adoption.
Progress is still being made, and modular buildings have steadily gained traction in the U.S. In 2022, the modular construction industry reached a $12 billion market size and claimed six percent of all building starts, nearly tripling its market share from 2015. According to the Modular Building Institute’s 2023 report, the surge is driven by cost efficiency, schedule reliability, and sustainability benefits.
North America is home to around 255 modular manufacturers, with 24 key players producing 8.1 million square feet of modular space annually. For the third year in a row in 2022, the latest year data is available, multifamily housing led the modular construction sector, contributing nearly one-third of the industry’s activity. This marks a sharp increase from its 24 percent share in 2021 and 21 percent in 2020.
Several multifamily companies have recently invested in modular construction, but no firm has embraced the trend as heavily as Greystar, the largest manager and developer of apartments in the U.S.
In April 2023, Greystar launched its flagship manufacturing facility for Modern Living Solutions (MLS), its modular construction business. By bringing development, construction, and modular manufacturing under one roof, MLS aims to streamline the development process. Modern Living Solutions is a wholly owned subsidiary of Greystar, with its corporate headquarters in Baltimore, Maryland.
Greystar says modular construction offers several advantages, including creating more sustainably produced housing and providing renters with a high-quality, more affordable option. Projects can also be completed up to 50 percent faster than traditional construction, sidestepping hurdles like unpredictable weather, labor shortages, and on-site safety risks.
Speed isn’t the only advantage. Due to sustainable designs and efficient material usage, Greystar claims MLS-produced units boast a smaller carbon footprint than conventional construction methods and 80 percent less waste.
The MLS factory will initially serve the Mid-Atlantic region, primarily the 30 to 45-minute radius outside major metropolitan areas like Pittsburgh and Baltimore. Greystar’s first modular-built community opened over the summer. Located in the Pittsburgh suburbs, Spring Run is the company’s first property, which was composed entirely of apartments created by Modern Living Solutions.
Spring Run began pre-leasing in April. Each apartment comprises two to four modules built at the MLS factory in Knox, Pennsylvania, then driven to the community and assembled. According to Allegheny County property records, Greystar purchased the 24-acre lot of vacant land in May 2023 for $2 million. Spring Run offers one, two, and three bedroom floorplans ranging from 662 to 1,373 square feet. The community is located in Corapolis, Pennsylvania, near Robert Morris University, Pittsburgh International Airport, and the headquarters of FedEx Ground.
A project like Spring Run would likely take 24 months to complete if built traditionally. With the MLS factory model, the development was finished in 14 months, a rate that’s about 40 percent faster.
Greystar’s MLS factory in Western Pennsylvania is currently the company’s only modular production facility in the U.S. The company is exploring additional locations, but in the meantime, it’s pushing ahead with projects that’ll begin on the Knox, Pennsylvania, factory floor. Greystar says it has close to 15 modular deals in various pipeline stages, with six under contract.
The next MLS project rolling off the production line is Chesapeake Club, a 224-unit development in North East, Maryland. Two additional Maryland projects, in Elkton and Southfields, are already in the works, set to bring another 528 units. Greystar expects its modular construction process to deliver 1,600 new homes over the next 18 months.
Greystar’s first modular projects, developed in the U.K. between 2015 and 2018, include the world’s two tallest modular residential properties. MLS Managing Director Andy Mest oversaw those operations, and he’s now in charge of Greystar’s plans to build on that experience in the U.S.
Greystar’s size and experience, combined with Modern Living Solutions’s establishment as a vertically integrated company, have helped them control costs. Those include upfront charges by third-party factories that often require a 25 percent deposit and a 25 percent payment when manufacturing begins. Both are early capital outlays that can reduce a project’s potential returns.
Inside the factory, the Modern Living Solutions approach borrows concepts from assembly-line manufacturing. Employees work repeatable tasks at designated workstations. Greystar estimates that the time saved from the assembly line model doubles productivity compared to on-site construction.
Miami-based developer Resia is another multifamily firm investing in modular construction. Resia is delivering moderately priced homes without government subsidies by leveraging prefab techniques. Resia projects involving modular buildings are underway in Texas, Atlanta, and South Florida.
Formerly known as AHS Residential, Resia says its prefabricated housing pods are actually more expensive than building on-site. However, on average, the pods save two and a half months in construction time, a significant amount of time that makes the process worthwhile.
In February, Resia invested over $25 million to develop a 252,000-square-foot manufacturing facility for prefabricated mechanical, electrical, and plumbing systems in Fulton County, Georgia. Resia also plans to build a similar facility in Bay County, Florida, to produce about 20,000 pods annually.
While traditional contractors report barriers to modular construction, builders who specialize in it are finding ways to overcome these challenges. Windover is a Massachusetts-based construction company that offers multifamily modular solutions. The company’s multifamily division accounts for 60 percent of its annual work portfolio, and about 15 percent is modular.
Unlike Greystar and Resia, Windover takes a different approach by partnering with modular manufacturers rather than owning its own factory. To streamline the process, the company has developed databases that guide building trades, ensuring everything is executed once a modular pod is installed.
Increased modular construction may help many multifamily firms reduce construction times and bring other benefits like potential cost efficiencies and sustainability improvements. Modular construction may also become an increasing tool to bolster America’s affordable housing stock.
Modular building still represents a small segment of the U.S. construction market compared to other countries where the practice is well-established, but this could change soon. Widespread labor shortages are another factor fueling interest in modular building. With multifamily firms like Greystar leading the way, we can likely expect more apartment developers to explore the trend.
