Offsite / Modular Construction: Shifting into Turbo Growth Mode Through 2030

Construction Supply Chains in 2025: Less Chaos, Same Systemic Flaw

Construction today is no longer “just” about concrete, steel and bricks. It is about data, risk – and very deliberate cost management.

After the brutal price shocks of 2021–2022 many people sighed with relief: “Well, that’s over.”
It isn’t. It has only changed shape.

Global analyses still expect construction costs to rise by around 3–4% in 2025. That looks like a “moderation” compared to the post-covid spike, but it is growth on a very high base. Anyone comparing to fixed-price contracts signed before 2020 is still watching a pile of money burn.

Construction remains a key part of the economy: in OECD countries it typically accounts for 4–6% of GDP, and one construction job indirectly generates roughly two additional jobs. In plain language: if we mismanage supply chains and costs in this sector, the whole economy pays the price – not just contractors.

1. Geopolitical roulette: prices are calmer, risk is not

The 2021–2022 period showed everyone what happens when a system is built for decades on the principle of “cheapest from anywhere”, and then a pandemic, a war, logistics chaos and tariff conflicts all arrive at once. Annual price increases of 20–30% were not business risk – they were a lottery.

Between 2023 and 2025 material prices have fallen from their peaks in many markets, but:

• we are still operating on a structurally higher cost level,

• geopolitical risk – tariffs, sanctions, trade wars – has become embedded in the system,

• financing is more expensive, investor appetite more cautious.

In this environment, whoever still just “puts a margin on the offer” instead of managing a full risk picture is not an entrepreneur – they’re a gambler.

2. Nearshoring: not a miracle weapon, just forced sobriety

“Nearshoring” – bringing production and supplier capacity closer to Europe – is not a buzzword. It is a rational response to a more unstable world. Central and Eastern Europe has become a natural target for this logic: lower relative cost levels, good geographic position, adequate skills.

But here comes the uncomfortable part that many prefer to ignore:

• Nearshoring ≠ automatic cheapness. Closer production often means more expensive labour, stricter regulation, higher energy and environmental costs.

• Nearshoring ≠ risk-free. If the host region is politically or institutionally unstable, supply risk does not disappear – it simply changes shape.

• Nearshoring + weak institutions = risk premium. Investors always price the cost of an unstable regulatory environment – either as lower investment volumes or higher required returns.

If someone in Hungary still believes that “we are in the middle of Europe and labour is cheap” is enough to win complex supplier decisions, they have not understood that in 2025 these decisions are made with risk models, not with a wall map and a marker.

3. Prefabrication and industrialized building: answer to chaos – or just a new hype?

Prefabrication, modular construction and industrialized building methods are no longer marginal curiosities; they are real strategic responses:

• In some Northern European countries, more than 90% of single-family and semi-detached homes are built using some form of prefabricated system.

• European reports on prefabrication point to 20–50% shorter build times and significant material savings compared to traditional on-site construction.

• Off-site production is increasingly used as a tool to tackle housing shortages and break the cost spiral.

The dominant narrative today is that industrialized construction:

1. Improves cost control (less waste, shorter duration, lower exposure to on-site disruptions).

2. Responds to labour shortages, because factory production needs fewer but more skilled workers.

All of this is true – on paper. Reality starts where the brochures end:

• If regulation, permitting and standards do not keep up with technology, prefabrication can die on exactly the same bureaucratic altar as traditional projects.

• If investors still think only in “cheapest price per square metre”, they will not pay the initial premium of industrialization – even if it would generate larger savings over the life cycle.

• If the state does not create stable, predictable long-term project pipelines, high-capacity factories simply won’t invest locally.

Industrialized construction is therefore not a tech gadget. It is an institutional issue: contract culture, regulation, standardization, long-term programmes. Without these, it is just expensive marketing.

4. Labour shortage: not a “temporary disturbance” but a structural problem

European analyses are fairly consistent: the shortage of skilled construction labour is persistent and worsening.

From a cost-management perspective this means:

1. Labour cost is no longer “just one line in Excel”, but a strategic factor. If there are too few good professionals, wages rise in a spiral while quality fluctuates.

2. The cost of delays is often higher than the cost of higher wages. Time overruns eat into financing, overhead and reputation.

3. Industrialization and digitalization are not optional add-ons, but conditions for survival. Competing with manual, fragmented on-site work against industrialized systems is like trying to run on the motorway with a horse.

In Hungary the situation is further complicated by the post-2008 crisis and the wave of emigration in the last decade:

• the share of young workers in construction is low,

• the quality and practical orientation of training often lags behind Western benchmarks,

• undeclared work still exists, distorting wage structures and destroying cost transparency.

5. What does all this mean for a Hungarian contractor or investor in 2025?

1. The business logic of the “old world” is dead.
Cost management cannot be handled as it was in 2015. A model of “material cost + 10–15% profit + labour hours times wage” is simply not capable of handling real risk today.

2. Cost management = risk management.
At a minimum, serious projects must now include:

• price indexation mechanisms in contracts,

• multiple supplier sources (not one critical country or producer for key items),

• inventory strategies for critical materials,

• assessment of prefabricated or modular solutions already at concept design phase,

• explicit pricing of labour-related risk (not only in wages, but also in potential delay costs).

3. Anyone who does not consider industrialized solutions today is building a competitive disadvantage.
Not because “it’s trendy”, but because:

• shorter construction time = lower financing and overhead costs,

• lower on-site labour need = lower exposure to labour shortages,

• higher degree of off-site production = fewer on-site errors, less rework.

4. The state’s role remains decisive – in both good and bad ways.
If public procurement, building regulation and subsidy systems do not clearly reward transparent, industrialized, high value-added construction – but instead support short-term spending – then:

• potential nearshoring benefits will be captured by other countries in the region,

• prefabrication capacity will be built elsewhere,

• and we will be left with shaky subcontractor chains and volatile quality.

6. Conclusion: fewer excuses, more strategy

After the 2021–2022 price storm the market is now “only” choppy. That is deceptive: it looks like normalisation. In reality, systemic flaws – over-long and fragile supply chains, weak contract culture, underfinanced training, a fractured labour market – have now become structural cost drivers.

In construction, supply-chain and cost management are no longer administrative tasks – they are strategic weapons. Those who understand this, industrialize, diversify and manage risk will survive the next cycle. Those who don’t will keep hiding behind “unexpected cost increases” – as long as there is still someone willing to pay for them.

In 2025 the key question is no longer whether construction costs rise by 3.4% or 3.9%. The real question is: who will control the capacity that stands on stable, transparent and industrialized supply chains – and who will remain a permanent subcontractor, financing other people’s risk.

Sources

• Turner & Townsend: International Construction Market Survey (latest editions, 2023–2024).

• Atradius: Construction Industry Trends and Outlook (2024–2025).

• ING: Nearshoring in Central and Eastern Europe (sector and regional reports, 2023–2024).

• European Investment Bank (EIB): Investment Report – Rebuilding EU Supply Chains (2023–2024).

• European Commission and industry reports on modular and prefabricated construction in Europe (Nordic and Western European case studies, 2020–2024).

• National statistics and sector studies on industrialized housing in Northern Europe (e.g. Sweden, 2019–2024).