The Modular Construction Landscape

A taxonomy of the technologies, approaches, and startups of the modular building ecosystem

“The process is like sitting here doing our work and dodging all these knives thrown at us”

—Mimi Hoang, Partner at nArchitects and designer of the Carmel Place modular building in NYC

Modular homebuilding has a long history of both promise and underperformance. The vision of factory-built homes solving the inefficiencies of traditional construction has captivated innovators for decades. However, the reality of modular construction reveals persistent challenges—economic, logistical, and cultural—that repeatedly thwart its success. Today, as the real estate industry grapples with rising material costs, labor shortages, and environmental issues, modular construction faces its most significant test yet. Will it finally deliver on its potential, or will it succumb to its flaws again?

Modular building startups have and are continuing to take an array of strategies to evolve to a final, built product. That said, modular companies all get painted with the same brush due to high-profile failures. As one modular company CEO told me: “my peers need to stop dying; it's a bad look for all of us.”

Today’s letter tackles the modular construction industry, including:

• A background on prefabrication with a focus on modular;

• A classification of modular companies;

• The industry’s outlook based on current realities, and

• Recommendations for developers using modular on their own projects.

A Background on Modular

Deciphering modular and related words can be incredibly confusing. Here is a taxonomy to get us started:

• Prefabrication - Prefabrication involves the production of construction assemblies off-site. In other words, this is not stick-built. Prefabrication is an umbrella term, while modular is a specific method within it.

  • Modular - All modular construction is prefabricated, but not all prefabrication is modular. Modular involves the standardization and repetition of parts.

    • Volumetric - Volumetric modular involves constructing three-dimensional modules (essentially, room-sized units) in a factory setting. These modules are fully finished with walls, floors, ceilings, wiring, plumbing, and finishes. The completed modules are transported to the site and stacked to form the building.

    • Panelized - Panelized modular in contrast, involves manufacturing flat building components (like walls, floors, and roof panels) in a factory. These panels are then transported to the site and assembled into a structure, often requiring more labor and time compared to volumetric modules, but they allow greater design flexibility. They are easier to transport compared to volumetric modules.

In plain English, volumetric modular could be executed as fully built apartment units transported to a site and erected like building blocks. Panelized modular could be the same building but executed as smaller assemblies transported to a site and assembled with a higher number of connection types. Some companies do volumetric, some do panelized, and some do both.