E-commerce companies and manufacturing units look forward to prefabricated construction

Published On: March 2018

Prefabricated Buildings Market Introduction

Prefabricated buildings are constructed using prefabrication structures and components. These components are factory built and are later transported on-site to be assembled into a building. This saves the construction time and, thus, have gained popularity across applications such as industrial construction, commercial construction, and residential construction.

Many organizations especially in Europe and Asia Pacific region have witnessed expanding share. Asia Pacific being one of the fastest growing markets, companies are grabbing opportunity and are keen on expanding their units in this region. Moreover, there are other small and medium scale players that are able to generate revenue from the local markets. Astron Buildings, Kirby Building Systems LLC, Lindal Cedar Homes, Inc., Ritz-Craft Corporation, Modern Prefab Systems Pvt. Ltd., Par-Kut International Inc., United Partition Systems Inc. has been recognized as the global leaders with serving the broad range of prefabricated buildings products.

Establishment of SEZs

Special Economic Zones (SEZ) are established to promote industrialization and economic growth through sustainable development. Such zones, in last decade, have been able to generate employments as well as helped the country achieve structural transformation. Countries, such as India and China, have emerged as the destinations that attract lot of SEZ investments and there have emergence of many such zones since 2008. As per Ministry of Commerce (India), SEZs can enjoy tax breaks, simplified procedures, less regulations and restrictions, exemption from customs and duties, to promote exports of goods and services, encourage foreign investment, create employment opportunities, and to develop Infrastructure facilities. Due to these government policies, the number of SEZs in India is growing significantly. This will boost demand for the prefabricated buildings in India.

Future Trends in prefabricated buildings

E-commerce industry deals with the buying and selling of goods and services mainly through internet. According to International Post Corporation, E-commerce sales globally will continue to grow in 2017, rising at a rate of 23% to reach USD 2.3 tn. China and the U.S. together are expected to represent almost 70% of global e-commerce sales in 2017. While e-commerce in the U.S. will grow by 15% in 2017, the Asia-Pacific region is expected to have a 30% growth rate in 2017. This e-commerce growth in Asia Pacific is particularly driven by very high mobile commerce sales.

The average population in APAC region has increased their spending on e-commerce platforms. Even in countries like Japan, where retail sales showed stagnation, e-commerce continues to grow. Higher internet penetration, and mobile usage has enabled consumers to purchase more frequently. This has also led to the retailers improving their shipping, storage and delivery methods to expand their reach in the region. This in turn is expected to spike the demand for prefabricated construction solutions to build storage shelters, warehouses, and pickup and drop location shelters for such e-commerce companies.

The Indian manufacturing sector is projected to reach USD 1 trillion by 2025. This would contribute approximately 27% to 30% of total GDP. The manufacturing industry exported around INR 1,144.33 billion in August 2016 and accounted for 70-75% of share of total exports in the same year. Also under “Make in India” campaign, the government is focusing on expanding manufacturing plants. For instance, India is fast emerging as a global hub for sourcing auto parts. It has registered a market size of USD 39 billion in the 2015-16 recording a growth rate of 8.8% during the same year. Under “Make in India” campaign, the government has target to make a world class automotive manufacturing hub. Also the manufacturing industries are growing at a moderate growth rate. As a result, the requirement of flexible and fast construction would increase in near future. This will upsurge the prefabricated construction in manufacturing sector.

Mergers & Acquisitions – Growth strategy

Extensive growth in prefabricated buildings market has brought to light that mergers & acquisitions by key players, is a key strategy adopted extensively by the players with a share of 42.86%, to expand their product portfolio and meet expanding customer base. The market of prefabricated buildings is governed by the increased expenditure on infrastructure and construction activities. The demand of such prefabricated buildings have become more popular due to less time consumed in construction and minimal wastage. Thus the market requires constant product innovation and development. Furthermore the companies are investing heavily in expanding its presence across borders. The increasing demand and private construction has led to investment by manufacturers to expand the market share and brand name.

Algeco believes in organic balanced growth with greater flexibility and effort to identify trends and opportunities. The company is focusing on mergers & acquisitions along with partnerships & collaborations as their major growth strategy. For instance the company successful closed acquisition of all of the shares of Touax Solutions Modulaires SAS in 2017.