On Monday, Greystar will open a modular apartment complex of six buildings with amenities such as a gym in Coraopolis, Pennsylvania, about 16 miles west of Pittsburgh, offering 312 apartments for rent in one of the largest multifamily modular projects in the United States.

It is the first property at Greystar's Knox, Pennsylvania modular plant, with six more projects in the works.

Modular homes are assembled at the factory and shipped to the site for stacking. (Courtesy of Greystar)

The advantages are faster construction, less labor, and lower material costs, but they face challenges such as transportation costs, financing and regulatory approvals, though use is steadily growing.

According to the Modular Building Institute, its annual market share will more than triple to 6.6% from 2015-2023.

Developers such as Related, Amherst and Marriott hotels are already experimenting. McKinsey predicts global modular building revenues will grow significantly by 2040.

Greystar, based in Charleston, South Carolina, manages more than 954,000 apartments in North America.

According to Andy Meister, general manager of its modular business, Findlay construction is about 40% faster than conventional projects, with one-third the labor, 90% less waste, and construction costs about 10% lower than nearby conventional projects, with apartments ranging in size from one to three bedrooms. Its modular properties are located within a roughly 600-mile radius of the Knox plant.

Modular development has many constraints, such as construction practices that require more prep work, lenders that are skeptical of financing due to unfamiliarity, financing that requires more up-front capital deposits sooner, and high interest rates and low loan amounts.

Greystar has worked hard to educate lenders on the unique financing structure of modular projects, and regularly organizes trips to the Knox plant to give lenders a clear and thorough understanding of the projects they are financing.

However, modularity currently faces regulatory hurdles, with building codes and inspection standards varying from jurisdiction to jurisdiction, and Greystar needs to get projects licensed and manufacturing centers individually certified. The Modular Building Institute is promoting specific standards, which have only been adopted by some states.

Despite the problems, enthusiasm for modular construction is growing, and its popularity may be inevitable given the U.S. housing problem.