Current status and future trends of the international prefabricated building industry

Prefabricated buildings, as a sustainable building solution, are receiving more and more attention worldwide. Prefabricated buildings, also known as industrialised building systems (IBS), are often described in some countries as a potential solution for sustainable building processes, especially when combined with the circular economy. Despite the increasing number of publications on prefabricated buildings and the circular economy in the construction industry, there is a lack of studies discussing the integration of prefabricated buildings with the circular economy and the future direction of this strategy. Therefore, this paper will review the current literature on prefabricated buildings and circular economy approaches and map future trends in prefabricated buildings and circular economy.

The prefabricated buildings industry is rapidly expanding globally, especially in China. in 2016, the Chinese prefabricated buildings industry achieved a 392% year-on-year growth in market size, with a 57% increase in the cumulative area of new prefabricated buildings. However, compared to developed countries (90% in the U.S. and Japan, and 85% in France), China's prefabricated housing penetration still has significant growth potential. Nonetheless, the cost of prefabricated panel houses is still higher than that of traditional cast-in-place buildings, mainly due to the low capacity utilisation of prefabricated component factories, a single business model, and the fragmented industrial distribution of the companies involved.

In the international market, the demand for prefabricated buildings is growing and the global modular and prefabricated buildings market is expected to be valued at USD 254 billion by 2032, growing at an estimated CAGR of 5.7% from 2024 to 2032. This growth is fuelled by increasing demand for affordable housing and rising global investments in healthcare and commercial infrastructure. Rapid urbanisation and industrialisation is expected to increase the number of new projects, especially in the commercial and industrial sectors, which will drive the expansion of the global construction industry. Technological advancements in the construction industry and benefits of modular construction such as faster building schedules, reduced costs, greater flexibility, reusability, and less material wastage are driving product demand.

Challenges faced by the prefabricated buildings industry include fluctuating raw material prices and logistics and transportation issues. Modular construction is mainly carried out in rural areas where labour is cheap. However, transporting completed modular buildings over long distances can be expensive. Truck use regulations, such as weight limits and other restrictions, further add to the difficulties. Nonetheless, the prefabricated housing industry continues to grow strongly, particularly in Europe and North America, where market leaders are adopting strategic steps, such as mergers, acquisitions, partnerships, and collaborations, to consolidate their market positions and meet growing consumer demand.