Sustainable Real Estate and Modular Housing

Sustainable Real Estate and Modular Housing

Author | Source

Severin Renold

Weissknight Corporate Finance


Real Estate, Mobile Housing

Blog only available in English


Real Estate Market


Real estate is a significant component of the economy’s capital stock and households’ wealth, which serves as both a crucial input for producers and providers of residence. Investment in real estate can be categorized according to its use as either commercial or residential.

  • Commercial real estate typically accounts for around half of business assets whilst residential real estate constitutes one-third of household net worth.

As a result, the construction sector lies in an influential position as a significant contributor to the business cycle.


Overview of the Construction Industry

The construction industry, and its broader ecosystem, are the foundation of our economies and are essential to our daily lives.

  • However, the industry also has performed unsatisfactorily in many regards for an extended period of time. The COVID-19 pandemic may be yet another crisis that wreaks havoc on an industry that tends to be particularly vulnerable to economic cycles.
  • The construction value chain includes a wide range of economic activities, going from the extraction of raw materials, the manufacturing and distribution of construction products up to the design, construction, management and control of construction works, their maintenance, renovation and demolition, as well as the recycling of construction and demolition waste.
  • As such, the construction sector plays a vital role in delivering the global goals for smart, sustainable and inclusive maturation.


Construction, which encompasses real estate, infrastructure, and industrial structures, is the largest industry in the global economy, accounting for 13% of the world’s GDP.

  • According to Global Construction, the volume of construction output will grow by 85% to $ 15.5 trillion worldwide by 2030, with three regions – China, the US and India – leading the way and accounting for 57% of all global growth.
  • In Europe more specifically, it generates about 9% of GDP (so a market worth 1.5 trillion Euro) and provides 18 million direct jobs.


Construction Related Spending


The lagging performance of the construction industry is a direct result of the fundamental rules and characteristics of the construction market and the industry dynamics that occur in response to them. Cyclical demand leads to low capital investment, and bespoke requirements limit standardization. Construction projects are increasingly complex, and logistics must deal with heavy weights and many different parts. The share of manual labour is high, and the industry has a substantial shortage of skilled workers in several markets. Low barriers to entry in segments with lower project complexity and a considerable share of informal labour allow small and unproductive companies to compete. The construction industry is extensively regulated, subject to everything from permits and approvals to safety and work-site controls, and lowest-price rules in tenders make competition based on quality, reliability, or alternative design offerings more complicated.


The construction industry was already starting to experience an unprecedented rate of disruption before the COVID-19 pandemic. In the coming years, fundamental change is likely to be catalyzed by transformations in market characteristics, such as scarcity of skilled labour, persistent cost pressure from infrastructure and affordable housing, stricter regulations on work-site, sustainability and safety, and evolving sophistication and needs of customers and owners. Emerging disruptions, including industrialization and new materials, the digitalization of products and processes, and new entrants, will shape future dynamics in the industry.


Customers and owners are increasingly challenging, and the industry has seen an influx of capital from more savvy customers. Client demands are also evolving regarding performance, TCO, and sustainability: smart buildings, energy and operational efficiency, flexibility and adaptability of structures will become higher priorities. Expectations are also rising among customers, who want simple, digital interactions as well as more adaptable structures.


Change in real estates market customer demand


Overview of the Challenges of this Industry

Towards a zero-emission, efficient, resilient building and construction sector.


The EU Member States retain the competency to regulate issues such as safety, indoor air quality, noise and radiation. They also have the responsibility to implement European legislation. Local authorities have an essential role to play in the promotion of low-carbon and resource-efficient cities, building on the involvement of stakeholders and citizens.

  • Sustainable construction can be defined as a dynamic between developers of new solutions, investors, the construction industry, professional services, industry suppliers and other relevant parties towards sustainable development.


  • Sustainable buildings combine improved energy performance and reduced environmental impact throughout their life cycle. Their users enjoy better health, well-being and productivity gains that translate into cost savings. Buildings have the potential to reach a 90% reduction of their greenhouse gas emissions by 2050.


  • The EU is aiming for a 30% cut in its annual primary energy consumption by 2030. The building sector, together with public transportation, has tremendous potential for savings.


Construction Worker


CO2 emissions from the building sector are the highest ever recorded:

This industry must eliminate all CO2 emissions from the built environment by 2040 to meet 1.5° climate targets.

  • The built environment generates nearly 50% of annual global CO2 emissions. Of those total emissions, building operations are responsible for 27% annually, while building materials and construction (typically referred to as embodied carbon) are responsible for an additional 20%.


  • In 2040 approximately 2/3 of the global building stock will be edifices that exist today. Without widespread building decarbonization across the globe, these facilities will still emit too much CO2 in 2040, and we will not achieve the Paris Agreement’s 1.5°C targets.


  • Global building floor area is expected to double by 2060. Achieving zero emissions from new construction will require energy-efficient buildings that use no on-site fossil fuels and are 100% powered by on- and/or offsite renewable energy.


  • Just three materials – concrete, steel, and aluminium – are responsible for 23% of total global emissions (most of these are used in the built environment). There is an incredible opportunity for embodied carbon reduction in these high-impactmaterials through policy, design, material selection, and specification.


  • To achieve a net-zero carbon building stock by 2050, the IEA estimates that direct building CO2 emissions would need to decrease by 50% and indirect building sector emissions decline through a reduction of 60% in power generation emissions by 2030. These efforts would need to see building sector emissions fall by around 6% per year from 2020 to 2030. For comparison, the global energy sector CO2 emissions decreased by 7% during the pandemic.


  • Investment in energy efficiency in buildings is picking up again, but the speed of change lags behind overall building construction investment. Building decarbonization commitments are growing. But they need to rapidly increase in scale and pace to achieve the Paris Agreement goals.


  • The time for action to decarbonize the existing and future global building stock is now.




Overview of the Solutions to address these Challenges

Development and implementation of new technologies are needed to reduce the demand for construction materials and enable their circularity and contributions to resilience.

  • This includes designing innovative circular materials and products that can be fully recovered in closed-loop processes; intelligent selection of materials for components and structures with minimized life cycle impact using material libraries; rightsizing and light-weighting of components and systems; consideration of thermal properties of construction materials in relation to regional needs; structures with extended lifespans, suitable for deconstruction and reuse of materials and components.
  • It is equally important to include material processing and fit-for-purpose cement based on local feedstocks produced with less energy, emissions, and impact; closed-loop production cycles. Activities such as manufacturing and construction use digital systems to track materials and prevent excessive use.


Adopting offsite (modular) construction for disassembly and enhancing additive manufacturing with closed-loop materials for waste avoidance will further result in material efficiencies.


Offsite manufacture for construction is a manufacturing-based approach involving the production of components of buildings (e.g., foundations, roof cassettes, walls, floors, kitchen, and bathroom units) or whole (modular) units of a building in a factory for installation on-site. Offsite construction manufacturing is increasingly associated with greater use of digital technologies at different process stages.

  • In recent years, a wide range of advantages of deploying modular homes has been put forward. The most crucial of these relates to tackling housing shortages and addressing housing affordability problems, low housing quality and maintenance issues.
  • In light of the housing shortage and the failure of traditional housebuilding approaches to deliver new homes at the required rate, a number of governments/countries worldwide have identified a need for innovation in the construction industry. New developments in construction aim to enhance productivity, speed up delivery and overcome delays, reduce the cost and use of on-site labour, reduce the environmental impacts of construction, and improve the overall quality of the end product.


The need to address sustainability challenges has been brought to the fore on the agenda of the whole sector. Emphasis on energy efficiency standards, and commitments to reducing carbon emissions across the construction industry, also derive from the world’s leading governments‘ commitment to achieving carbon net-zero by 2050.


Mobile Homes


There are numerous benefits of non-traditional and offsite construction, including the speed of on-site operations; fabrication quality; safer working conditions; material efficiency, reduced waste; and less noise and disruption for residents and neighbours:



  • Modern construction methods are expected to improve industry productivity, although many developers experimenting with modular home building have yet to find the process either quicker or cheaper than a traditional build. It is expected that if such methods could be deployed at a grander scale, they may provide an opportunity to deliver new homes more quickly, with higher quality and at a potentially cheaper cost than traditional methods. Such advantages are based on high-precision, factory-based approaches to construction. Increased speed of construction means that offsite manufacture for housing construction could be a valuable tool in attempts to increase the numbers of new-build housing units at a rate fast enough to meet government housing supply targets.


  • The automated processes, offsite factory production of components, digital systems and other innovative elements that are a part of the use of offsite manufacturing require less time and input from construction workers on-site. They could therefore help address the labour shortages the construction industry is currently facing.


  • The traditional housebuilding approach involves assembling multiple components (e.g., bricks, windows and door sets, etc.) in an open-air, site-based environment by workers from various trades and sub-trades. When numerous subcontractors are involved in the construction process, on-site rectification of design problems and poor inter-trade coordination often result in increased reworking, contributing to poor overall quality. Prefabrication of components or structures can reduce the need for on-site design alterations and reworking late in the construction process, both of which are time-consuming and costly.


  • Offsite manufacture of housing and modern methods of construction can create opportunities for better build quality.


  • The current model of construction is highly localized, whereas modular construction involves the outsourcing of many stages of the construction process to specialized facilities or factories, thereby reducing the time taken for installation on site. Modular construction creates less disruption for the local area and residents, including reductions in noise, dust, and road blockages.


The potential for offsite and modular technologies to help tackle the problems related to the housing crisis and open up opportunities for advances in the construction sector is widely recognized. These innovations could deliver faster construction speed, better quality of housing and could provide a ‚golden thread‘ of information needed for effective management and maintenance of housing.


Construction View


Global Tiny Homes Market


Tiny homes are full-fledged dwelling units that are less than 500 square feet and have the basic amenities of a permanent home. They have evolved over the recent decades and come in many styles and designs, appealing to people from all walks of life, retirees, starter home-seeking couples, and minimalist young people, among others. Tiny homes offer a wide range of quality, affordable, and environmentally friendly housing that can be used to meet personal dreams, financial and lifestyle goals, and community needs.

The market share is expected to increase by USD 3.57 billion from 2021 to 2026, and the market’s growth momentum will accelerate at a CAGR of 4.45%. In 2022, North America is expected to dominate the market due to changing lifestyles and the rise in investments and initiatives towards the construction of tiny homes for both commercial and residential.


The key factor driving growth is its affordability by the mass section of the population. Tiny homes are recognized as the most affordable housing system, preferred especially by millennials as recent studies show. Tiny homes are just a fraction of the price of traditional homes and can be designed based on customers‘ requirements. Increasing usage of tiny homes in tourism activities is another important driver for the global tiny homes domain. The rising inflation leading to a rise in living costs and the increasing popularity of affordable housing solutions, and the tiny-house movement are expected to propel the development of the global sector.


Tiny Homes Market Size


Tiny homes do not require permits in many parts of the world as they are considered vehicles depending on their size and specificities. Many families have invested in tiny houses and then rented them to people. Some service providers even rent their tiny homes in various architectural and decor styles. These styles depict modern or minimalist to rustic or traditional as a unique alternative to the hotel stay. They equip the tiny homes with a kitchen, living space, bathroom, and sleeping area. Various factors, such as globalization, internet penetration, and growing social media influence, have boosted the demand for tiny homes. Furthermore, new lifestyles, higher disposable incomes, and increasing consumer environmental awareness create demand. This, in turn, is expected to act as a driver for the growth of the global market in addition to the recently emerging trend for mobile houses, which are easier to set up and dismantle and therefore also offer short-term possibilities for use.