Prefab Power Plays: The Billion-Dollar Bet On Modular Data Centres

The race to modularize data centre construction is officially off the blocks as industry players jockey to meet unprecedented global demand. With hyperscalers and investors pouring billions into prefabrication strategies, the investments and acquisitions landscape is red hot, and specialized firms are prime targets. Consider DigitalBridge and IFM Investors’s $11 billion acquisition of a controlling stake in Switch, a firm known for its modular data centre designs; Goldman Sachs’s £75 million investment in TopHat, a modular home builder; and modular building start-up Boxabl’s $3.5 billion merger. But – as with all disruptive industry trends – the path to maturity will be a turbulent one.

The Good: speed and sustainability
Modular construction has long been hyped up as the silver bullet for the construction sector’s woes, promising to address worsening skills shortages, carbon emissions and sluggish productivity. Contrary to misconceptions, its value lies in standardizing repeatable techniques rather than building design, eliminating the need to start each project as if from scratch. While site preparation and foundations are underway, building components are manufactured simultaneously and delivered for ‘just-in-time’ assembly. This approach can slash project timelines by 30-50%, according to the Modular Building Institute. Real-world examples include Greystar’s multifamily projects, which were constructed 40% faster than using traditional methods. Additionally, modular techniques can cut carbon emissions by 45% compared with conventional construction, which is critical given that the sector is one of the most polluting industries.

The data centre boom is set to catalyse the adoption of modular construction across real estate, driving a shift where speed is non-negotiable. Google has set a benchmark in modular data centres by leveraging factory-built cooling, electrical and server components that enable rapid deployment with rigorous off-site testing. Construction management software (CMS) like Dassault Systèmes’s 3DEXPERIENCE platform is fundamental to modular construction, using digital twins to simulate assembly and logistics processes, streamline coordination and provide real-time supply chain visibility.

The Bad: logistics and tech hurdles
For all its successes, modular construction remains polarizing, especially in the high-stakes world of data centres, where transporting massive modules through urban environments presents monumental logistical obstacles that complicate the ‘just-in-time’ delivery model.

While many CMS platforms are evolving to support modular workflows, most still cater to traditional construction methods. Advanced capabilities like digital twins unlock real-time synchronization and performance simulation but often come with expensive price tags and complex management demands. Consequently, many firms lack the organizational readiness or financial resources to leverage these solutions, hindering modular construction’s current potential.

The Ugly: financial gambles and bankruptcies
Despite its clear advantages, modular construction carries substantial operational and financial risks that cannot be overlooked. High upfront capital requirements, combined with the challenges of scaling production while ensuring consistent quality, can quickly erode profit margins. This reality is exemplified by the downfall of modular builders like Katerra, Veev and Modulous, which collapsed due to unrealized growth despite heavy investments. While large funding bets can accelerate innovation, the pressure for rapid returns often drives overly ambitious growth, leaving some firms unable to deliver.

The Verdict: an invaluable tool, not yet a total transformation
Modular techniques are reshaping data centre delivery but remain several steps behind mainstream adoption. Too often, stakeholders equate modular construction with cookie-cutter buildings, when it is more akin to manufacturing one of the world’s most complex products in a factory before assembling it on-site. Even the production of cars – far simpler than buildings – took centuries to refine. Prefabricated buildings will also be challenging to orchestrate, and the sector has much to learn before modular methods become a standard fixture in the construction toolbox. To stay up-to-date on the latest industry developments, explore our recent reports here.