Dive Brief: One of the most anticipated projects in the modular sector, the Marriott AC Hotel in Manhattan, has been delayed due to the effects of the COVID-19 pandemic, according to The Wall Street Journal, which reported that 842 Enterprises is looking for additional financing to complete the $80 million project. . When complete, the 26-story building will be the tallest modular building hotel in the world, but for now, its prefabricated components, including 100 factory-built hotel rooms, are on a pier in Brooklyn, according to the newspaper. In addition, liens against property have been filed by more than a dozen contractors for unpaid bills, according to public records cited by the magazine. Industry watchers say that after gaining interest among developers in recent years, the pandemic has brought both opportunities and challenges to modular construction. Dive Insight: Many modular construction companies have been hit hard by the effects of the pandemic. Pre-manufacturing giant Katerra filed for Chapter 11 bankruptcy earlier this month and Chicago-based Skender Manufacturing closed its doors last fall due to the COVID-19-related effects. Modular construction showed promise at the start of the pandemic last year, especially because it offered a fast way to build in a controlled environment while using fewer workers. The space saw a rapid rise in demand for non-permanent emergency medical facilities and rapid response units when the pandemic first began. But interest in the rapid medical uses process began to fade as this demand was affected and projects were eventually suspended. With more and more people staying home, governments have chosen to repurpose existing empty buildings, halting any new construction of medical facilities. “As a result of the pandemic, it is fair to say that modular construction has fallen short of expectations over the past year,” said Henry D’Esposito, Head of Construction Research at JLL. “The challenges this year were due to a combination of lower demand for new hospitality projects and lower risk appetite across the board.” In addition, many lenders are reluctant to finance hotel projects, especially in crowded cities, where the future of corporate travel remains uncertain. Given the uncertainty in 2020, D’Esposito said, taking on a benchmark project is becoming less and less attractive for many developers. But labor and material costs continue to increase in the industry, which is a boon for the adoption of modular construction. Factory construction is often resorted to by developers as a more efficient and faster alternative to traditional construction. “The relative value of modular construction only increases when labor is scarce and expensive,” Desposito said. “Our forecast calls for construction worker shortages to worsen over the next few years, driving up labor costs.” He said the pandemic has derailed hundreds of projects — whether they are built on sites or units — across the country, so no single project delay should be used to determine overall units. “Modular construction has grown sporadically and started in the United States over the past few decades, and I would regard the problems over the past year more as a setback than any indication of a fundamental flaw in the modular concept,” he said.