Modular Housing: A Faster, More Affordable Way to Build

$Release_Title.getData() 3 Oct 2018

By James Nelson, Principal, Head of Tri-State Investment Sales

BERWICK, PENNSYLVANIA – This past month my team traveled two and half hours west to visit the Deluxe Modular factory. Previously, this quarter-mile assembly line manufactured Stuart Tanks for World War II, but today it assembles buildings and delivers them all across the U.S. At this factory entire buildings are built in one place, shipped to a construction site and then assembled. A factory assembly line allows individual parts to be built faster and at a lower cost than traditional construction.

Over the past 50 years, productivity in construction has fallen significantly with a loss of 19 percent, while all other non-farm production has increased by 153 percent during the same period. Deluxe has what it believes is an innovative solution. It owns one of over 100 modular factories, but one of the few that uses steel. This allows Deluxe to construct far more advanced projects, and deliver them 50 percent sooner at more than a 20 percent savings in cost.

While there, we stood in front of an assembly line that was constructing pieces of what would ultimately become a county jail. We found out that modular construction can do far more advanced projects. It is no longer not just wood frame, box construction. With the use of steel, some modular buildings now rise many stories. For example, the Stack in Harlem was assembled from 56 different pieces in just 19 days. This was the first New York City project before Atlantic Yard’s B2 mass project. In addition to residential construction, modular is used for dorms, hotels, restaurants, retail and single-family structures. These buildings come delivered turn-key, meaning for hotels they come with sheets on the bed and towels on the rack!

“As you can see, there’s no rain in here, and there’s no snow and there’s no mud, and what we’re doing is we’ve taken building off of the job site and put it into a controlled environment,” said a company representative. They also do not have to wait for trades to coordinate at the job site, as they are all under one roof at the factory.

Deluxe is unique in the industry because it is a “design-built” firm. They have on-staff architects, engineers and drafts people, and they work with a high-quality architecture firm, such as alums from Robert A. M. Stern’s firm to places like Zaha Hadid’s firm. “What we are designing is state of the art,” the representative continued. “As the world realizes there’s no labor available to build, that the cost of construction is increasing drastically, that you can literally efficiently build it in half the time at lower cost at an indoor site where you can mechanize much of the process. That is what makes us a unique and better competitor.”

Modular construction represented about three percent of U.S. construction last year according to Deluxe, and is projected to hit 10 percent of U.S. construction in the next five years. “What we’re seeing is a high-quality modular product based on three-dimensional technology,” the representative said. “It gives us the ability of doing a very high quality, high-end, structurally sound building, [but] it’s taking technology this long to get there.”

On the other side of the country, San Francisco Mayor London Breed announced earlier this month that the city has committed to buying $100 million worth of modular housing to combat its dual housing shortage and affordability crisis. San Francisco is not alone. To ease a homelessness crisis, Vancouver has built six modular facilities, creating hundreds of homes, and has at least five more being built in the next few years. Cities with even worse homelessness crises in the United States, such as Seattle and Detroit, are considering multi-unit modular facilities as an alternative to more costly shelters.

Amazon is also capitalizing on modular housing as an opportunity to promote new voice and smart home technology. The Seattle-based company fundraised $6.7 million to invest in Plant Prefab, a California-based modular home company, with the goal of incorporating the Amazon Alexa system everywhere in multifamily homes.

This is certainly an option that developers should consider moving forward.