The construction industry is known for its slim profit margins and erratic market cycles—this despite accounting for $13 trillion in spending worldwide in 2023, or approximately 7 percent of global gross domestic product. Many of the sector’s inefficiencies stem from low gains in productivity, which, according to a report released by McKinsey & Company in August 2024, lags that of other industries. The construction sector saw just a 10 percent improvement in productivity between 2000 and 2022, compared to a 50 percent gain across the entire economy and 90 percent within the manufacturing sector.

Modular construction has long promised to address industry roadblocks such as a decline in skilled workers and the lack of standardization from one project to the next. Successive high-profile construction startups, like Katerra, which filed for bankruptcy in 2021, have seemingly been unable to crack the code of long-term viability. But the fact remains, modular construction—with components manufactured within controlled settings and shipped as either flat-pack assemblies (think IKEA, but with building systems and components), or volumetric forms (fully integrated stacked boxes)—can offer a suite of advantages when compared to traditional modes of building, especially in residential construction.

The workhorse of the American housing market is the often-maligned five-over-one, the multifamily residential buildings typically composed of several light-frame wood stories on a concrete podium. Despite their ubiquity, they are, according to Gensler principal Brooks Howell, inherently inefficient. “A typical multifamily project might end up with 35 different unit types, which requires varying wall, kitchen, and bathroom layouts, and a number of custom items,” says Howell. “In the United States, partially owing to market demand for lower housing density and the size of the timber industry, we haven’t really moved past balloon framing.”