Tuesday, December 15, 2020

Questioning Innovation in Off-Site Construction

Innovation in off-site construction is in the news every day. Millions of dollars are being invested by huge corporations like Google, Facebook, Oracle and others trying to improve the oldest and most labor-intensive industry on Earth.

I’m sure the supervisors working on the Great Wall of China, The Pyramids in Egypt and the Mayan Temples were always on the lookout for ways to speed things up, increase productivity and cut costs. All of those ancient projects needed more than just raw labor to complete, they needed innovative ideas.

Today those innovative ideas involve the use of technology which is evolving more rapidly than anyone could have imagined just 20 short years ago. That technology is helping to improve productivity in off-site factories, using renewable and recyclable resources; reducing energy consumption and waste; creating a healthy, environmentally-friendly environment; protecting the natural environment and advanced designs and construction techniques that reduce heating, cooling, ventilation and lighting energy consumption.

All these innovative ideas come with some questions. First, what is the true cost of actually putting all these innovations into the everyday business of construction? If millions and millions are being invested in bringing these innovative ideas to fruition, who is going to spend the millions to implement them into their factory or job sites? Will it be the production builders, the off-site panel and truss plants, the manufactured and modular factory, all of them or none of them?

Profit is the reason businesses remain open and unless companies can see a future profit from these innovations, they will simply continue doing what has always made them profit before.

Some say that once the majority of the off-site industry begins using a certain technology, then everyone else will too even if it means costs are increased which ultimately get passed onto the consumer or developer. The second question then becomes will the consumer or developer pay extra for that innovation? Tract builders and developers are always looking to get things built faster and cheaper and unless they see substantial savings in at least one of those two areas, they will probably pass on paying more for the high-tech equipment and processes investment by their suppliers.

The single-family home buyer is probably interested in sustainable materials being used in their home, savings on energy bills and improved air quality but at what point do those things begin to price themselves out of the picture? New home buyers are governed by two main things when it comes to buying a home. One is the mortgage and the other is the appraisal. Price a home too high and it will go unsold. Maybe not in today’s market but what happens when the market softens and appraised values begin to go down. Remember, housing is a cyclical market and what goes up will come down.

Every $10,000 added to the average mortgage is an extra $40 monthly payment for 30 years. If imposed building code regulations account for 25% of the cost of a new home and the median price of a new home is $350,000, the buyer’s mortgage will already include $340 a month just to pay for those regs. Now add $20,000 - $40,000 more to finance all the innovations they could be forced to buy and their monthly mortgage payment could find them underwater if the market softens like it did in 2008. OUCH!

Innovation just for the sake of innovation is never a good thing. Innovation in production building that is slowly, methodically and effectively implemented at a cost that doesn’t mean millions of dollars for the factory is good. 

Innovative technology will be used first by the production factories that produce a lot of the same walls, trusses, or modules over and over for the developer’s projects. We’re seeing that today more than ever. Automation and high-tech software companies are using these factories to get products to the market quicker and possibly a little cheaper, otherwise, why would Google, Facebook and others invest hundreds of millions of dollars into companies like Factory OS. It certainly isn’t to build custom single-family houses. No, innovation is the key to the future of production building.

Innovation in construction is absolutely the best thing to ever happen to the oldest industry on Earth but before it becomes the answer to all our prayers, we really have to decide which part of the off-site construction industry would best be served by it and how fast do we implement it. 

Introducing BIM, Augmented Reality and robotics to a factory that is 40-50 years old that produces custom modular homes will be a tough sell but give those same tools to a brand new modular company mass producing product that is owned by Millennials and watch what happens! It will be amazing.

Innovators need to pick their target market and then go after it.

Gary Fleisher, the Modcoach, publishes the Modcoach News blog for the modular industry professional and Modcoach Connects for construction consultants

email me at modcoach@modcoachconnects.com

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