Executive Summary

Modular construction is gaining significant momentum in North America, capturing about 6.6% of new construction starts in 2023 (approx. $14.6 billion in project value) – up from just 2.1% in 2015. By 2024, the North American permanent modular construction market is projected to reach $34 billion, with steady growth (~4.6% CAGR) as developers seek faster, cost-effective building methods. This surge is underpinned by urgent housing and infrastructure needs – for example, Canada’s government launched a plan in 2024 to add 3.87 million new homes by 2031, a target impossible to meet with traditional methods alone. Clearly, the market is primed for innovative modular solutions.

However, foreign modular building firms face steep market-entry challenges in the U.S. and Canada. Regulatory hurdles, from building code compliance to certification, can thwart newcomers unfamiliar with North American standards. Logistical complexities – long-distance shipping of volumetric modules, potential tariffs, and supply chain risks – add cost and uncertainty. Critically, trust and local credibility are often the deciding factors in winning projects: major North American buyers and developers are cautious with unfamiliar overseas suppliers for multi-million-dollar projects. In this context, having an on-the-ground presence isn’t just helpful – it’s increasingly essential. Studies show that 40% of B2B customers will only buy from a new supplier after meeting a sales representative in person. In the construction sector, where relationships and reliability are paramount, a local office can dramatically improve win rates.

This white paper provides an analysis for executives at foreign modular construction firms considering North American expansion. It validates and updates key data points with 2023–2025 sources, and makes the case that partnering with a local sales agency as a dedicated Canadian sales office can mitigate market-entry risks and significantly boost sales performance. We examine:

· Market Entry Challenges for Foreign Modular Builders: A detailed look at regulatory, logistical, and trust barriers in the U.S. and Canadian construction markets, with updated facts on codes, tariffs, and client expectations.

· Comparative Analysis: Direct Online Sales vs. Local Representation: An objective comparison of a direct-to-client approach versus establishing local representation, highlighting impacts on market penetration, compliance, and credibility.

· Quantitative Sales Impact of Local Sales Presence: Evidence and metrics showing how local presence translates into higher client conversion rates, faster sales cycles, and greater market share – including B2B buyer research.

· Case Studies: Updated real-world examples of foreign or international modular firms – both successes and cautionary tales – illustrating the outcomes of different market entry strategies. These include a Canadian-Asian partnership achieving North American code compliance, a European modular product successfully delivered by coordinating with local authorities, and a Japanese firm that vaulted into the U.S. top-five builders through local acquisitions.

· Strategic Recommendations for Market Entry via a Local Sales Office: Actionable guidance for leveraging a local partner like API as a springboard into Canada (and by extension the U.S.), including regulatory navigation, trust-building measures, and phased market development steps.

In summary, North America represents a huge growth opportunity for modular construction providers, but it demands a localized approach. A trusted local sales arm can be the differentiator that ensures foreign entrants meet local codes, deliver on time, and earn client confidence. Partnering with API as your Canadian sales office offers immediate market expertise, on-the-ground relationship management, and a platform to accelerate your North American expansion while minimizing risk. The following sections delve into each aspect in detail, backed by current data and industry examples, to inform your strategic decision-making.

MARKET ENTRY CHALLENGES FOR FOREIGN PREFAB AND MODULAR BUILDERS

With the large opportunity there are also some challenges worth considering. Entering the U.S. and Canadian modular construction markets as an overseas manufacturer entails navigating a complex landscape of codes, regulations, logistics, and business culture. Below we dissect the primary challenges – and why a nuanced understanding of these factors is critical for any market entry strategy:

1. Regulatory and Code Compliance: Building codes in North America are stringent and locally enforced. Every new building must comply with the local building codes in the jurisdiction where it’s erected, regardless of where it was manufactured. In practice, this means foreign-produced modules must meet U.S./Canadian standards for structural, fire, electrical, and plumbing systems. For instance, Canada requires an “off-site review” to prove factory-built modules meet code – typically achieved by certifying the manufacturing process under the CSA standard. Without such certification, authorities won’t approve projects in many provinces. Several jurisdictions (Alberta, Quebec, Yukon, etc.) explicitly require CSA certification for modular units. Similarly, in the U.S., state and local building departments insist that modular components be inspected and stamped by licensed engineers to comply with state building codes.

Meeting these standards can be daunting for a foreign firm. A case in point: citizenM Hotels (a Netherlands-based developer) sourced 228 modular hotel rooms from a factory in Poland for a project in Seattle. The European production practices initially did not align with Washington State’s code requirements. The solution was intensive coordination – the constructors worked closely with Seattle officials to modify production processes and documentation to U.S. codes. Thanks to this collaboration, the 2020 Seattle citizenM hotel’s modules were accepted, but it underscores the regulatory friction foreign providers face. The same case study notes another project – an Alt Hotel in Calgary – where modules built in Poland were shipped via Thunder Bay and successfully assembled in Alberta. Crucially, international products can be certified to meet Canadian standards, often by involving accredited third-party agencies in the inspection process. Engaging such agencies and local code consultants early is often mandatory for foreign manufacturers to obtain approvals.

2. Permitting and Approvals: Beyond technical code compliance, the permitting process itself can be challenging to navigate remotely. Each municipality may have different documentation requirements and procedures. Lack of familiarity with local permitting (and the necessary relationships to smooth that process) can result in delays. In North America’s fragmented regulatory environment, approvals that a domestic builder might expedite through local knowledge could become weeks-long hurdles for an outsider. Cross-jurisdictional communication is key – as seen in the citizenM Seattle project, where constant dialogue between the European factory, U.S. code inspectors, and city officials was needed. Without a local presence, maintaining this level of communication and responsiveness (often across time zones and languages) is difficult.

3. Logistics and Supply Chain Risks: Shipping entire building modules across oceans and continents introduces significant logistical complexity. Modules – often large, volumetric units – count as oversized cargo and are prone to transport damage if not expertly handled. A single high-rise project can involve moving hundreds of heavy modules; one mishap in transit can require costly on-site repairs. Long-distance shipping rates spiked (trucking rates rose ~12% from 2019 to 2020) and remain subject to fuel costs and global supply chain disruptions. For foreign modular suppliers, this volatility can erode the cost advantage of off-site construction.

There are also tariff and trade considerations. Import duties on building materials (steel, aluminum, lumber) or on finished prefab units can inflate costs. The Modular Building Institute (MBI), representing the industry, has openly opposed tariffs on prefabricated buildings and components, noting that such tariffs “increase the cost of construction, reduce affordability for housing, and hinder growth”. In a free-trade context like USMCA (United States–Canada–Mexico Agreement), modules traded within North America avoid tariffs, but a manufacturer shipping from outside (e.g. Asia or Europe) may face import duties unless they have a strategy (such as final assembly in Canada or the U.S.) to qualify for trade benefits. Compliance with customs and import regulations (such as proper HS codes for “prefabricated buildings”) is another administrative hurdle requiring expertise. In short, foreign firms must account for longer lead times, higher carrying costs for inventory in transit, and the need for robust logistics partnerships to ensure modules arrive on site intact and on schedule.

4. Local Competition and Market Preferences: The North American market has established domestic modular players and conventional builders who may view new entrants skeptically. Entrenched relationships often dominate construction procurement. Many projects (especially government or institutional builds) require bidders to have local references or completed projects. A foreign modular firm with no North American track record starts at a disadvantage in such bids. Market preferences can also differ – North American clients might expect different dimensions, finishes, or technical specs (imperial measurements, HVAC standards, etc.) than what a foreign design would assume. Adapting product design to local tastes and norms is usually necessary, which is hard to do without local market feedback.

5. Trust and Credibility Barriers: Perhaps the most subtle yet crucial challenge is building trust with customers. Construction is high-stakes: developers and end-users need assurance that the building will be safe, durable, and supported over its lifecycle. A foreign supplier might be perceived as riskier due to questions like: “Will they provide support if something goes wrong? Are spare parts or additional modules readily available? Do they understand local warranty and liability expectations?” The lack of a local office or representative can amplify these concerns. It’s telling that many countries require local representation to do business in construction – while the U.S. and Canada don’t mandate it by law, in practice a foreign firm without a local partner is often not taken seriously for large projects. As the Allianz Trade analysts note, partnering with a local company helps navigate local customs and make connections with customers and officials more quickly. In the same vein, North American clients often feel more secure if there is a local entity – a domestic company or branch – that is accountable. This provides a sense of recourse; if issues arise, there’s someone nearby to address them rather than a distant supplier overseas.

In summary, foreign modular builders face a combination of technical and interpersonal challenges: they must deliver a product that meets all local technical requirements and also convince stakeholders of its reliability. The risk of missteps is high if attempted in a purely remote manner. Each of the above factors – from code certification to client trust – suggests that a ground-level presence in the market is invaluable. The next section will contrast two approaches to market entry in light of these challenges: a direct online/export strategy versus establishing local representation, and how each stacks up in overcoming these hurdles.

Request the full white paper: Top 10 Market Entry Strategies - entering North America’s prefab and modular market, overcoming challenges, and driving measurable sales results: