Is Housing Facing a ‘Henry Ford’ Moment for Offsite Construction?
Recently I was at an event where two industry leaders shared some predictions about the future of the housing industry.
The first, head of one of the largest production builders in the country, said that in three to five years he expects between 30—50% of all housing will be built offsite.
The second, an investor, predicted that we are at a Henry Ford moment, where most of housing will shift to offsite construction and be produced faster, at a higher quality, and at a lower price. Noah Knauf, a partner at investment group BOND, added that housing is a product and it’s the only consumer product in existence that isn’t produced in a factory.
These are fairly arresting comments, but at the same time, the reasoning is sound. As onsite labor is harder to come by and material prices are escalating, your builder customers are looking for ways to lower overall construction costs to stay competitive in the marketplace.
One of the most effective ways of moving into this new realm is through digitization, a critical element of offsite construction that reduces waste, eliminates call backs, improves accuracy, and therefore reduces cost. Using technology to produce designs that are then brought to life in the protected environment created by a manufacturing facility, a home design can be fed into a machine and then produced to super tight specifications (like 1/16″), beyond what’s possible onsite facing outdoor elements, changing schedules, and other unforeseen situations.
As an LBM pro, there are ways to prepare to be an active player in this process. First, you should understand what offsite construction is—and know that you may already be providing it or involved in it through components like trusses, wall panels, or structured insulated panels. If you are already offering these products and services, you can start thinking of manufactured housing as a continuation of your business model and prepare to offer more of these services.
All this likely means a seismic shift in the way that business is done today. If most of the work is done in a contained environment, the builder’s entire operations will need to evolve, which means you need to be prepared if you want to be their supplier of choice. There are several ways that you can start understanding the impacts to your business.
First, find some housing manufacturers in your area who are doing prefab with either homes or panels. Get closer to them to learn the process. Because you are no longer dealing with onsite challenges, the builder may opt for completely different products than you’re currently offering.
And, because the construction takes place in a factory, timing for capital will be likely different, so you may have to rethink payment terms. Second, look to the technology players and investors who are leading the way, and be sure to have the conversation with your builders about this shift. Monitor the growth of offsite housing throughout the U.S., so you and your team are prepared to be a resource when and if it becomes a reality in your market.
If we truly are at a “Henry Ford moment,” the more you learn about the offsite building opportunity, the better you’ll be positioned to help your builders and while providing the materials for these new homes.