Saturday, December 14, 2019

The Mis-Perception of Modular Construction

We’ve all heard the wonderful benefits of modular construction all the media folks, construction experts and paid speakers have been feeding investors and developers for the past 4 years.


It reminds me of a dozen blindfolded people trying to describe an elephant. It all depends on where you’re standing and what they touch. They all know it’s big but beyond that there is no point of reference for them to collaborate on.


The person in the front may think he is touching an extra long tail as is the person at the back. Are those tree trunks or legs? And what’s with those long rock-like projections?

You get the picture. We all know something about modular construction but very few know it all. It all depends on your viewpoint.

About four years ago I invited a modular home “expert” to tour a modular factory with me. As he looked at the production line, he asked me when the steel frame gets added to the house? Turns out he had only toured two factories, both were manufactured home plants. I spent the rest of the tour explaining the differences to this university professor.

Fast forward to the present and I’ve encountered many more of these housing “experts” that had no idea what true modular manufacturing is all about. These same experts were speaking at events and conferences I was attending. You have to ask yourself what part of the elephant were they touching before they spoke to their audiences?


The problem with this begins when they speak to a group of investors and developers that are so ready to drink whatever Kool-Aid these experts provide. I know very few speakers that have ever been in the trenches of modular construction. There are so many levels of knowledge and expertise needed and most of them only know their small segment.

One of the first mis-perceptions is when the developer is told, usually by the expert along with the factory rep, exactly what they want to hear. Modular construction is cheaper by 25%, it’s finished in half the time, it is available whenever the developer wants it; etc. I know, this sounds like the perfect way to build a 5 story apartment building or hotel.

And it could be if it was reality. I know of no modular factory in the world that can shave 25% off the cost of a site built project. That ship sailed a long time ago. And that part about taking half the time; who’s kidding who here? Yes, you will probably save some time but not by half unless you’re just counting the time from the modules arriving on the jobsite until the building is ready for occupancy.

And what about the part of getting it when the developer needs it? Let’s look at that. Factories can’t afford to set idle just waiting for the developer to secure permits, financing, tax credits and code approvals, each of which can extend the lead time for producing the modules in the factory back weeks, months or even years.

So the modular factory must accept whatever comes in their door ready to begin the process. If a factory produces 15 modules a week and the project is 75 modules, that is five weeks the production line is building nothing but that project.

Suppose that project gets delayed a week before going to the line because of a SNAFU with financing, zoning, etc, can the factory wait for the developer to correct the problem? No, they are a business and building modules is their product. Without product, they lose money. Lose enough money and they are forced to close their doors.

People have been asking me lately, why would a modular factory go out of business when there are so many modular projects that need built? Now you know part of the answer.

Since there is no national network of independent modular factories that could easily shift the developer’s project to another factory, the project is delayed and the developer is stuck in the void.

So what is modular reality?

It’s the best way for investors, developers and builders to construct everything from hotels, affordable housing projects, single and multi-family homes, ADU’s, tiny houses, workforce housing and just about any other type of building.

But there are limitations and that’s the reality. Listening to those “experts” and planning your project around what they say is not the way to go.

Before you even begin talking to any modular factory about building your next project, you should take the time to find a consultant with the working knowledge and expertise of what is modular reality for your project. That reality is not always found by just talking to the factory people.

I recently learned that the engineering department at one modular factory turned down a developer’s project after the developer spent countless hours and many meetings talking about it with the sales and management side of the factory. They couldn’t build what the developer wanted, so he went back to using a site builder for the project.

Little did the developer know that another factory within a hundred miles actually has built similar projects but since they didn’t use any consultant with modular knowledge, they missed the boat.

Here is more reality.

Modular construction can be slightly faster to complete, it can save you money and it will definitely give you a better product over site-building your project. It is also inherently more energy efficient, greener and sustainable.

The modular factory becomes your partner in identifying problems and offering solutions before anything is even built. You can also visit the production line and watch as your modules are produced. Your groundwork and foundation can be completed at the same time your modules are being produced.

And let’s not forget the people that build the modules for your project. They actually show up every day! They also work in a stable environment and usually work in the same station on the production line where they hone their skills.

It was Winston Churchill that said “Indeed it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time.…”

That is also true for modular construction. It is the worst type of construction except for all those other types that have been tried from time to time.
Gary Fleisher is a housing veteran,
editor/writer of Modular Home Builder blog
and industry speaker/consultant. Contact modcoach@gmail.com

Friday, December 13, 2019

Who and What to Watch in 2020

I receive a lot of calls and emails all asking the same general question, “What do see happening in the modular housing industry next year?”
There are so many ‘things’ that can and will affect our industry in 2020 ranging from an increasing need for affordable and homeless housing to stricter building codes as well as new factories opening while others shuttered the doors but all those things are simply what will happen anyway. So I started looking at the “Who” and “Where” side of 2020 and these people and places quickly rose to the top. My list is in no particular order along with an article or two to support my choosing them.
Colorado Building Systems

Colorado
If I had to pick one state that will be the true hotbed of new modular factories and innovation in 2020, it would have to be Colorado. Colorado is One Step Closer to Having a New Modular Home Manufacturing Plant

VBC factory
Volumetric Building Companies
All the way from Australia came Vaughan Buckley who in a very short period of time has gone from building modular apartment buildings in Philly to owning his own modular factory. His commercial modular apartments and affordable housing projects along with his personal consulting will make him one of the biggest movers and shakers in our industry




HUD’s Dr Ben Carson
Good old Ben shook up housing last year with his statements about integrating HUD manufactured homes into R1 neighborhoods and hosting a Modular Expo on the National Mall in DC that featured HUD product almost exclusively. We have to believe he is working on ways to make HUD manufactured homes acceptable in every neighborhood in 2020. HUD's Dr Ben Carson Has Good News and Not So Good News for the Modular Housing Industry

Building Systems Council
The past couple of years has seen the BSC begin to look like the BSC of old by taking the lead in bringing top systems built people together with NAHB’s housing experts culminating in two great events, the BSC Annual Summit and the BSC lounge at 2020’s IBS in Vegas. Talking with Building Systems Council’s Director, Devin Perry


Express Modular Franchise
Nothing anything Ken Semler, President of Express Modular, does in 2020 should surprise anyone. His growing modular housing business, which covers most of the United States, is entering a world that has never been tapped before; franchising! If you haven’t met Ken yet, just give it a few days and you will. Express Modular Launches Franchise Program

West Coast Affordable Housing
One of the most volatile housing markets in the US is Northern California north to Seattle, Washington. Not only is affordable housing a major issue in those states, there is the homeless crisis. With a huge labor shortage, these states will put enormous pressure on both the prefab and modular industries to feed the beast.

Dave Cooper
If you attended any type of housing conference, seminar or simply had breakfast with a modular industry colleague, you’ve probably had Dave walk up and ask you if you’d like to be interviewed on camera about what you do. He is doing something that has never been done before. He is recording our industry's history. If you see him at an event in 2020, be sure to say hello and thank him!




Amazon's DC H2 
DC Metro/Northern VA
Where the West Coast and Colorado are the hungry beasts devouring housing as fast as it can be produced, the East Coast, especially the DC Metro and Northern Virginia housing market is the silent predator just waiting to pounce on housing in 2020. With Amazon and Microsoft expanding their East Coast presence bringing along with them a rumored need for at least 100,000 affordable housing units, this beast will awaken in 2020. Will Amazon and Google Find Housing in Their Push Toward the East Coast?


Pop-Up Factories
Developers and housing investors will continue to build their own modular and prefab factories serving only their needs but 2020 may be the year they begin building 100,000 sq ft factories designed to serve their needs only for the duration of their nearby projects before moving those factories to another area. Is the Pop-Up Factory the Future of Modular Housing?

Small Builder Presence Will Decline
2020 is the make or break year for the small modular or prefab single family home builder. The modular factories currently operating are facing their own challenges of building projects for developers or building single family homes for a dwindling number of modular home builders. A factory’s choice may not bode well for small builders.



Gary Fleisher is a housing veteran,
editor/writer of Modular Home Builder blog
and industry speaker/consultant. 
Contact him @ modcoach@gmail.com

Thursday, December 12, 2019

What's Happening at Guerdon Modular Buildings?

I was just sent a Notice of Public Auction for all the equipment, tools and other assets of Guerdon Modular Buildings in Idaho. I can't find out why this is taking place on December 17. 2019.

Does anyone know what is happening at Guerdon Modular?


Complaints Build Against Modular Home Maker Vermod

Tim Fisher purchased a Vermod ultra-energy-efficient modular home in 2017 for his disabled adult son and a live-in caretaker. He wanted an "instant house" that would be affordable, environmentally friendly and better looking than a typical factory-made home.


But the Cornwall artist says the $134,000 shelter underperformed, and so did the Wilder-based company that sold it to him. By Fisher's account, windows cracked and doors were hung incorrectly. The heat pump system could not get his son's bedroom above 50 degrees in the winter. A solar panel nearly fell off the roof. And six months after the house was delivered, Fisher was sitting in the living room visiting with his son when he noticed a potentially bigger problem.

"I looked up and saw that the Sheetrock had cracked, and then I looked down and saw that the floor had sunk," Fisher said.

Vermod executives disagree with Fisher's contention about the quality of the home he bought and defend their company's product and service. "We build a high-performance home. That is the only thing we do here in this company," said Steve Davis, Vermod's founder and owner. He and his team point to the accolades the company has received for its innovative product, which combines affordably priced housing with a minimal carbon footprint. Vermod launched in 2013 with support from Efficiency Vermont, a utility ratepayer-funded nonprofit that has funneled nearly $1 million in subsidies to Vermod buyers.

Modcoach Note: I visited this factory in April of this year. I’ve been a lot of modular factories but this one was unique. Not a real model of efficiency or productivity.

But as the 6-year-old business prepares to finish its 100th home of the future, Fisher isn't the only customer who is griping. Three others have complained to the Vermont Attorney General's Office about the company. And in interviews with a half dozen additional Vermod owners and renters, concerns about sagging floors, cracking drywall and moisture problems cropped up repeatedly.

CLICK HERE to read the entire Seven Days article

Wednesday, December 11, 2019

Question of the Week


What new or innovative things do you think 2020 will bring to the modular construction industry?

Tuesday, December 10, 2019

Modular Factory Available Near Metro DC and Northern VA

The old saying in Real Estate is “Location, Location, Location!”


This well established family owned modular home factory is located only 70 miles from the Metro DC/Northern VA market. If that isn’t an ideal location, nothing is.


The factory is 46,000 sq ft of conditioned space with another 5,000 sq ft of offices. 14' x 60' modules are produced regularly but it can accommodate up to 15'9 x 65'.

This successful modular home factory builds some of the finest homes on the East Coast and has been for more than 53 years. It’s buildings and equipment are well maintained.

This factory has produced over 300 homes a year but can easily be converted to affordable housing, commercial and dormitory module production.

There are no encumbrances on the factory so it can be acquired quickly. Present management willing to assist during the transition period.

Modular builders looking to begin building their own homes, modular factories looking for an additional factory to serve the DC Metro area or an investor looking to own a modular factory close to the fastest growing housing market in the East will want to know more about this.

Contact Bill Murray at 252-432-5896 or wamurray3rd@gmail.com for more information about this once in a lifetime opportunity.

Job Seekers - An Early Christmas Opportunity

December means gift giving for most of us. Here is the gift of a new job opportunity from LGA Recruiters.
The Active Candidates section below represents candidates looking for new career opportunities. The Open Positions section represents companies, who are looking for candidates to fill their open positions. Contact Lynn Gromann at 888-831-0327 or Lynn.Gromann@LGARecruiters.com if you would like further information on an available candidate or on an open position.
Active Candidates
EXECUTIVE / FINANCIAL COO / VP - Commercial MOD + General Contractor experience, possible relo

PRODUCTION / OPERATIONS
Production Manager - 30 + years HUD / MOD - IN only

ENGINEERING / ARCHITECTURAL
Designer - 14+ years MOD & RV experience, IN only
Drafter - HUD / MOD, PA, no relo

Sales Manager - Tiny Homes / MOD - wants TX
Sales - Commercial MOD & MOD, wants western 1/2 of U.S.
Sales Rep - 11+ years HUD / MOD, Southeast MATERIALS / PURCHASING / ESTIMATING Materials Manager - 15 years HUD / MOD + 5 years other, will relo
Open Positions
EXECUTIVE / FINANCIAL General Manager - Commercial MOD - South
General Manager - HUD / MOD Director of Engineering - Commercial MOD -Upper Midwest PRODUCTION / OPERATIONS Process Improvement Coordinator - HUD / MOD - Southeast Project Manager - Commercial MOD - South Assistant Production Manager - Commercial MOD - South Project Manager - MOD - Midwest Production Manager (2) - MOD - Upper Midwest Production Manager - HUD / MOD - Upper Midwest Production Manager - HUD / MOD - Southwest Production Manager (2) - HUD / MOD - Southeast Production Supervisors - HUD / MOD - All Regions ENGINEERING / ARCHITECTURAL Designer - Commercial MOD - West Engineering Manager - MOD - Northeast Drafter - MOD - Northeast Design Manager - Commercial MOD - Pacific Northwest Design Manager - Commercial MOD - Southwest Revit Designer - Multi-family - Upper Midwest AutoCAD Drafter - MOD - Midwest AutoCAD Drafter - MOD - Upper Midwest Drafter - Commercial MOD - Midwest Engineering Manager - MOD - Pacific NW SALES / MARKETING Sales Manager - HUD / MOD - Upper Midwest Sales Manager- MOD - Pacific NW MATERIALS / PURCHASING / ESTIMATING Estimator - Commercial MOD - South Purchasing Manager - Commercial MOD - West SERVICE / QUALITY Service Manager - HUD / MOD - Southeast

Developers Begin Looking at Entering Modular Manufacturing

There is a growing trend of developers wanting to use modular construction to shorten their build-out times but with only a finite number of modular factories in the US, many are starting to build their own factory.


We are seeing this happening in the West, especially in CA and CO where the need for multi-story affordable housing is increasing rapidly but there are few modular factories to handle this snowball of demand.

2019 has seen several new modular factories opening West of the Rockies and many more planned for 2020, all geared up to supply the affordable housing market and most of them are being built by developers for their own projects.

In the East where there are more modular factories, that demand is currently being met but with Google, Amazon and Microsoft moving large segments of their management and research facilities to the Metro DC and northern VA area, demand for affordable housing there will soon increase manyfold.

Those established East Coast factories that for decades relied mostly on single family home builders have been shifting some or most of their production to projects of 20 modules and larger. However this creates a secondary problem many of those factories feared might happen and in fact it is starting.

The problem is inconsistent production. When these factories were building mostly homes and townhouse projects, keeping the line filled was not a major problem but projects are anything but consistent. If a 100 module project is put on the production line today and takes 6 weeks to complete, it means no single family home can be produced because of the tight schedule required by the developer of the project.

That single family home goes to the end of the production schedule where hopefully it and all the other homes that have been ordered will be completed before the next 60 module project, requiring another 4 weeks of production time.

In the winter, many factories look for projects to keep the line full as few modular home builders in the North want their homes delivered. That’s great in theory but all it takes is one of those projects to be delayed a month or more and you can just throw all your best laid plans out the window.

You have nothing to build for an entire month and when the project once again is scheduled for the production, tying up 4-6 weeks, all those new homes builders who ordered their Spring starts need to have them on the line. But the factory promised another developer they would start their project and so it goes, on and on. Feast or famine.

Developers in the Western US are doing something about this problem by taking things into their own hands. It won’t be too much longer until East Coast developers say “Enough” and begin buying their own factory or building one.

Gary Fleisher is a housing veteran, editor/writer of Modular Home Builder blog and industry speaker/consultant. Contact modcoach@gmail.com

Monday, December 9, 2019

Factory Closures and Bankruptcies Continue Despite Housing Demand

Here we are just a decade after the housing crunch that forced the closing of both prefab and modular factories across the entire country and it’s deja vu “all over again”.

Katerra, the Silicon Valley startup backed by SoftBank, has closed a large factory in Phoenix, weeks after one of its co-founders left the firm. The Menlo Park, CA–based firm, which is valued at more than $4 billion, says it uses tech to deliver construction projects inexpensively. But it has a history of delaying or abandoning projects and in recent months has laid off hundreds of employees.
The Phoenix, AZ factory, which was the company’s first, had been used to prefabricate building components for Katerra’s construction projects. It’s been announced that the factory will close its doors and lay off 200 employees by the end of the month. They are opening a mass-timber plant in Spokane, WA and planning to replace the original AZ factory in Tracy, CA. One of the biggest investors in Katerra is Softbank which has seen its share of problems when it overvalued another company they invested in, wework, the rental office space company. Time will tell if Katerra will ever be the darling of the media it once was or will it simply just become another one of “those” upstart companies that saw a huge profit in supplying the affordable housing market in the West and fades from the scene.

Meanwhile on the East Coast, one of the biggest modular home factories in the Mid-Atlantic region, Cardinal Homes, filed for Chapter 11 Bankruptcy on December 2nd.


Chapter 11 allows the owner to reorganize to stay in business and we wish them well in their endeavor.

This isn’t the only modular factory that has either closed their doors in 2019 or saw a drop in production. There are rumors of modular plants with assembly lines either shutdown for short periods of time or running a very low capacity in order to keep employees from jumping ship.

What’s causing this to happen when we hear so much about a shortage of affordable housing? As I see it, the three biggest factors were the move by East Coast modular factories to large projects such as hotels, dormitories and commercial which put hundreds of modules on the production line at the same time single family home builders were ordering new homes and the tightening of state and local regulations and code imposed almost exclusively on modular housing.

The third factor is the lack of “new modular homebuilders” coming on to replace the current group of builders that want to retire. Even if hundreds of new builders wanted to build with modular construction today, there is absolutely training or continuing education for them.

These fundamental problems will never be solved unless the modular housing industry decides to do something collectively about it. This is a problem that needs to be discussed openly and honestly before we see more factories close their doors.

Sunday, December 8, 2019

Weekly Staff Meetings Are Simply an Excuse for Donuts

More than 50% of all your company meetings are those dreaded Staff Meetings and almost 75% of those meetings have no written agenda. The only thing attendees look forward to are the donuts.


The reason for scheduling these weekly snooze sessions is you think your business is running at a super fast pace and these meetings will keep everyone on the same page. More often the real reason is the meeting organizer simply wants to have something they can say they are in charge of.

And as we all know, one meeting usually leads to another meeting about a superfluous topic that has already been beaten to death.

Less than 25% of all meetings are Information Sharing donut fests. 20% of those meetings are Panic Meetings. These can include such topics as a competitor just stole your biggest builder, your top sales rep quit and took all his builders with him or maybe your biggest builder just canceled their orders.

And the length of time for each meeting is always between 30 and 60 minutes. That’s because all your smartphones only recognize 30 or 60 minute durations. How many of you have ever been in a staff meeting that only lasted 21 minutes? What in the hell are we supposed to do with the 9 minutes we saved. We already ate all the donuts.

The typical modular factory management staff attends more than 50 formal and informal meetings a month. Some are in-house and others are in the field. Some of them last more than 4 hours. Moreover, over 65 percent of attendees admit they do other work during meetings.

However the human brain is a marvelous machine that can multitask and refocus instantly if one of your keywords is mentioned during the snooze fest. An engineer may come out of their self imposed coma if words like “statistics, plans or material properties” are mentioned by someone.

Purgatory is real and it can be found in weekly staff meetings. You and your purgatory mates are waiting for the 60 minute alarm to sound on your smartphone so you can get a 30 minute reprieve before your phone sounds the 10 minute alarm that your next meeting is about to start.

Wouldn’t it be great if every Monday morning the boss would send out an email saying there will be no meetings this week because they trust your judgement and work ethic but if you have a problem, please drop in for a quick talk.

Donuts are in the break room. Enjoy.