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By Peter Norman, VP & Chief Economist; Marlon Bray, Senior Director, Cost & Project Management | December 9, 2020


This is a term we’re hearing more frequently in conversations within the construction industry.

While modular construction has been around since the early 1900s when consumers could order pre-fabricated house kits from Sears Roebuck and Company for assembly onsite, several recent trends are contributing to the renewed popularity of this form of construction.

The 2020 pandemic may be accelerating the pressing need for affordable housing across the country. With municipalities urging speedy solutions, the federal government launched the Rapid Housing Initiative, allocating $500 million to 15 cities to quickly build affordable housing via conversions of non-residential buildings – and construction of new modular multi-family housing. Since funding recipients have 12 months to deliver this housing, modular’s ability to condense construction timelines offers a practical solution. 

Modular is often touted as being able to reduce construction costs by improving production. As the time to complete developments continues lengthening­ – in some cities as much as eight years to complete planning, acquire approvals and permits and complete construction – modular is supposed to be that faster alternative to conventional construction that can significantly reduce the development phase.

Is this really the case though?

Modular construction is something that forward-thinking governments, investors, manufacturers, developers and builders are looking at, but it is important that it be tempered with a clear understanding of advantages versus constraints, and a proper assessment of opportunities and how to mitigate the risk.

This article highlights the key issues to consider.


Prefabricated (prefab) construction

Any component of a building – flat or modular – that is manufactured in a factory and then transported and installed on a building site.

Modular / 3D / volumetric construction

Prefabricated construction of three-dimensional modules of enclosed space. Entire modules, such as rooms, are manufactured and assembled in a factory and then delivered to a site for installation. A building may be constructed entirely of modules, or portions may include conventional construction. Modular buildings may be wood, steel, concrete, or a combination, and as many stories as building codes allow.

Panelized construction

Manufacturing of flat panels such as walls, floors and ceilings in a factory. These are transported and assembled  onsite to form three-dimensional spaces and a completed building.

The evolution of modular construction in Canada

Following the Second World War, when Canada’s population and economy were booming, factory-built mobile and modular homes gained popularity. As the process of constructing site‐built homes improved and costs declined, the popularity of factory-built housing ebbed while the appeal of site-built grew.

During the past decade, starts of factory‐built residential housing have ranged from 8-16% of total single‐family housing starts.

Habitat 67 Apartments - Montreal - Canada

A Canadian modular icon

Remember Moshe Safdie’s revolutionary Habitat 67 at Expo 67 in Montreal? It was intended to be an experimental solution for high-quality housing in dense urban environments. Three hundred and fifty-four identical prefabricated modules were stacked in a variety of combinations and connected by steel cables to create 148 residences in a giant futuristic sculpture.

Habitat 67 has retained its original purpose and continues to be a popular housing complex – and  an icon of the era. 

With new innovations and improvements in manufacturing , customization, quality, performance and  sustainability, there’s been a recent resurgence of interest in modular across Canada.

No longer cookie-cutter boxes, many of these buildings now feature customized designs that incorporate green and smart tech.

These characteristics, along with modular’s streamlined and cost-efficient production process, has made it popular among policy makers as a solution for rapid deployment of affordable housing. British Columbia, as an example, has mandated provincially-funded affordable housing projects to use modular design.

Meanwhile, with the conventional Canadian construction sector being relatively slow to modernize, and costs and labour shortages escalating, prefabricated construction is appearing in a variety of housing – not only affordable buildings, but also single-family homes, apartment buildings, student residences and seniors housing. In 2018, domestic production of residential factory-built housing in Canada was about $1.4 billion.

But modular is not confined to the housing market. The US journal, Engineering Structures, estimates that in North America[1], 3% of new commercial construction is modular and this is expected to increase to 5% by 2022. More markets are embracing this form of construction, from education, to healthcare, and office to entertainment.

As demand for factory-built components grows, so have the number of suppliers. In Canada, construction company Ellis-Don established a new subsidiary, ED Modular, and in 2020 completed a 300,000-square-foot robotics factory in Stoney Creek, Ontario.

Advantages and constraints

Of course, modular construction has both advantages and constraints in comparison with conventional construction methods. Following are some of the most significant.


Reduced onsite construction timelines: Manufacturers build modules in indoor facilities, unaffected by weather. Concurrently, demolition, excavation and building foundations can take place onsite. This can translate to shorter timelines for delivery, greater savings, quicker occupancy and faster return on investment.

Greater cost certainty: Efficiency of construction, along with a greater ability to control costs, labour, schedules and delivery means that builders benefit from fewer budget overruns by using modular construction compared with conventional site-built construction.

Better quality control: Modular components are fabricated in a controlled environment that facilitate quality control.

  • Permanent modular construction buildings are required to meet the same building codes and requirements as site-built structures. There are national standards of the National Building Code and Canadian Standards Association, as well as varying provincial standards and certifications.
  • Modules are manufactured in climate‐controlled facilities, which protects materials from exposure to damaging weather conditions.
  • Precision manufacturing equipment and software, combined with continual supervision of production processes, helps to ensure consistent, quality products.

Labour optimization and safety: Construction projects are labour intensive, and the industry has an ongoing challenge attracting enough skilled workers. Labour shortages are a chronic problem that add time and costs to many projects.

Modular construction helps to optimize a project’s labour force. Fewer job activities and fewer workers are required onsite, while in the factory, an assembly-line approach and the use of technology streamlines processes and increases worker productivity. 

Project safety is also optimized. Since prefabrication takes place in a quality-controlled factory with specialized equipment, it could be considered a safer work environment than onsite construction, with fewer instances of injury.

Environmental sustainability: Prefabrication has a reputation for having a lower environmental impact than traditional construction. Producing less waste and using more efficient recycling and waste disposal, in addition to emitting fewer greenhouse gas emissions are a few of the claims.

As well, modular components reduce the time and intensity of onsite construction, which reduces the amount of waste materials, emissions, noise pollution, and construction traffic and road closures.

Increasing customization: Advancements in construction design software and digital tools are enabling more customization options. Building designs, features and options are increasingly comparable to site‐built construction.

Greater benefits for end users: For buyers, tenants and other end users, modular prefabrication processes and innovations provide more affordable buildings, high quality materials and components, faster construction and more reliable close and move‐in dates.


When determining whether modular or conventional construction will be most advantageous for a project, there are also a number of constraints to consider.

Capacity limitations: Canada has only a modest amount of modular manufacturing capacity among a relatively small number of modular manufacturers. While most plants can build modules for any type of building, retooling and adapting worker skills for different types of products can be costly.

Since modular construction projects tend to involve only one or a few suppliers, this increases execution risk. For manufacturers, purchasing and setting up the facilities and processes to construct a modular building represents a large initial upfront investment; this can restrict the financial viability of undertaking smaller projects. There are fewer than 20 plants nationwide that can manufacture a high volume of units. Should something go wrong with a modular construction contract, a buyer may find themselves facing limited alternatives.

Moreover, prefabrication involves a front-loaded design process – more design and engineering are completed up front and require architects, engineers and contractors to be familiar with modular fabrication. This country currently has a limited number of experienced design/construction teams in modular construction.

Financing and cash flow: Many lenders are unfamiliar with modular construction projects, which can make it difficult to secure financing.

For a traditional construction project, a lender provides capital in a series of tranches as the project progresses and the onsite building becomes increasingly valuable as collateral. By contrast, for a modular project, much of the total capital is required upfront; the lender has only an empty lot as collateral. Thus lenders will frequently require additional security, guarantees and insurance.

For developers, cash flow during a modular construction project is also significantly different from standard construction. Manufacturers typically require deposits prior to final design and again prior to manufacture.

Proximity of suppliers and transportation logistics: The geographic proximity of the manufacturing facility is critical for any modular construction project. Transporting large modules long distances can offset the cost savings achieved by labour efficiency gains.

As well, there are transportation risks. A patchwork of roadway regulations across provinces can limit the dimensions and weight of modules. And a mishap during transport could lead to a need for repair or replacement, and unexpected project delays.

Compressed timing and project planning coordination: To achieve the time and cost saving advantages of factory‐built modules, extensive pre‐project planning, early engineering design completion and close project management are critical to ensure each stage of a project is completed in a timely, coordinated fashion.

Factory fabrication also requires the design and engineering of the units to be finalized early in the manufacturing process. This requires committing early to final design and limits the flexibility of later design changes.

Since onsite assembly and installation is accelerated, timing of components and contractors must also be carefully coordinated.

Emerging opportunities in modular construction

With streamlined fabrication processes, factory-controlled quality, and efficient use of labour and materials,  modular can, in many cases, be a very competitive alternative to conventional construction. At the same time, modular designs are becoming more cutting edge and modern.

Examples of modern modular construction


Murray Middle School in California  is  a complete campus that includes classrooms as well as media center, gymnasium, cafeteria, and administration facilities – and  is one of the first blast-resistant modular campuses in the state. The 68,000-square-foot campus was completed in 319 days.


A conceptual modular sports complex design by Pendulum enables communities to construct sports complexes ranging in capacity from 3,000 to 10,000 seats. The design incorporates retractable seating to accommodate multiple sports field configurations and offers six phases of building with modular elements such as seating and amenities that can be added to increase size and complexity.


For Humber River Hospital in Toronto, PCL built 14 telecommunications data rooms and 360 patient washrooms offsite and delivered them within three months as part of the 1.8 million-square-foot hospital.


Modular construction is embedded in Marriott Corporation’s strategic plan. The world’s tallest modular hotel – Marriott International’s 168-room, 26-story AC Hotel New York, NoMad , will open at the end of 2020 with prefabricated guest rooms having arrived at the hotel site fully constructed, inside and out.


The 75,000 square-foot Bruce Power Protected Area Office Complex, built by NRB in Tiverton, Ontario was completed in 378 days. Fabricated with steel and pre-poured concrete floors, the two-storey admin building accommodates 1,200 staff members. The building was placed partially over underground piping that could not be disturbed by a foundation system.


Highrise: The world’s tallest modular building was built in 2019 in Singapore. Nearly 1,900 prefabricated modules were used to build 505 luxury apartments in the 40-storey dual-tower Clement Canopy building.

Green: When completed, the 18-storey wood-and-plant Toronto Tree Tower will comprise 4,500 square metres of residential areas and 550 square metres of public areas with a cafe, a children’s daycare center and workshops for the neighboring community. The primary structure of the building is constructed from massive timber panels.

Seniors housing: The 126,000 square-foot Seasons Cambridge Retirement Residence in Ontario was completed in 623 days by A-LINX. This eight-storey senior living residence includes 125 suites, a memory care wing and 28,000 square feet of underground parking.

Student housing: Ninety light-wood-frame modules form the five-storey Jacobson Hall student residence of Trinity Western University in Langley, BC, which was completed in 2018 in nine months, adding beds for 220 students.

Single-family: sometimes what is old is also new again. Harkening back to Sears Roebuck days, IKEA and Scanska teamed to produce sustainable, quality, low-cost pre-fabricated homes called BoKlok. They have built more than 11,000 homes in Sweden, Finland, Denmark and Norway. The homes cost 40% less than their traditionally built counterparts and are ready in eight to 12 month.

Moving forward while mitigating risk

Governments, institutions, investors, manufacturers, developers, builders, architects and consumers can all benefit from the expanding advantages of modular construction. And all can play a role in eliminating  barriers to reaping these benefits. To realize rewards while mitigating risks, consider the following.


Build awareness of the benefits

There remains some general lack of awareness about the benefits of modular building. All of the stakeholders involved should take a more active role in informing policy makers, investors, buyers and consumers about the ways the industry is evolving and the potential gains for all.


Educate lenders and insurers

Manufacturers and developers need to educate lenders and insurers about the characteristics of modular construction today. Finance and insurance providers can perceive loans and insurance policies for prefabricated projects to be riskier because they are developed offsite. Fabricators and developers need to continue working with these stakeholders to put in place consistent solutions across the country. A clear and consistent risk framework will help to secure more affordable financing and insurance options for these projects.


Collaborate to build scale

Manufacturers, designers, architects, owners, developers, investors and governments need to foster productive relationships to bolster a reliable modular construction pipeline. In 2019 for example, in partnership with the Government of British Columbia, the Vancouver Affordable Housing Agency and the non-profit real estate developer Community Land Trust, Canada Mortgage and Housing Corporation (CMHC) invested $184 million for the construction of 1,100 units of affordable housing in Vancouver.

Make capital investments in capacity and innovation

Investors, manufacturers and suppliers need to strike alliances and make greater capital investments in the modular construction industry to advance capacity and innovation. As an example, in 2018 Amazon invested in Plant PreFab in California to integrate its virtual assistant, Alexa, into its prefabricated single and multi-family houses. The company specializes in smart home technology and sustainable construction.

Establish supportive legislation and policies

Governments should be encouraged to enact legislation and policies that encourage the growth of the modular construction sector. The federal government’s Rapid Housing Initiative, for example, could assist in the production of up to 3,000 new affordable housing units across the country. The initiative specifically covers the construction of modular housing to address this urgent need.

Develop new business models

To be sustainable, companies involved in modular construction should consider alternatives to traditional business models. Developers need to devise a sustainable model that considers the size and depth of potential markets and the availability and capacity of suppliers. And manufacturers need to develop business models that maximize efficiencies and quality.
In Canada today there is growing potential for in modular construction – opportunities to accelerate project timelines, reduce costs, advance innovations and product quality – and bring value to stakeholders.

Could this be the opportunity modular has been waiting for or is this no more than a trend?

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