In a Manhattan cityscape dotted with iconic skyscrapers and littered with construction cranes promising rivals, a 26-story building is easy to overlook. But one taking shape in Midtown (due to open as the Manhattan AC Hotel by Marriott later this year) will be deserving of attention when it becomes the nation’s tallest modular hotel.
That distinction, which had belonged to another New York hotel, a 19-story property opened two years ago, won’t register on the spectacle scale that dominates the city’s competitive commercial real-estate development world. However, it could prove to be another milestone for developers trying to show that the budding modular building concept can expand to new applications and settings.
A construction tactic that uses off-site factory-built components — or modules — that are transported to a site and assembled, modular has been employed in a limited way for decades in specialized applications — from housing early on to data centers, hospitals, and lodging of late — but has been attracting more wide-ranging interest as techniques are refined and the economic case for it strengthens. The Marriott project is being marketed as a potentially important step down that path because of the intense focus the modular element has received from early in the design process and how that could play out in the finished product. Relying on innovative building design, broad up-front commitment to modular, and strong collaboration between project parties, the hotel’s developers anticipate being able to showcase the project as an example of what modular can deliver — functionally and aesthetically — when it’s positioned as a design centerpiece.
The hotel is an example of volumetric steel high-rise construction: 168 pre-built and pre-furnished guest rooms and a rooftop and rooftop bar modules manufactured in Poland vertically stacked atop a conventionally built lobby and restaurant and around a cast-in-place elevator tower, a property that will showcase modular’s adaptability and versatility, predicts project architect, Danny Forster, of Danny Forster & Architecture, New York.
“This project is significant in the way that it deploys modular best practices,” Forster says. “Oftentimes, the modular piece will get very complex, removing the efficiencies that it can deliver. We’ve been very diligent about how to do this the right way.”
The project design reflects a primary emphasis on making the modules fully site-ready and easy for workers to place and connect after delivery, addressing a bottleneck that often plagues modular projects. A notable feature of the module design, Forster says, is that each comes with a section of corridor that provides workers with quick, remote access to each room’s mechanical-electrical-plumbing (MEP) infrastructure for connecting to the MEP tie-ins for the entire building.
“All of the MEP shafts are pulled to the corridor wall, so when the trades come to the site, they’re able to make connections to the room module from corridor access panels; they’ll never need to enter the pre-furnished hotel room,” he says. “Plug-and-play may be an overly simplistic description, but that’s the logic behind the design.”
For Marriott, which began building modular hotels several years ago and now operates about 30 low-profile ones in the United States, the Manhattan tower offers a new vision of what modular may be able to deliver to builders. When announcing the project in 2018, the company predicted it “will act as a game-changing symbol to ignite even greater interest in modular among the real estate and lending industries.”
Domino Effect
Whether the project fulfills that role or not, modular construction is indeed on the rise, drawing more interest as developers look for ways to cut costs, improve productivity, speed construction time, and navigate a worsening construction worker shortage. Seeing opportunity, a small but growing number of construction firms are committing resources to developing modular capabilities — moves that will almost certainly end up filtering down to impact the work of MEP and other subcontractors. Should the build phase for more project elements transition from the construction site to a factory floor, trade contractors could face disruption that could take the form of more in-house or third-party factory work, changed on-site work demands, or even a shifting or loss of work to specialized, vertically integrated module builders.
It’s premature to gauge the extent or nature of modular’s impact on construction contractors, but it’s becoming clear that it is on the industry’s radar. A recent flurry of research and surveys suggests developers, designers, builders, and contractors are seeing more opportunities to employ modular strategies.
In a recent survey of general and trade contractors, engineers, architects and modular manufacturers, Dodge Data & Analytics found that around 60% of all respondents expect to use either panelized or full volumetric modular in at least 10% of their projects over the next three years, and that around 20% think they’ll use it half or more of their projects (see Chart below). That compares with a little less than half reporting they used it in at least 10% of their projects over the last three years, and around one-third reporting it was an element of half or more of their work in that span.
The survey suggests modular could be especially impactful for trade subcontractors. Whereas 59% said full volumetric modular had been used on at least 25% of projects in the last three years, 75% said it would be a part of at least that much in the next three. A similar rate of increase is seen with panelized modular. In both cases, trade contractors anticipate a bigger impact in coming years from modular than do general contractors/construction managers or engineers/architects.
Looking for Opportunity
Tri-M Group, LLC, a Kennett Square, Pa., electrical contractor, is watching with interest as modular becomes an outgrowth of sorts of electrical component pre-fabrication, an area where it has experience. Chief Estimator Marcus Kratz says Tri-M has had informal discussions with a neighboring firm, a growing modular wall builder, about someday partnering to provide electrical rough-in services on the units.
“The idea is that at some point we may see an opportunity for custom applications where the walls can be shipped as a final piece instead of builders having to put those components in at the construction site,” he says.
Modular is still too untested for the company to plan around it, Kratz says, but the concept makes sense and bears watching, especially in Tri-M’s northeastern U.S. market where factors that give it value are more acute. With workers hard to find and congested job sites difficult to manage, being able to build in a controlled environment, manage parallel production schedules, and deliver when needed is attractive.
“Logistics is one of the big concerns, where we don’t have the room to stockpile parts and pieces on site,” he says. “A real key driver of this is just-in-time delivery.”
Prefab electrical is a growing part of project delivery at Gillespie Electric, Inc., Greenville, Pa., and could be a gateway to modular construction opportunities, says Matt Sauers, chief estimator. Noting a recent Pennsylvania university hospital project that incorporated more than 500 factory-built patient bathroom modules, Sauers says it’s an approach that carries risk and opportunity.
“One of the big red flags is ensuring quality control, where you have something designed wrong and it’s installed and no one catches it,” he says. “But then on job sites today, you have crews constantly jumping around to complete things. You may only need five guys on site instead of 30.”
The Dodge study found trade contractors especially optimistic about modular’s ability to make their lives easier. They rated its potential impact on seven key project delivery touchpoints notably higher than GCs/CMs or design firms did. Improved safety, quality, and productivity got the most trade contractor mentions for “very high” impact, ranging from 39% to 27%.
Contractors who work with Skender Construction Co., a Chicago-based GC/CM, are enjoying a host of advantages by partnering on projects coming out of a Skender modular construction operation opened last year, says Pete Murray, president of manufacturing. One Chicago-based electrical contractor, along with other subcontractors, contribute pre-fab components and both factory and construction site labor to projects, resulting in more control and predictability for them while helping Skender deliver modular’s advantages to its clients, among them multi-family residential and medical clinic developers.
“They like it because they know what they’re going to build,” he says. “The MEP contractors we work with see that as an opportunity for steady, predictable work in a tightly controlled factory environment. But it’s a change of mentality where you’re not one of three low bidders but are in a more strategic relationship.”
Upending Contracting?
One of the dangers modular poses to subcontractors, however, is the chance that it slowly squeezes them out. A 2019 McKinsey & Company analysis of modular trends notes modular allows up to 80% of labor to be moved off-site, meaning some costly skilled labor could be caught up and therefore, “We would expect transitioning to off-site manufacturing to reduce labor costs on a project to up to 25%, and savings are more substantial when more of the high-value activities such as electrical, plumbing, and HVAC installation can be migrated.”
PCL Agile, the modular construction division of PCL Constructors of Canada, Inc., Edmonton, Alberta, mostly utilizes subcontractors, though it has adopted some “self-performance” tasks, says Division Manager Troy Galvin. Many subcontractors, though, are well down the prefabrication road themselves, understand the quest for efficiency in construction, and see advantages to adapting to modular’s demands, he adds.
“From an electrical standpoint, for instance, if we can bring more overhead work down to the ground level, that’s safer, takes less hours to complete, and means less wear and tear on workers’ bodies,” he says.
But if reducing on-site work becomes one of the primary drivers for modular, more of the off-site work could be captured by specialists in modular building and prefabrication. For a laboratory/office project for a global chemical company, IMC Construction, Malvern, Pa., outsourced construction of modules, including MEP racks and a central utility plant, to modular companies that in turn used specialized trade providers to perform the assembly work. Nevertheless, electrical contractor Tri-M, hired to do the on-site work, also got a piece of the modular work, building modular conduit racks that were installed in prefabricated duct banks.
“There was a lot of underground electrical on the project requiring some huge conduit,” says Bob Liberato, IMC project executive. “Tri-M had the racks all ready to go, which made it quicker and safer to drop them in, meaning less time for men in the bottom of a hole.”
The project is one of IMC’s biggest forays into modular, an area Liberato says will likely grow as the number and capabilities of modular manufacturers expands. Pending now for IMC in modular, he says, are potential contracts with a modular medical room designer and an office building and multi-family residential developer.
With predictions like McKinsey’s that modular could account for $130 billion of new real-estate construction in the United States and Europe in a decade (and 10% of industrial/infrastructure expenditures), it’s evident that more builders are slowly pivoting to modular. Galvin says it may only be an element of around 4% of construction starts now, but some predictions have that tripling in just the next three years. Should innovative, high-profile projects like the new Manhattan Marriott provide fresh evidence of modular’s capabilities and strengths, the fire under it could start burning hotter, pulling more builders off the sidelines and more specialty contractors into a potentially disrupted future.
It’s all enough of a muddle to lead the president and CEO of Egan Company, a Brooklyn Park, Minn., electrical and multi-trade specialist, to spin a vision of a world in which those trades operate differently as construction projects adopt more modular elements. It may not unfold this way, because modular’s net benefits could prove to be a mirage, but Duane Hendricks says it’s possible contractors could see project man-hour demands fall, mergers with other trades accelerate, and increased competition from manufacturing entities.
“For many, it could be a negative because it will be harder to compete, get work, and transition to becoming a modular fabricator,” he says. “But for larger contractors, this could be an opportunity, maybe through mergers, to move into a more predictable, less variable business. Modular is coming, and it will probably come fast when it does.”
Zind is a freelance writer based in Lees Summit, Mo. He can be reached at [email protected].
