Selling Offsite to Big Builders

Production builders represent a big potential market. We look at some offsite companies who are successfully working with them.

• Given their high volume, big production builders, are a strong potential market for offsite solutions. And many are exploring new ways of building.
• Some big builders have acquired component manufacturers or opened their own plants, but they’re still receptive to working with outside suppliers.
• The manufacturer must demonstrate its ability to work within the big builder’s production systems. Given the high potential for repeat work this can be worth any compromises that are required.

The building industry has a reputation for resisting change, but that reputation isn’t entirely justified. Architect Neal Gwin of D.R. Horton in Maitland, Fla. says that builders are open to trying new products, materials, building components and methods, but that they always proceed carefully. “We can’t do something new if it costs more, just for fun.”

The good news for manufacturers of various offsite systems — including modules and prefabricated components — is that they can help alleviate some of a builder’s pain points including challenges around speed, efficiency, costs, regulations and labor. The use of offsite systems is still low, but the number of homebuilders adopting them continues to rise, and that number includes large volume builders.

Most of the adoption seems to be with components. According to a 2021 Home Innovation Lab survey of 348 homebuilders (many of them big production builders), 22% plan to use roof trusses and 19% plan to use turnkey framing services in the next five years, up from 15% and 7%, respectively, in 2019. Use of panelized, pre-assembled floors and factory-built closed wall panels is still much lower at 11% and 10%, respectively, so there’s room for growth.

How can manufacturers get in front of big builders and help them see the advantages of offsite systems?

Solving Problems

The secret to winning big builder business is to address the cost, labor and quality challenges those builders are facing.

Money matters. According to Brett Welch, Scottsdale, Ariz.-based Director of Innovation at Meritage Homes, the nation’s fifth largest homebuilder, cost reduction is the most effective way for an offsite manufacturer to get builders’ attention. Meritage mostly builds for entry-level buyers in the South, and “there’s only so much cost those buyers can absorb,” he says.

A NAHB Construction Cost survey conducted in Fall 2022 found that, on average, 60.8% of a home’s sales price is determined by construction costs (interior and exterior finishes, framing, mechanical rough-in, foundation, site work) and 17.8% by finished lot costs.

Gwin says that D.R. Horton’s effort to solve the problem includes “looking at every offsite solution that comes our way.” As the largest US homebuilder by volume, it has relationships with companies nationwide that make roof and floor trusses, I-joists, basic wall panels and framed and sheathed panelized systems.

However, the amount that offsite can lower construction costs depends on geography, and the choice of whether or not to use components is market specific. “In many places it’s still less expensive to stick frame than to bring in wall panels,” Gwin explains.

When offsite does offer a good return, the savings tend not to come from lower material costs but from the fact that it’s a faster, more efficient way to build. “The advantage of offsite construction is time savings,” Gwin says. “If we can get to a point where our cycle time is 60 days versus 120 to get a house to market that’s huge; there’s real money there.”

Worker woes. It’s not news that the industry as a whole faces a  shrinking building workforce dominated by older workers approaching retirement. Builders have been thinking for some time about how they will replace those workers. “Almost all of our trades are over 50 and we’re concerned some of them won’t be around [for long],” says Chris Fox, Vice President of Architecture and Building Science at Van Metre New Homes in Ashburn, Va.

Van Metre got ahead of the problem in the early 2000s by increasing its use of components, and ultimately opening three of its own component manufacturing facilities. They have found that the manufacturing environment attracts a wider pool of workers than on-site construction; for instance 13% of hires are women. “There are fewer [weather delays], there are machines to help people lift, and the work is computer driven,” Fox says.

Builders are increasingly open to addressing the labor issue with cutting edge technologies such as Apis Cor’s robotic concrete wall printers. Headquartered in Melbourne, Fla., the company has a versatile, scalable robotic system designed for on-site use.

“It’s a highly flexible, user-friendly robot paired with a mixer that contractors can easily transport in a trailer and set up on any concrete slab,” says CEO Stefan Safko. “With a quick 30-minute setup, a single contractor can begin printing concrete walls with precision, speed and efficiency.”  

Safko says there has been interest from D.R. Horton and other big builders. “We are getting unbelievable support from our customer base, including the top three largest builders in the nation. We cannot answer queries fast enough.”

Ensuring quality. Another pain point for builders is quality control, and addressing that can be a real selling point for offsite systems. Building in a weather-protected location makes an ideal environment for producing highly accurate building components.

When PulteGroup, the nation’s third-largest homebuilder, acquired Jacksonville, Fla.-based component manufacturer Innovative Construction Group (ICG) in 2020, part of the motivation was a desire to have more control over product design and quality. “For us, ICG was an opportunity to take the common plan management and design elements and gain greater leverage to help us improve upfront product design,” says Brandon Coca, Pulte Group’s Director of National Procurement, who is based in Southeast Florida.

Demonstrating Value

Of course, you will be in the strongest position if you can solve more than one problem for the builder. According to Zack Zimmerman, Co-Founder and Chief Commercial Officer at BamCore in Ocala, Fla. the manufacturer’s solution “has to address multiple pain points.”

BamCore makes panelized framing systems from eucalyptus and other fast-growing fibers, and has been working with D.R. Horton. Zimmerman says they’ve been able to accelerate construction cycles, minimize waste and reduce labor.

Panels are shipped in the order they will be used, and there’s an app for each job that shows workers how to do the build. “Because [the panels] come out prefabricated, millimeter accurate, the install is pretty quick. Entire exterior walls can be installed in two hours or less. You can have the roof trusses on and the roof sheathed in a day, and can possibly even begin interior work on the same day.”

Zimmerman says that getting the attention of a big builder requires more than just showing up at a trade show. BamCore benefitted from third-party recognition. “Early on we were trying to prove out concepts and get a grassroots marketing movement going,” Zimmerman explains. Then in 2021 they won an Ivory Prize — an annual award for innovation in housing affordability from Ivory Innovations, at the University of Utah’s David Eccles School of Business.

The award got Horton’s attention. “We went from medium-level discussions to the executive level,” Zimmerman says. “They thought what we were doing was pretty unique and that their markets could utilize it. I never, in a million years, thought D.R. Horton would be our first big partner, but I love that they are.” 

Another way to stand out from the endless products vying for a builder’s attention is to show and not just tell. “I’m more engaged by what someone has done,” says Mertiage’s Brett Welch. “I want to see actual outcomes. I’ve deemphasized participation in trade shows, which seem to be echo-chambers. I think builders are action oriented. Real documented results and demonstrated outcomes are going to get more traction than vague statistics.”

Once a manufacturer gets a big builder’s attention, a good next step is a pilot project. Ideally, the project should address the needs of the specific builder that the manufacturer is targeting. Coca says that Pulte is looking for turnkey solutions and he suggests that manufacturers engage with them early about that priority. “They need to ask questions and allow us to ask questions.”

The manufacturer also needs to show that they’re able to work collaboratively and that their culture can align with that of the builder customer. “Whether there’s an acquisition or not, we go through a due diligence process to understand [a partner’s] long-term strategic goals,” Coca says. “It’s not just, Do they have the best quality product, or do they deliver on time? but What’s their culture and does it align with ours?”

However, while some builders want turnkey solutions, others may not. Many builders are concerned about their relationships with existing trade partners and how the offsite solution will affect those trades’ business models. The question of whether the component system be installed by the builder’s current framer or by a manufacturer-supplied crew is an important one. “We’re protective of our trades and long-time partners and won’t yank them around just because someone has a better version of framing,” says Welch.

The bottom line is that if you can get a big builder to see that your product is sound, if you can get close to their cost structure, and if you are flexible enough to work with their processes, you’ll be successful.

Horton, for its part, is open to a variety of offsite methods. “If an offsite manufacturer can [work with us to] custom tailor a group of product offerings and optimize whatever system they’re working with, and if we can put houses on the ground that are affordable, we’d work with them,” says Gwin. “We [can] build out of wood, concrete or CLT, as long as they meet code. And we’ll continue to stick build. We’re not looking to replace anything, just add to it.”

Stacey Freed is a freelance writer and editor based in Pittsford, New York. She focuses on construction, remodeling, real estate, sustainability and wellness.