Increasingly, U.S.-based housing and construction sector leaders hop on the plane these days to see how their business is conducted in The Netherlands, Scandinavia, Switzerland, Germany, Ireland, Japan, etc..
And they're coming back to North America with some different ideas about how they're going to make money in home building in the United States.
While they're abroad, they're getting a close look at plants and factories that have become a mainstay of home building in these countries. They're witness to the care, quality, and precision with which assembly of homes' components and systems and modules takes place, and the velocity--speed, accuracy, and economic profitability--of the fabrication begins to change their minds about processes they've stuck to for scores of years.
CNCs, lasers, robotics, and fastening devices that cut, measure, join, and attach down to nano-measures of straightness, rightness, structural strength, etc., all perform to specifications fed through numerically-controlled code to each machine in the order of assembly offsite, where people and computer-aided fabrication equipment each use their best skills--technical, technological, manual, and automated--to produce panels, components, modules in whole, to be craned into place or erected by a small team of workers on a prepared jobsite.
This year, as in no other year before, more offsite fabrication facilities are not only producing the first yield of Europe- and Japan-like homes and apartments here in the United States, but several are pilots for soon will be a growing nationally dispersed infrastructure of manufacturing locations.
We heard during a session at last week's Multifamily Executive Conference in Las Vegas that an optimal service-area radius for such facilities is 800- to 1,000 miles, a distance beyond which shipping becomes less economical.
Walpole, N.H.-based Unity Homes this summer began expansion its manufacturing plant, tooling a new 100,000 sq. ft. Keene, N.H. facility to add four-fold to its capacity to fabricate, or "montage" its lines of Unity and Bensonwood Homes. Tedd Benson's strategy is to bring Unity Homes manufacturing plants to Colorado and the Northwest as part of the brand's manifest destiny.
Meanwhile, other players like Ripon, Calif.-based Entekra, Durham, N.C.-based Prescient, BMC's Ready Frame, Bone Structure, Boise, Id.-based Guerdon Modular, Blu Homes, Modular Lifestyles, Akcel, HercuTech, Randek, etc., are looking to raise growth capital to expand their facilities and distribution points to head across housing's tipping point into a new era of U.S. home production.
A rallying cry among many of these companies is that their technologically advanced systems can effectively offset the massive undersupply of skilled laborers necessary to fully activate higher volume construction activity. Areas like Houston since Hurricane Harvey, and Dallas and Denver chronically, have experienced shortages that impact delivery dates, lost sales, and missed budgets.
As much as technology, automation, and, eventually, artificially intelligent machine-driven production may one-day relieve skilled labor capacity dislocation, that is not the key take-away here, in our opinion.
For, in fact, skilled people who are up-trained to program sophisticated construction assembly tools are as sorely lacking as any tradesmen and women. Home building needs people skilled not only in the "what", the "how," and "why" of craftsmanship, but in the ability to leverage technological learning to stay resilient their entire careers, through housing and economic cyclical ups and downs. They need craftswork training and tech coding training to extend their value and earnings potential.
In the Sept. 22 issue of The Z Report, Zelman & Associates' twice-monthly analysis of housing's most pressing issues and trends, a piece focuses specifically on the question, "Are Buffett, Japanese Companies the Catalysts to Unlock Innovation in Construction?" (You can get a free trial of The Z Report by clicking here.)
The Zelman team sets the context of the question around observation that three, large Japanese companies--Sumitomo Forestry, Sekisui House, and Daiwa House--and Tennessee-based Clayton Homes make a case for an inflection point toward tech-enabled offsite construction. Zelman analysts note:
"A perfect storm is brewing, suggesting the housing industry might finally be on the verge of the disruption and innovation that is necessary to offset structural tightness in construction labor. Notably, these strategic buyers all have deep pockets, extremely long-term capital allocation plans, a low cost of capital on par with, or even below, the largest public builders in the country, and vast experience building a large number of homes in factories."
Imagine as well, if you can build a small square footage house profitably, what a game-changer that would be in a marketplace where there's a growing mismatch between median household income levels and the threshholds housing finance has placed on the dream of homeownership.
Here's how Oakwood Homes ceo Pat Hamill discribed a real value of combining Oakwood with Clayton Homes this past July.
"One of the neat things about this combination with Clayton is that they can help improve our factories to the next level or two," Hamill says. "We're piloting a concierge process whose goal is to take as much pain out of the home-buying experience as we can for our buyers, something better technology will help us do. With Clayton, we're now going to have the gold standard as a resource to build improvement into our processes not just for us and our profits, but for our home buyers. This business is so ripe for disruption."
You bet it is.