Market map: Construction circularity — the categories that will matter next

Construction and demolition activities generate approximately 40% of global solid waste—a staggering 2.2 billion tons annually in North America alone. This waste stream represents not just an environmental liability but a massive untapped resource pool worth an estimated $48 billion in recoverable materials. As embodied carbon regulations tighten and raw material costs escalate, the construction circularity market is poised for fundamental restructuring over the next 12–24 months. The categories that capture value will be those addressing the persistent bottlenecks: fragmented material tracking, misaligned demolition incentives, and the liability frameworks that make reuse economically irrational despite its environmental logic.

Why It Matters

The construction sector accounts for 38% of global carbon emissions, with roughly half of that—the "embodied carbon"—locked into materials before buildings are ever occupied. In 2024, the U.S. construction industry consumed 600 million tons of virgin materials while sending 145 million tons to landfills. This linear throughput model faces mounting pressure from three converging forces.

First, regulatory momentum is accelerating. California's Buy Clean Act, now in its third compliance year, requires contractors on state-funded projects to report and eventually limit the Global Warming Potential (GWP) of structural materials. New York City's Local Law 97, targeting operational emissions, will expand to embodied carbon requirements by 2027. The SEC's climate disclosure rules, finalized in 2024, require public companies to report Scope 3 emissions—which for real estate developers means accounting for the carbon intensity of their supply chains. Federal procurement under the Inflation Reduction Act's Buy Clean provisions now mandates Environmental Product Declarations (EPDs) for concrete, steel, glass, and asphalt on projects receiving federal funding.

Second, material costs have fundamentally shifted. Steel prices remain 35% above 2019 baselines despite demand normalization. Portland cement—responsible for 8% of global CO2—faces carbon pricing exposure in jurisdictions with carbon border adjustments. Virgin timber prices fluctuate with wildfire patterns that show no signs of stabilizing. These cost pressures make reclaimed materials economically competitive in ways they weren't five years ago.

Third, institutional capital increasingly demands circularity metrics. The $130 trillion of assets committed to net-zero targets under the Glasgow Financial Alliance for Net Zero (GFANZ) includes substantial real estate allocations. Pension funds and sovereign wealth investors are beginning to require whole-building lifecycle assessments as conditions of equity participation. The EU's Taxonomy for Sustainable Activities, which influences capital flows into North American operations of European developers, explicitly rewards circular construction practices.

The market opportunity is substantial: McKinsey estimates circular construction could generate $600 billion in global value by 2030, with North America capturing roughly 25% of that pool. But the value will concentrate in specific categories rather than accruing evenly across the sector.

Key Concepts

Design for Disassembly (DfD)

Traditional construction optimizes for initial assembly speed and structural permanence. Design for Disassembly inverts this logic, specifying connections, joints, and material combinations that enable future separation and reuse. Bolted steel connections instead of welded joints; mechanical fasteners instead of adhesives; layered building systems that allow envelope replacement without structural demolition. The upfront cost premium runs 3–8% on structural systems, but lifecycle economics favor DfD when material recovery values are credited. The challenge lies in split incentives: developers who sell buildings immediately after completion don't capture end-of-life value, creating a market failure that policy must address.

Material Passports

A material passport is a digital record of a building's components—their chemical composition, manufacturer specifications, installation date, maintenance history, and projected reuse pathways. The concept originated in the EU's Buildings as Material Banks initiative and is gaining traction in North America through platforms like Madaster (now operating in the U.S. and Canada). Material passports solve the information asymmetry that plagues secondary materials markets: buyers currently can't verify the provenance or performance characteristics of reclaimed materials without destructive testing. With standardized data protocols, a deconstructed steel beam becomes a tradeable asset with verified specifications rather than undifferentiated scrap.

Urban Mining

Urban mining reframes the built environment as a mineral deposit. North American buildings contain an estimated 900 million tons of steel, 450 million tons of aluminum, and 12 billion board feet of dimensional lumber—concentrations often exceeding virgin ore grades. The economics of extraction depend on material density, accessibility, and local processing infrastructure. Dense urban cores with aging building stock offer the highest-value targets. The key constraint isn't supply; it's the coordination cost of matching available materials with demand in projects on compatible timelines.

Demolition vs. Deconstruction

Demolition prioritizes speed: mechanical equipment reduces buildings to undifferentiated debris streams in days. Deconstruction prioritizes material recovery: trained crews dismantle buildings systematically over weeks or months, salvaging components for direct reuse or high-value recycling. Labor costs for deconstruction run 2–3x higher than demolition, but material recovery values can offset this premium when markets exist for salvaged goods. The policy lever is clear: jurisdictions that require or incentivize deconstruction create the supply-side conditions for secondary materials markets to function.

Secondary Materials Markets

The missing infrastructure in construction circularity is market-making. Primary materials flow through mature commodity markets with standardized grading, futures contracts, and global price discovery. Secondary materials lack these mechanisms. A developer seeking 10,000 board feet of reclaimed Douglas fir can't efficiently match with the demolition contractor recovering that volume across town. The transaction costs—verification, transportation coordination, quality guarantees—often exceed material values. The emerging category to watch is the platforms and aggregators building marketplace infrastructure for secondary construction materials.

Construction Circularity KPIs

Metric	Current North American Median	Top Quartile	2027 Target
Construction Waste Diversion Rate	52%	>75%	>85%
Recycled Content in New Construction	12%	>25%	>35%
Embodied Carbon Intensity (kgCO2e/m²)	450–550	<350	<250
Material Passport Coverage	<5% of new projects	>30%	>60%
Deconstruction vs. Demolition Ratio	8% deconstruction	>25%	>40%
Secondary Materials Procurement Rate	4%	>15%	>25%
DfD Adoption in Commercial Projects	3%	>12%	>30%

These benchmarks derive from industry surveys by the U.S. Green Building Council, EPA construction waste tracking, and project-level data from LEED v4.1 submissions. The gap between median and top-quartile performance indicates substantial room for improvement without requiring technological breakthroughs—the tools exist; adoption lags.

What's Working

Modular Construction Scaling

Off-site manufacturing of building modules enables controlled-environment production that minimizes waste, standardizes material specifications, and preserves recovery value. Factory Homes of America, Katerra's successor operations, and Canadian firms like Bird Construction are demonstrating 60–70% waste reduction compared to conventional on-site construction. The modular approach inherently supports circularity: standardized connections facilitate future disassembly, controlled manufacturing enables material passport generation, and factory consolidation makes recovery logistics tractable. Volumetric modular construction grew 18% year-over-year in 2024, reaching $12 billion in North American market value.

Mass Timber Revival

Cross-laminated timber (CLT) and glue-laminated timber (glulam) store carbon rather than emitting it, sequestering roughly 1.1 tons of CO2 per cubic meter of wood. North American production capacity has expanded from 180,000 cubic meters in 2020 to 650,000 cubic meters in 2025, with additional mills under construction in Oregon, British Columbia, and Alabama. The International Building Code's 2021 revisions permitted mass timber structures up to 18 stories, unlocking commercial and residential applications previously restricted to concrete and steel. Importantly, mass timber buildings are more readily deconstructable than their concrete equivalents—the connections are mechanical rather than monolithic.

Material Reuse Platforms Gaining Traction

Digital platforms matching material supply with demand are beginning to achieve the liquidity necessary for market function. Rheaply, operating across 15 metropolitan areas, reported $24 million in materials transacted in 2024. The platform specializes in corporate surplus—office furniture, architectural elements, and building materials from renovation projects. REBID, focused specifically on construction materials, facilitated reuse of 45,000 tons of materials in its first two years, primarily serving general contractors in the Midwest and Southeast. These platforms solve the coordination problem that has historically made secondary materials more trouble than they're worth for time-pressed project managers.

What's Not Working

Regulatory Barriers to Material Reuse

Building codes and structural engineering standards are designed for virgin materials with verified specifications. Reclaimed steel requires re-certification that often costs more than the material value. Salvaged lumber faces grading requirements developed for mill-fresh products. Fire ratings, seismic performance, and liability underwriting all assume known provenance that secondary materials cannot provide without disproportionate testing costs. Code modernization is underway—the International Code Council published guidance on reclaimed materials in 2024—but local adoption lags by years, and liability frameworks haven't caught up.

Demolition Economic Incentives

Speed drives demolition economics. Contractors are paid to clear sites quickly, not to recover value. The 2–3x labor cost premium for deconstruction isn't offset by material revenues in most markets because those markets don't function well enough to price materials competitively. Without policy intervention—deconstruction mandates, landfill taxes, or material recovery credits—the economically rational choice remains mechanical demolition. Several jurisdictions (Portland, San Jose, Austin) have implemented deconstruction requirements for buildings of certain ages, but coverage remains patchy and enforcement uneven.

Liability and Insurance Gaps

Who bears responsibility when a reclaimed structural element fails? The original manufacturer's warranty has expired. The deconstruction contractor may lack the insurance to cover structural claims. The installing contractor faces uncertain liability exposure. This unresolved liability chain makes specifying secondary materials professionally risky for architects and engineers whose licenses depend on defensible decisions. Until insurance products and liability frameworks adapt, risk-averse professionals will continue specifying virgin materials even when reclaimed alternatives are technically adequate.

Key Players

Established Leaders

Skanska — The Swedish-American construction giant has committed to 50% reduction in embodied carbon by 2030 and operates material recovery programs across its North American portfolio. Their "Skanska Carbon Calculator" is integrated into project estimation workflows.

Lendlease — The Australian developer's North American operations require material passports on all new projects exceeding $50 million. They've partnered with Madaster for digital twin integration and committed to 100% circular operations by 2040.

Bouygues Construction — Through their U.S. subsidiary, Bouygues has implemented design-for-disassembly standards on commercial projects and operates a materials reuse facility in Dallas serving the Southwest market.

Clark Construction — One of the largest U.S. general contractors, Clark has achieved 85% waste diversion rates on recent projects and requires supply chain Environmental Product Declarations as a bid qualification.

Mortenson — The Minneapolis-based firm leads in mass timber implementation, with 15 CLT projects completed since 2021, and has established partnerships with regional timber suppliers operating certified sustainable forests.

Emerging Startups

Rheaply — Chicago-based materials exchange platform with $24 million in annual transaction volume, focused on corporate and institutional material flows.

Circular — Boston startup providing AI-powered building component identification and valuation for deconstruction planning, recently raised $18 million Series A.

Rotor DC — Originally Brussels-based, now with U.S. operations, specializing in architectural salvage and high-value interior component recovery for commercial renovations.

Madaster — Dutch company operating North American material passport registry, partnering with major developers and engineering firms for standardized building documentation.

BamCore — California-based manufacturer of bamboo-based structural panels, offering carbon-negative alternatives to wood framing with designed-in disassembly features.

Key Investors & Funders

Fifth Wall — The largest real estate-focused VC has made multiple investments in circularity-enabling technologies, including material tracking and modular construction.

Building Ventures — Boston-based VC specializing in built-environment innovation, with active portfolio companies in materials reuse and deconstruction technology.

Breakthrough Energy Ventures — Bill Gates-backed fund investing in embodied carbon reduction technologies, including alternative cement and low-carbon steel production.

U.S. Department of Energy — ARPA-E programs funding advanced materials and building decarbonization, with increasing focus on end-of-life considerations.

Canada Infrastructure Bank — Actively financing circular construction approaches in Canadian projects, with mandate expansion influencing cross-border practices.

Examples

1. The Kendeda Building at Georgia Tech (Atlanta, 2019)

This Living Building Challenge-certified project achieved 90% construction waste diversion and incorporated 35% salvaged or reclaimed materials by mass. The design team specified reclaimed lumber from regional demolition projects, salvaged brick for hardscaping, and steel with 97% recycled content. Material sourcing required 18-month lead times and partnerships with five deconstruction contractors, illustrating both the potential and the coordination costs of circular construction. Post-occupancy monitoring confirms that embodied carbon intensity of 180 kgCO2e/m² was 65% below conventional construction baselines.

2. Google's Bay View Campus (Mountain View, 2022)

The 1.1-million-square-foot campus achieved operational carbon neutrality but more significantly committed to full material passport documentation covering 98% of installed components. Google partnered with Madaster to create a living record of material specifications, enabling future recovery at end of life. The project used 40% regionally-sourced materials and specified design-for-disassembly approaches in curtain wall systems. The material passport is publicly accessible, establishing a template for corporate transparency on embodied carbon.

3. Vancouver's King County Deconstruction Ordinance (2024)

Seattle's King County implemented North America's most comprehensive deconstruction requirement in 2024, mandating systematic disassembly for all buildings constructed before 1940 (when old-growth lumber was commonly used). First-year results: 12,000 tons of materials diverted from landfills, emergence of three new deconstruction-specialty contractors, and 40% increase in regional reclaimed lumber availability. Material recovery created 85 new jobs at living-wage levels—demonstrating that circular construction isn't just environmentally beneficial but economically generative for local labor markets.

Action Checklist

• Conduct a material inventory of existing building assets to identify recovery opportunities before renovation or demolition decisions are made
• Specify material passports as a deliverable requirement in design contracts for new construction projects
• Evaluate design-for-disassembly approaches during schematic design phase, when connection and material decisions still have flexibility
• Establish relationships with regional deconstruction contractors and material reuse platforms before project timelines force demolition defaults
• Require Environmental Product Declarations (EPDs) for structural materials in procurement specifications
• Incorporate whole-building lifecycle assessment (LCA) into investment underwriting to capture end-of-life value
• Advocate for local deconstruction requirements and landfill surcharges to level the playing field between demolition and recovery
• Train project management staff on circular construction metrics and reporting requirements

FAQ

Q: What is the typical cost premium for circular construction approaches? A: Direct cost premiums range from 2–8% for design-for-disassembly structural systems, though this varies significantly by project type and local labor markets. However, lifecycle economics often favor circular approaches when material recovery values, reduced landfill tipping fees, and regulatory compliance costs are fully modeled. The most comprehensive studies suggest net lifecycle savings of 3–12% when end-of-life value capture is credited.

Q: How do material passports work in practice? A: Material passports are digital records attached to building information models (BIM) that document the specifications, location, and recovery pathways for installed components. Implementation requires coordination between architects, contractors, and material suppliers to capture data at installation. Emerging platforms like Madaster provide standardized templates and registry services. The key challenge is maintaining passport accuracy through building modifications over decades of service life.

Q: What regulatory changes would most accelerate construction circularity? A: Three policy interventions show highest leverage: (1) Extended Producer Responsibility (EPR) requirements that make material manufacturers responsible for end-of-life recovery, shifting incentives toward design for recoverability; (2) landfill surcharges or bans on recoverable construction materials, making demolition economically uncompetitive with deconstruction; and (3) building code updates that establish clear pathways for structural certification of reclaimed materials without disproportionate testing costs.

Q: How does embodied carbon relate to operational carbon in building decisions? A: Historically, operational carbon (from heating, cooling, lighting) dominated building lifecycle emissions, making efficiency investments the priority. As grids decarbonize and operational efficiency improves, embodied carbon represents a growing share—now 50–70% of lifecycle emissions for efficient new buildings. This shift makes material selection and end-of-life planning increasingly important for meeting carbon targets. Investors should evaluate both operational and embodied carbon to avoid stranded asset risk.

Q: What is the investment thesis for construction circularity? A: The core thesis rests on regulatory tailwinds (embodied carbon requirements expanding), cost pressures (virgin material price volatility), and market creation (platforms that solve coordination failures). Near-term opportunities concentrate in enabling infrastructure—material passports, reuse marketplaces, and deconstruction services—rather than speculative technology. The sector resembles waste management 30 years ago: unglamorous, fragmented, but poised for consolidation as regulatory and economic forces align.

Sources

• U.S. Environmental Protection Agency, "Construction and Demolition Debris Generation in the United States, 2018–2024," January 2025
• McKinsey Global Institute, "Building a Circular Future: The $600 Billion Opportunity in Construction," September 2024
• World Green Building Council, "Bringing Embodied Carbon Upfront," 2024 Update
• Ellen MacArthur Foundation, "Completing the Picture: How the Circular Economy Tackles Climate Change," 2023
• International Code Council, "Guidance on Reclaimed and Salvaged Building Materials," July 2024
• U.S. Green Building Council, "LEED v4.1 Construction Waste Management Credits: Performance Benchmarks," 2025
• Carbon Leadership Forum, "North American Material Baselines for Embodied Carbon," University of Washington, 2024
• King County Department of Local Services, "Deconstruction Ordinance Year One Report," December 2024