"Stats & Facts:
An Industry on the Move -
2001 MBI Survey Results"
The President's Message
September 2002
by Michael I. Roman

The Commercial Mobile Office and Modular Building Industry includes hundreds of manufacturers and dealers involved in the manufacture, sale, leasing and servicing of a wide variety of structures. During 2001, the industry generated an estimated $5.5 billion gross revenues.

The industry can be divided into two major segments: single and doublewide factory built buildings (together referred to herein as "mobile offices") and multi-unit (three or more) modular buildings.

Mobile Offices vary in size, with the smallest unit measuring 8' x 16' and the largest 18' x 84'. Typical construction is wood frame mounted on a steel chassis, with fixed or removable axles and hitches. In addition to construction site offices, mobile offices are used as classrooms, in-plant offices and general commercial offices. Specialty mobile units also function as office/storage combinations, toilet units, showers, decontamination units, change units, restaurants, diners, fast food buildings, equipment shelters and branch banks.

Unlike mobile offices, which generally offer standard floor plans and standard features, modular buildings are often designed and built to meet the specific requirements of the initial end user. Modular buildings provide high quality, relocatable or permanent solutions to the space demands of a broad client base. Construction generally involves steel frames, steel studs and concrete floors. Simultaneous manufacturing and site work often allows modular building occupancy to occur much faster than traditional methods of construction. A shorter construction period can reduce both construction period financing and supervision costs and can put the building to work sooner. Nearly all engineering, design, and architectural disciplines are part of the manufacturing team, thereby eliminating the time consuming involvement of outside engineers and consultants.

Combining the design flexibility of traditional building methods with the quality of controlled manufacturing, the industry has refined a construction process which provides speed, economics and architectural aesthetics. Historically, modular buildings have been used as hospital and diagnostic health care facilities, educational facilities, daycare centers, correctional facilities, banks, commercial office buildings and in a variety of high tech fast-growth industries. These practical, time and money saving alternatives to site-built buildings effectively meet the specialized needs of diverse businesses.

Customers served by modular buildings include federal, state and local governments, school boards, corporations, non-profit organizations, Indian tribes, quasi-government entities like the U.S. Postal Service, as well as individuals, partnerships and sole proprietorships. Other uses include medical facilities, airport facilities, military installations, restaurants, retail businesses and remote telecommunications switch stations. Some facilities are used as an adjunct to existing buildings while others are stand-alone buildings. Flexibility and reutilization are the hallmarks of modular buildings. Unlike structures built on-site which generally have fixed utilization and occupancy design, modular units fulfill a unique function of reutilization that is not site specific. It is not unusual to have a modular building serve a wide variety of users during its long life span.

Since users of the relocatable buildings are diverse, specific industry slowdowns do not significantly impact sales and leasing companies. Certain market segments of the industry are counter-cyclical. This is particularly true of education, prisons and governmental agencies that want to transfer funding for facility needs from capital expenditures to operating budgets. This concept also applies to industries which may want to expand, but are uncertain about the long-term strength of their growth. Budget driven companies often opt for lease facilities. In such cases modular buildings offer benefits and options without long-term capital commitments.

For the past ten years, the Modular Building Institute has conducted an annual survey of all member and non-member manufacturers and dealers of mobile offices and modular buildings for commercial applications. The 2001 results are summarized for wholesale manufacturers, manufacturers-direct (these manufacturers also sell and lease retail) and retail dealers.

WHOLESALE MANUFACTURERS

During 2001 nineteen respondents reported producing 16,616 units, a 20% increase from the total reported a year earlier. The median average was 600 units up slightly from the 594 reported in 2000. Thirty-nine percent (39%) of the units produced were doublewides, 26% were singles, 20% were units for building complexes of four or more units, 9% were triples and 6% were units for multi-story building complexes.

The 16,616 units totaled 10 million square feet or just over 600 square feet per unit. Median average production per wholesale manufacturer was 336 thousand square feet. Gross sales reported in 2001 was $303.3 million or $12.3 million per manufacturer based on the median. Based on cost, 38% of 2001 gross sales were single story complexes for the general office market, 24% were for education and 17% were for the construction market. The remaining 21% was divided between residential (dormitories 11%); health care (3%) and daycare, restrooms and other specialty units.

Based on a total of 145 wholesale manufacturers in the U.S. and median averages, wholesale manufacturers contributed the following during 2001:

• Gross Sales: $1.78 billion
• Units Produced: 87,000
• Square Feet Produced: 48.7 million

Using the 2001 estimates for wholesale manufacturers, each unit has an average cost of approximately $20,500 and a per square foot cost of approximately $36.55. The actual per square foot cost reported by the 2001 respondents ranged from $19.11 to $168.32. The calculated averages and reported ranges are virtually unchanged from the prior year.

MANUFACTURER DIRECT

During 2001 ten respondents reported producing 5,063 units with a median average of 492, up significantly from the median of 263 a year earlier. Singles accounted for 29% of 2001 production; doubles 21%; triples 10%; single story building complexes 17% and multi-story building complexes 23% of 2001 production.

The 5,063 units represented 2.4 million square feet with a median average per manufacturer-direct of 202 thousand square feet. Gross sales reported in 2001 were $250.7 million with a median of $20.5 million. Based on cost, 46% of 2001 gross sales were for man camps, 18% for education, 13% for single story building complexes and 19% for equipment shelters. Daycare (1%), health care (1%), banks (1%) and mobile offices (1%) comprised the balance of 2001 end use markets.

Based on a total of 93 manufacturers-direct in the U.S. and median averages, manufacturers that sell to both dealers and retail customers contributed the following during 2001:

• Gross Sales: $1.9 billion
• Units Produced: 45,756
• Square Feet Produced: 18.8 million

Using the 2001 estimates for the manufacturing portion of the manufacturers-direct revenues, each unit had an average cost of $41,500 and a per square foot cost of approximately $100 per square foot. These averages are much higher than the wholesale counterpart given the nature of the projects undertaken by the manufacturers-direct. In addition, these averages undoubtedly include ancillary services which are not undertaken by the wholesale manufacturers.

TOTAL MANUFACTURER

Adding the sales, units produced and square feet produced in 2001 for both wholesale manufacturers and manufacturers-direct yields an estimate of the manufacturing contribution to the industry in 2001:

• Gross Sales: $3.68 billion
• Units Produced: 132,756
• Square Feet Produced: 67.5 million

DEALERS

Seventeen dealers reported 2001 gross revenue of $1.16 billion with a median average of $5.1 million. If sales of new units are ignored because they were counted on the manufacturing side, dealer gross revenues in 2001 drops to $967 million and the median drops to $1.6 million. Gross revenues other than sales of new units arise from rents, sales of used units and delivery, installation and other services.
Based on an estimated 203 dealers in the U.S., and excluding gross sales from new sales (since this was counted on the manufacturing side), the dealer contribution to the industry in 2001 was $324.8 million. This calculation highlights the problem of dealing with small samples and averages. If $967 million on non-new sales gross revenue was reported by seventeen respondents to the survey, gross revenues (excluding sales) cannot be $324.8 million as calculated above. Assuming the two largest respondents together have 45% of the total U.S. market, dealer contribution to the industry in 2001 from all sources other than the sale of new units was $1.8 billion.

MANUFACTURER-DIRECT AS DEALERS

Manufacturers that maintain lease fleets or sell direct to customers are designated manufacturer-direct by the industry. The manufacturing contribution was detailed above. Revenues from lease fleets and ancillary services are reported separately. Gross lease fleet revenue from manufacturers-direct was $32.6 million in 2001 with a median of $670 thousand. Based on 93 industry participants, the estimated contribution from manufacturers-direct on the dealer side was $62.3 million.

SUMMARY

Based on results reported to the MBI for calendar year 2001, median averages and an estimate of industry participants, the MBI estimates the industry generated $5.54 billion of gross revenues from the following participants:

The five and one-half billion revenues generated by the industry in 2001 come from sales, leasing and related services for single units (31.4%); doublewides (27.6%); and modular buildings (41.0%). Thus, the mobile office side of the industry contributed 59% of 2001 gross revenues while the modular building side contributed 41% of the total.

Finally, the $5.5 billion gross industry revenue in 2001 was derived from the following market segments. The general office market accounted for 31.6% of 2001 revenues as reported by the wholesale manufacturers, manufacturers-direct and dealers. Education represented just over one-quarter (25.2%) while the construction office trailer market constituted 14.8%. Man camps and dormitories contributed 17.9% of 2001 gross industry revenues, primarily from the manufacturer-direct companies. Health care contributed 1.7%, while all other building uses accounted for 8.8%.

Michael I. Roman is the chief executive officer of Resun Leasing Inc. headquartered in Dulles, Va. He also is a past president of the Modular Building Institute. He can be reached at mroman@resunleasing.com.

Copyright © Modular Building Institute, September 2002.