It may depend on the game, but typically you would use a 3D modeler to make building blocks and then assemble them in the 3D engine. This is good because it is more optimized.
For example, you have more opportunity for culling objects if they are separate. This could be done on an engine level, but having the individual objects makes it easy to do if the engine doesn't support it natively.
Also, when you create a collision shape, you would do it on the scene for a single object, and then all of them are updated. Or if you need to fix something, you can fix one object and not a huge mesh. This limits the damage you can do with a bad edit.
