What's Happening?
A report by McKinsey & Co. reveals that modular construction companies offering both manufacturing and assembly services are more profitable than those focusing on just one aspect. These integrated companies benefit from higher margins due to greater control over processes, quality, and speed. They can efficiently manage broader scopes of work and reduce costs passed on to subcontractors. The report also notes that companies specializing in high-value assets like hotels and hospitals see higher profitability due to less competition and the higher cost per square meter.
Why It's Important?
The findings underscore the advantages of vertical integration in the modular construction industry, which can lead to improved efficiency and profitability. As the demand for modular construction grows, driven by technological advancements and the need for cost-effective building solutions, companies that can offer comprehensive services are well-positioned to capitalize on market opportunities. This trend could encourage more firms to adopt integrated business models, potentially reshaping the competitive landscape of the construction industry.
What's Next?
The modular construction sector may see increased investment in technology and digital platforms to enhance integration and efficiency. Companies might also explore partnerships or mergers to expand their service offerings. As the industry evolves, stakeholders will likely focus on developing specialized skills and capabilities to meet the growing demand for modular construction solutions.
