(Note: Opinions in the articles are of the authors only and do not necessarily reflect the opinion of the European Union)

Europe’s housing and decarbonisation goals depend on the construction sector’s ability to deliver high-quality, affordable and sustainable buildings at scale. The scale of the challenge is substantial: the European Commission estimates that Europe needs to build more than two million homes each year to meet current demand—around 650,000 more than the roughly 1.6 million built today—requiring approximately €153 billion in annual investment. Off-site construction can make a decisive contribution to this challenge, yet its potential remains largely unrealised.

The construction sector is central to this effort: in 2023 it employed 13.9 million people across around four million EU enterprises and generated €727.5 billion in value added, equivalent to 7.0% of the EU business economy. The main obstacle is not a lack of technology, but a fragmented market. Manufacturers, contractors, designers, investors and public authorities often work in separate silos, while project demand remains dispersed and short-term. This limits industrial investment, weakens confidence in off-site solutions and prevents the sector from achieving the scale needed for meaningful impact.

Addressing these barriers requires a shift in how off-site construction is planned, procured and evaluated. Rather than focusing on initial capital costs alone, public and private decision-makers should adopt a long-term whole-life value approach—one that considers quality, performance, delivery time, environmental impact and whole-life cost.

This article outlines a set of interconnected mechanisms for industrial market activation and collaborative growth. Together, they aim to create stable demand, connect the value chain, develop skills and confidence, and activate procurement and planning. In doing so, they can help translate ambitious European policies—including the EPBD, the European Affordable Housing Plan, the Construction Products Regulation (CPR), the EU Taxonomy and the New European Bauhaus—into concrete operational delivery.

The article is organised around four mutually reinforcing activation pillars: stable demand, value-chain integration, skills and confidence, and procurement and planning. Each pillar identifies a market failure, proposes practical instruments and indicates the actors best placed to lead implementation. A final section links these measures to the European policy framework and defines the conditions for phased implementation.

Creating stable demand

The first condition for scaling off-site construction is predictable demand. Fragmented, short-term projects do not provide manufacturers with the certainty needed to invest in serial production, standardisation and industrial capacity.

Demand aggregation addresses this barrier by pooling local housing initiatives into stable, multi-year public pipelines. Long-term procurement frameworks and demand guarantees—particularly in social housing—can give manufacturers the confidence to invest, while centralised delivery portals embedded in municipal governance can make off-site construction a standard baseline for public tendering. The need for coordinated supply is particularly acute in affordable housing: social housing represents only 6–7% of the EU housing stock, while the Commission estimates that an additional 650,000 dwellings per year are needed over the next decade to close the supply-demand gap.

Stable demand is therefore the foundation for industrial investment. However, aggregated demand must also be easy to access and manage. Two complementary instruments can make this possible.

First, predictable project pipelines aggregate fragmented housing initiatives into multi-year public procurement frameworks and long-term demand guarantees. This gives manufacturers the visibility and security needed to invest in serial production, standardisation and industrial capacity.

Building on this stable pipeline, one-stop shop delivery models simplify access to aggregated demand. By embedding centralised aggregation platforms within municipal governance, they streamline procurement, coordinate project requirements and position off-site construction as a default delivery model for public housing.

For demand aggregation to be credible, pipelines should be defined by minimum volume, duration and standardisation requirements. A practical starting point would be multi-annual frameworks of at least three to five years, with a published annual pipeline of housing units, common technical requirements and transparent allocation rules. This allows manufacturers to plan production batches, secure supply chains and justify investment in DfMA-capable capacity.

Demand aggregation should not impose a single building typology. It should define performance-based requirements—energy, circularity, accessibility, quality, delivery time and lifecycle cost—while allowing manufacturers to respond with different technical configurations.

The potential benefits of a more industrialised delivery model are significant: modular projects have consistently been completed 20–50% faster than comparable traditional on-site builds, while potential cost savings can reach around 20%, although outcomes depend strongly on design standardisation, logistics and project scale.

Connecting the value chain

Stable demand is therefore the foundation for industrial investment. However, aggregated demand must also be easy to access and manage. Two complementary instruments can make this possible.

First, predictable project pipelines aggregate fragmented housing initiatives into multi-year public procurement frameworks and long-term demand guarantees. This gives manufacturers the visibility and security needed to invest in serial production, standardisation and industrial capacity.

Building on this stable pipeline, one-stop shop delivery models simplify access to aggregated demand. By embedding centralised aggregation platforms within municipal governance, they streamline procurement, coordinate project requirements and position off-site construction as a default delivery model for public housing.

Two complementary mechanisms can support this transition:

• Cross-sector strategic alliances create formal collaboration platforms linking off-site manufacturers, contractors, designers, investors and public authorities. They provide the institutional space needed to align priorities, share knowledge and coordinate investment and delivery capacity.
• Building on these alliances, digital B2B and clustering platforms make collaboration operational at scale. Using BIM-based matchmaking tools, they connect manufacturers’ supply capabilities with regional project demand, making opportunities, capacities and requirements more visible and easier to match.

These platforms should include three core functions: a verified registry of manufacturers and their production capacity; a demand-side repository of public and private housing pipelines; and BIM-based compatibility checks between project requirements, component systems and available supply. Over time, the same infrastructure can support early design coordination, capacity booking and transparent reporting on delivery performance. Together, alliances and digital platforms help transform a fragmented value chain into a coordinated ecosystem.

Building skills and confidence

A connected ecosystem, however, can only deliver results if people and organisations are able to work in new ways. Off-site construction requires competences that go beyond traditional construction practice, including design for manufacture and assembly (DfMA), BIM coordination, logistics and on-site assembly. Where these skills are missing, even well-connected supply chains and stable demand pipelines can struggle to translate into successful projects. This is particularly important in a sector characterised by a large number of small operators: construction accounted for 12.1% of all EU business-economy enterprises in 2023, underscoring the importance of shared training, standardised processes and collaborative platforms for translating individual firm capabilities into sector-wide delivery capacity.

Capacity building is therefore a critical enabler. A unified European training offer can support contractors, installers, designers and public officials throughout their professional development, ensuring that the sector develops the shared technical language and practical capabilities needed for off-site delivery.

At the same time, skills must be accompanied by visible proof of concept. Working with pioneering SMEs, municipalities and early-adopting housing providers can generate reference projects that demonstrate the benefits of off-site construction in practice. These projects can reduce perceived risk, strengthen market confidence and encourage wider adoption across the sector.

Two complementary actions can support this transition.

• The first is the creation of an EU Offsite Skills Academy: a unified offer of initial and continuing education on off-site assembly, DfMA and BIM coordination. By developing a shared set of competences across the sector, it can help contractors, installers, designers and public officials work more effectively within industrialised construction processes. The Academy should combine short technical modules, project-based learning and certification pathways. Priority topics should include DfMA design principles, BIM-to-factory workflows, logistics and sequencing, quality control, installation, circular design, product information management and procurement of industrialised solutions.
• The second is a targeted engagement strategy focused on early adopters—innovative SMEs, municipalities and housing providers. By supporting these actors in delivering pioneering projects, the sector can generate practical reference case studies. These examples can demonstrate the benefits of off-site construction, reduce perceived risk and encourage broader market adoption.

Reference projects should be designed as measurable demonstrations rather than isolated pilots. Each project should publish comparable data on construction time, cost deviation, energy performance, embodied carbon, waste generation, defect rates, user satisfaction and operational performance. This evidence base is essential to convert early adoption into market confidence. 

Together, skills development and early-adopter projects create both the capability and the confidence needed to scale off-site delivery.

Activating procurement and planning

Demand, collaboration and skills can create the conditions for off-site construction to grow, but public authorities can accelerate this transition by shaping the market through procurement and urban planning. Because public bodies represent a significant and reliable source of demand, their choices can send a strong signal to the construction sector.

Public procurement is the first lever. When tenders explicitly reward off-site and DfMA solutions, and when manufacturers are involved early in the design phase, the public sector can create a dependable lead market for industrialised construction. This gives manufacturers greater certainty and encourages investment in production capacity and standardised solutions.

Urban planning can reinforce this effect. Density bonuses, reduced permitting fees and priority or BIM-based permit processing can make off-site projects more attractive and easier to deliver, without relying exclusively on financial incentives. Together, procurement and planning can turn off-site construction from a project-specific option into a mainstream delivery model.

Two complementary measures can put this approach into practice.

• Offsite-first tendering mandates would introduce public procurement procedures requiring an Offsite/DfMA-first evaluation and the early involvement of manufacturers in the design phase. By making industrialised solutions a systematic consideration from the outset, they can create a more predictable pipeline of off-site projects and encourage manufacturers to invest in production capacity. Tendering should evaluate off-site solutions through Whole-Life Value criteria rather than lowest initial price alone. Relevant award criteria may include delivery time, whole-life cost, embodied carbon, circularity and disassembly potential, digital product information, local supply-chain participation, quality assurance and post-completion performance guarantees.
• Fast-track urban planning incentives would reinforce this effect by making off-site projects easier and more attractive to deliver. Gross floor area bonuses, reduced permitting fees and priority or BIM-based permit processing can reduce time, uncertainty and administrative burden without relying exclusively on financial support. Planning incentives should be conditional on public-value requirements. Density bonuses, fee reductions and accelerated permitting should be linked to affordable housing quotas, long-term affordability, quality standards, environmental performance and demonstrable use of industrialised or circular construction methods. This prevents incentives from increasing land value without delivering accessible housing.

Together, these measures align public procurement and planning, intending to establish off-site construction as a mainstream delivery model.

Governance and implementation

These measures are mutually reinforcing: predictable demand enables industrial investment; connected ecosystems improve coordination; skills and reference projects build confidence; and procurement and planning create the institutional conditions for adoption.

Implementation should build on existing networks and initiatives, including Offsite Hub Italia, Energiesprong and local housing federations. This approach allows the sector to move toward long-term Whole-Life Value without paralysing the construction SME supply chain.

Implementation should follow a phased approach:

Phase 1: Pilot and capability building (years 1–2): select two or three regions or municipal clusters; establish demand-aggregation pilots; map manufacturers and skills gaps; launch reference projects and a first B2B matchmaking environment.

Phase 2: Regional scale-up (years 3–5): convert successful pilots into multi-annual procurement frameworks; expand the manufacturer registry and BIM-based matching tools; introduce Offsite/DfMA-first evaluation in selected public tenders.

Phase 3: Systemic integration (years 5+): standardise procurement templates, product-information requirements and performance reporting; connect regional pipelines into a European industrial ecosystem; align financing instruments with verified whole-life performance.

Alignment with European policy

The measures outlined above should not be read as isolated sectoral initiatives. Rather, they form an integrated set of operational and industrial tools that can help turn existing European policy objectives into practical delivery. By creating stable demand, connecting the value chain, developing skills and confidence, and aligning procurement and planning, these proposals address the implementation gap that often separates policy ambition from market reality.

The following sections show how this framework supports the objectives of key European initiatives, including the EPBD, the European Affordable Housing Plan, the CPR, the EU Taxonomy and the New European Bauhaus:

Energy Performance of Buildings Directive (EPBD)

The EPBD establishes the regulatory direction for a more sustainable building stock, setting decarbonisation obligations, efficiency targets and life-cycle calculation requirements. Meeting these objectives, however, requires more than regulatory compliance: it depends on the sector’s capacity to design, produce and deliver buildings according to whole-life performance criteria.

The collaboration and market-development measures proposed in this article provide the practical delivery mechanisms for this transition. B2B networks improve coordination across the value chain; transparent procurement creates reliable demand for high-performance solutions; DfMA and BIM skills support integrated design and production; and demand aggregation gives manufacturers the certainty needed to invest in industrialised delivery.

Together, these measures help ensure that the EPBD’s decarbonisation and efficiency goals can be achieved not only on paper, but through scalable and deliverable construction projects. Off-site delivery can also improve the reliability of whole-life carbon and performance data. Factory-controlled production, digital design workflows and standardised component documentation make it easier to collect, verify and reuse information on materials, energy performance, maintenance and end-of-life scenarios.

European Affordable Housing Plan

The European Affordable Housing Plan addresses a central challenge: increasing the production capacity of affordable homes while reducing delivery time and costs and regenerating the existing social-housing stock. The investment requirement is considerable: the European Commission estimates that delivering the additional homes needed each year would require approximately €153 billion annually. Achieving these goals requires a supply model capable of delivering more homes, more quickly and with greater cost certainty.

Off-site construction can support this shift, provided that demand is organised and industrial capacity is able to respond. Demand-aggregation platforms can pool fragmented housing needs into viable project pipelines, while multi-year framework contracts give manufacturers the certainty required to invest in serial production.

In parallel, DfMA and BIM skills help ensure that projects can be designed and delivered efficiently, while working-capital incentives for SMEs reduce financial barriers to participation in industrialised supply chains. Working-capital support should be targeted and conditional. It should address the specific cash-flow gap between advance production costs and payment milestones, prioritising SMEs and regional manufacturers that participate in aggregated public pipelines and meet quality, digital-information and delivery requirements. Together, these measures can help scale the supply of sustainable, affordable housing.

Construction Products Regulation (CPR)

The CPR provides the regulatory foundation for a more integrated European market in construction products, establishing harmonised rules on product performance, essential safety requirements, CE marking and declarations of performance. For off-site construction, however, harmonised rules must be matched by practical tools that make compliance, specification and procurement simpler.

Standardised DfMA catalogues can translate product performance into clear, comparable design solutions. Certification platforms can support transparency and trust in product information, while framework contracts and one-stop shop models can streamline the selection and procurement of compliant prefabricated components.

Digital product information should become a core requirement of off-site procurement. Standardised digital product passports, machine-readable declarations of performance, environmental data, installation instructions and traceability information would allow designers, manufacturers and public buyers to compare compliant solutions consistently. This would strengthen both regulatory compliance and circular decision-making across the building lifecycle.

Together, these measures can make the free movement of prefabricated products more effective, supporting a more integrated and competitive European off-site market.

EU Taxonomy

The EU Taxonomy establishes technical screening criteria that define when real-estate investments and building interventions can be classified as environmentally sustainable. These criteria provide a common basis for assessing the environmental performance of new construction, renovation, and building acquisition, helping investors and lenders identify credible green assets.

Within this framework, Whole-Life Value assessment can strengthen the investment case for off-site housing by accounting not only for upfront capital costs, but also for long-term operational performance, maintenance, environmental impacts, and end-of-life considerations. This broader perspective makes the economic and sustainability benefits of off-site construction more visible over the building’s life cycle.

Building on this evidence base, banking de-risking, CAPEX incentives, and demand aggregation can further improve access to green financing. Together, these mechanisms can reduce perceived investment risk, lower the cost of capital, and create sufficient market scale for off-site housing to attract sustainable finance. Financing instruments should be linked to verifiable outcomes rather than to the use of off-site methods alone. Eligibility could be conditioned on demonstrated reductions in delivery time or whole-life cost, verified embodied-carbon performance, circularity documentation, quality assurance and social-housing affordability requirements.

New European Bauhaus

The New European Bauhaus sets out a vision for living environments that combine sustainability, aesthetics, circularity, and inclusiveness. It calls for places that are not only environmentally responsible, but also attractive, accessible, and responsive to the needs of diverse communities.

Translating this vision into practice requires a construction sector equipped with the skills and processes needed for industrialised buildings. The EU Offsite Skills Academy can support this transition by developing the workforce capabilities required for off-site methods, while DfMA integration can align design decisions with manufacturing requirements, improving standardisation, quality, and resource efficiency.

These technical capabilities must be supported by more collaborative and transparent ways of working. Designer-producer collaboration platforms can enable early coordination between architectural design and factory production, reducing fragmentation and supporting better-performing housing solutions.

Finally, transparent public procurement can create reliable demand for projects that meet New European Bauhaus principles. By embedding sustainability, circularity, inclusiveness, and quality criteria in public tenders, public authorities can help translate these values into scalable off-site housing projects.

Risks and safeguards

The proposed framework can deliver significant benefits, but its effectiveness depends on avoiding three main risks.

First, aggregated demand must remain sufficiently standardised to enable industrial production, without becoming so rigid that it limits architectural quality, local identity or adaptation to different sites. Performance-based requirements, modular design principles and flexible component catalogues can address this risk.

Second, market concentration should be monitored. Demand aggregation and long-term frameworks should preserve access for SMEs and regional manufacturers through transparent qualification criteria, capacity-sharing mechanisms and proportionate participation requirements.

Third, public incentives must produce measurable public value. Planning bonuses, financial support and procurement preferences should be conditional on affordability, environmental performance, quality, digital product information and verified delivery outcomes.

A periodic review mechanism should assess whether the framework is increasing housing delivery, improving whole-life performance, strengthening SME participation and reducing market risk.