Watch This Video to See the Future of Building Materials
I shared this video on social media and received this comment.
“I had chills watching this video.”
Monica Prichard Building Materials
The future of building materials is going to be shaped by changes in four areas.
1. Panelized/Modular Construction – Owners, developers, builders, contractors, start-ups and even architects are shifting to panelized/modular while manufacturers are dragging their feet, waiting for it to become important.
2. Online Information and Sales – Building materials customers are way ahead of manufacturers and suppliers in the way they make purchasing decisions online.
3. Labor – Local governments, unions, and entrepreneurs are developing training programs and better ways to connect labor with employers; meanwhile, manufacturers are sitting on the sidelines.
4. Globalization – Companies from other countries have long been better at selling internationally than most US companies. They are now poised to become serious competitors, globally and in North America.
I plan to write about each of these coming changes to the industry, but in this article, I am going to focus on the growth of panelized/modular construction.
I have been watching panelized/modular for several years for a couple of reasons. The first is that it just has to happen. The way we build is very inefficient, and everyone hates inefficiency. It’s hard to think of another industry that has resisted or had to be forced into becoming more efficient.
Fast food, auto manufacturing, farming – almost every industry you can think of looks very different than it did just a few years ago, and they continually invest in improving their efficiency.
Inefficiency in construction means:
- Wasted materials
- Wrong or less than ideal materials
- Added material costs
- Installation errors
- Added labor costs
- Longer construction times
- Higher maintenance costs
- And more
The industry is stuck: many building practices and materials have not changed in over a hundred years.
The main reason for this is that the construction industry is made up of many small businesses. For every Toll Brothers, Gensler or Turner Construction, there are thousands of small builders, architects, and contractors.
Why does that matter? Because making serious changes to improve efficiency takes the kind of resources that only larger firms have. There are some building materials companies, distributors, builders, and contractors who have this scale, and some of them are making a serious commitment to improving efficiency. But they will face an uphill battle as long as the thousands of smaller players dictate building practices.
Experienced developers, owners, and builders are also guilty because they just accept that this is the way things are done. But we’re seeing more investment firms investing in buildings, and this will hasten the shift to a more efficient way of building and doing business. They have an army of MBA’s studying spreadsheets, and those number-crunchers have a lot of power. Their whole job is to find ways to improve these investors’ return on investment. And inefficiency is one of their most obvious targets.
These MBA’s will push the industry towards more efficient practices without ever setting foot on a job site.
The second reason that you should pay attention to this is that it’s happening fast. Panelized/modular construction is still a small market compared to traditional construction methods, but it is growing quickly. It will soon reach a tipping point where the building industry will have to reinvent itself.
When this happens, it will hit most building materials companies as if it were a serious recession. Their customers will change overnight, along with the way they buy and the types of products they need. Depending on how you approach this change, it can either be an opportunity or a threat.
Companies that recognize this coming change and are working to identify and meet the needs of panelized/modular customers will make this shift easily and leave their competitors behind. It’s also an opportunity for new businesses that can meet these needs better than today’s manufacturers. When this happens, you won’t be able to hide behind your brand name or big factory.
For those who are prepared, this will be an opportunity. But it will be a threat to companies who ignore this shift and wait for the change.
I am an avid watcher of changes in building materials. I read an array of global online publications every day, and I have an extensive news feed. At trade shows, I look for what’s new or different. In most cases, I find these changes in unexpected places, like smaller companies or well-funded startups with no industry experience.
Most people are looking at what’s directly in front of them: How can I get the spec on this building? What were our sales this month? But I make sure to spend some time every day looking out at the horizon. I want to see what if there’s anything there today that wasn’t there yesterday. I’m also watching to see if anything’s getting larger as it grows and moves closer.
When I look at that horizon, here’s what I see coming with panelized/modular.
1. The continuing growth of design-build. More than 50% of commercial buildings now use it.
2. Blu Homes and others have taken factory-built housing to a new level that is now preferable to site-built homes for many homebuyers. And they are not cheap.
3. Clayton Homes hires Starchitects to design a new line of their manufactured (what used to be called mobile) homes.
4. KB Homes and other major builders are exploring panelized construction.
5. Revolution Precrafted homes started in 2015 and is already valued at over 1 billion dollars. They are based in the Philippines but have global aspirations. They have also hired some of the world’s leading Starchitects to design their buildings. They also plan to develop new products, such as curved fiber cement, that will also make them a competitor in materials.
(And it’s great branding, too. I love the term Precrafted.)
6. The startup Katerra (they created the video above) is the one that really got my attention and made me realize just how close we are to a tipping point in construction practices and sourcing.
Spend some time on their website and tell me you don’t see serious change headed your way. Can you name a major builder, developer or owner who won’t want to meet with them?
Look at their leadership team. Notice that they have little or no industry experience to limit their thinking.
Check out their staff on LinkedIn. I was surprised to see that they already have 447 employees on the platform. When you look at their backgrounds, it’s clear that they are all A players.
They are well-funded, so they don’t have to worry about next quarter’s sales numbers.
Another interesting observation: when I look at the profiles of the leaders on LinkedIn, I see few contacts in the building materials industry. It’s not their job to connect with you; it’s your job to connect with them. And that better be a top-level contact.
7. Every week, I see more articles about panelized modular like these:
An ex-Amazon exec is getting into modular housing.
Marriott turns to prefabricated rooms for quicker hotel construction.
‘Grown men playing with Legos’: Why offsite modular construction is on the rise
The rise of factory built homes. Forbes Magazine.
The Construction Industry Has a Productivity Problem
Of all the changes that are coming to the building materials industry, the growth of panelized modular is the one you need to be on top of the most.
What You Should Do
Senior Executives – Get on a plane and visit some of these companies to do some research. Learn more about them and how you can help them be more successful.
Sales – Use the information in this article as talking points with your customers. Ask them whether they’ve been following this trend. Do they see it as a threat or an opportunity? Email the article to some customers with a note. Share it on social media with a comment.
Marketing – Become familiar with these companies and watch their progress. Sign up for their newsletters and get ready for the coming change.
Thanks for the following comments. I’d like to hear your feedback and suggestions.
“Mark, you are spot on, the future for building materials is right now!”
Business Consultant & Account Executive
Schaffer Associates, Inc.