It’s Time to Grow Offsite Construction’s Capacity
One of the things I get asked at conferences and meetings is, “How many offsite construction factories are there?” Well, that’s a good question. The answer is that no one really knows.
What constitutes an offsite construction factory? When we talk about offsite we’re really talking about system-built homes. The National Association of Home Builders (NAHB) defines four types of system-built homes—modular, panelized, concrete, log and timber frame.
Based on current data collected by NAHB, these account for less then 5% of new homes built in the U.S. But that percentage is growing: builders and developers have discovered offsite construction, and it appears they have discovered it in a big way. Is the industry ready to supply enough product to meet those builders’ and developers’ needs?
It takes 12-18 months or more to bring a new factory online. That’s the time required to take an existing building and convert it to offsite production or to build and outfit a new one. It’s not a small investment. Depending the level of automation, costs for a startup a factory can range from several million dollars to $100’s of millions.
In his book The Third Wave, Steve Case explains that the internet had three waves of disruptors. The first wave consisted of technology pioneers that laid the groundwork and built the platforms. The second wave was dominated by technology companies that didn’t necessarily know much about the industry they were conquering. Think Uber, AirBnB, and even Facebook.
The third wave is extending technology disruption to a much wider range of industries. In Case’s own words:
”Think about what’s been happening in Silicon Valley over the past few decades and imagine what it will look like when we apply that same culture of innovation and scope of ambition to every part of our economy. That’s the Third Wave—and it’s not just coming; it’s here.”
In the third wave, to be a successful disrupter you will need a deep knowledge of the industry you are trying to conquer, and that includes construction. This industry is too complex for someone to be able to come from outside and knock out the current industry players.
We have seen this already. Katerra attempted to use the brute force application of money without detailed industry knowledge to take over the construction sector. It failed spectacularly. Others have tried it on smaller scales, but still tens of millions of dollars have been spent and lost in these attempts.
The industry successes of this third wave likely won’t come from outside the industry. It will be smart capital, appropriately coupled with inside industry knowledge that takes offsite construction to the next level of success.
Luck is what happens when preparation meets opportunity. Let’s get prepared as an industry and start building the capacity we need going forward.
Offsite construction has been discovered. Can we have the 20/20 Vision? Can offsite be 20% of the construction industry in 20 years? Can we apply offsite construction’s culture of innovation and scope of ambition to every part of the construction industry? I believe we can, but we have to start now.
