Offsite Home Construction Continues To Ramp Up in the US
Modular, or offsite construction, is keeping pace with its 6% projected growth by 2022. The rise in offsite manufacturing and construction of homes is being driven by a number of factors:
Skilled labor shortages
New manufacturing technology
Housing supply not keeping up with demand
Rising Lumber and other construction materials costs
Substantial import tariffs
Faster turnaround time
Offsite home manufacturing is a defined market segment in the European and Asian markets, the delivery method is continuing to gain momentum in the US as more contractors and national home builders turn to offsite.
Investors have been taking note of this trend, offsite startups like Fullstack and Modular have raised millions of dollars in investment over the last few years and we expect this pattern to continue with more big name adopters like Google and Marriot, as they continue to use this method of construction.
RAD Urban has successfully completed several apartment communities that were built offsite, with orders for more on the books. KB Home used Entekra’s FIOSS™ (Fully Integrated Off-Site Solution) process to build the pre-insulated frame and roof for this year’s IBS Home of the Year in just two days. BMC’s ReadyFrame® technology has reportedly become so popular that they can’t keep up with demand.
The manufacturing process and technology that has been perfected oversees has rapidly made it’s way to the US market, now, the stigma of offsite construction that historically refered to cheaper, low quality manufactured homes of yesteryear, is no longer the case. This is a multi billion dollar industry where the winners will likely be the big builders who adopted early and invested heavily into the manufacturing infrastructure and the large single family rental companies who build simple homes on a large scale to rent.
So, What makes the offsite manufactured home boom different this time?
Substantial tariffs are already impacting the cost to build homes. Lumber prices have been soaring and undocumented cheap labor is a thing of the past on modern construction sites. Offsite construction typically takes a fraction of time to completed compared to traditional onsite construction so Investors can see a faster ROI so long as the price for completion stays the same, or is cheaper when factoring the additional transportation costs associated with offsite.
Not only has the technology improved on the manufacturing side of things, engineers and architects can now run computer simulations of finished products in real time, from anywhere in the world. We can build complete houses and communities on computers before a contractor has even shown up to the job site.
Most major US cities have been facing an affordability problem for some time. Offsite manufacturing allows for much simpler homes to be built and shipped at a fraction of the cost of traditional, more complex home building in today's market. Many national homebuilders have recognized this need for affordable, simple housing and offsite manufacturing can lower the cost substantially and help alleviate the affordable housing crisis.
As the pace of construction using offsite manufacturing ramps up, consumers are becoming more and more aware of the benefits to going with a prefabricated home. The stigma that used to surround this industry is gone, manufactured homes can now be made more energy efficient and constructed much faster than their traditional counterparts. The other benefits consumers understand more today than ever is the technology that goes into the home and it’s development is emerging at a much faster pace than that of traditional onsite construction.
Consumers desire to stay at the forefront of technology will be a driving force in the overall growth of the offsite manufacturing market segment. Ettro capital works with national home builders who develop using both traditional home building and offsite manufacturing. We’re excited to where this market segment is heading and will continue to keep updating our readers on its development. If you have any questions, please don’t hesitate to contact us using the link above.