The mobile and modular industry utilization has been on a steady decline since 2004. Utilization in 2009 exhibited a decrease of 10% over 2008. According to the Modular Building Institute (MBI), this decline is a result of the overall economic recession in all areas of the country, and especially in the construction sector. This has resulted in a significantly lower projected fleet spending rate, with many companies indicating that minimal to no fleet additions are planned for 2010.
The following figure illustrates the 13–year utilization rate trend of the mobile and modular industry.
Commercial modular units are generally non–residential, factory–built units capable of being transported from one location to another and are built to meet federal, state and local codes. There are three basic types of modular units: mobile offices, relocatable classrooms and modular buildings. Mobile offices, also referred to as trailers, are single or double wide factory–built temporary units that are generally leased on a short–term basis. Relocatable classrooms are generally single or double wide units built to serve the educational market. Modular buildings are multi-unit (three or more) factory-built complexes typically leased for longer periods of time.
Although the industry primarily consists of small, privately-owned, single facility operations, Modular Space Corporation and Williams Scotsman continue to dominate the industry. Participants within the industry include independent manufacturers that may sell only to dealers or also to retail customers, independent dealers and suppliers.
Mobile offices are utilized in an array of industries and for a variety of purposes, including construction, government, corporate, educational, in-plant and general commercial use. Mobile offices are often built based on a standard floor plan with standard features. Section modulars differ from mobile offices in that they can be designed and built specifically for the initial end-user. Historically, section modulars have been used as hospital and diagnostic healthcare facilities, banks, commercial office buildings, educational facilities, daycare centers and correctional facilities as well as in a variety of high-tech fast-growing industries. The major markets served by industry dealers primarily consist of general office, education and commercial industries.
Due to the nature of the business, the durability and flexibility of the product allows the commercial modular industry to target a vast number of end-user markets. Hence, although participants may face challenges within the modular industry, economic slowdowns occurring within other industries would most likely not have a significantly adverse effect on industry participants’ sales and leasing. The ability to relocate to more prosperous cities or industries as opportunities arise makes mobile offices and section modulars a highly flexible and secure investment. Competition typically occurs on a local or regional level due to the need to respond quickly to customer requirements, the cost of transporting units and variations in building codes.
According to the MBI, in 2009 the average fleet age was 6.25 years with units selling for approximately 105% of original cost. Over the period of 1997 to 2009, the 12-year average fleet age was 7.25 years, with a mean average selling price of 102% of original cost. Profitability within the industry is primarily driven by leasing economics rather than unit sales. In 2009, approximately 53% of dealer gross revenue was sourced from rental income followed by the sale of new units.
Industry growth is driven by a confluence of macroeconomic factors. General population shifts and demographic trends generate the need for temporary space. Local and state government regulations regarding classroom space and capacity as well as the increasing acceptance of modular classrooms and buildings as flexible and cost-saving space solutions are among the factors driving the growth of the modular mobile industry.
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