Is offsite construction just a fad or is it going to become the new normal for the construction industry? Is it an untapped market for manufacturers and suppliers? If your business is selling building materials, does it even matter whether you sell to offsite facilities or companies that exclusively build onsite?
You can probably guess my answers based on the title of this post. Offsite construction is growing rapidly in both the residential and commercial markets. If you don’t adjust your strategy accordingly, you will find yourself playing catch up as the market shifts.
Offsite Construction Is Growing
There are two types of offsite construction: panelized and modular.
With modular, large components of the building are put together offsite. Often, these are entire rooms with floor, ceiling, walls and many of the interior features already completed by the time the module is transported to the site.
Panelized is more of a hybrid approach. Some components of the building are built offsite, like walls and flooring. However, most of the assembly and finishing work still takes place on the jobsite.
For the purposes of this post, I’m going to ignore those details. There are important differences between panelized and modular construction, but both involve offsite construction, both are growing and both are becoming impossible to ignore.
In the commercial market, panelized and modular construction accounted for $8 billion of the $182 billion spent on non-residential construction in 2018, representing a 4.4% share of the total non-residential construction market. According to the National Association of Home Builders, the share of modular homes in the total single-family home market grew from 2.3% in 2017 to 3.4% in 2018, representing a growth rate of 47%.
And there’s every reason to think this is only the beginning, especially in North America. Here are eight reasons I’m confident offsite construction will keep taking a bigger share of the market and why you should be paying more attention to it.
1. Projects Get Completed Sooner
One of the big reasons we’re still building onsite is that it seems like the obvious, commonsense way to do construction. You need to erect an entire building from foundation to rooftop, so your first step is to get all your materials at the site and put it all together.
That seems straightforward enough, but it’s also incredibly inefficient. Construction work goes a lot more smoothly in a factory setting. Everything is far more controlled, standardized and you never have to deal with the weather.
That makes offsite construction faster, which is why it’s often used for time-sensitive projects like hospitals, schools, airports and data centers.
There are few things that builders hate more than construction delays and projects running late. So it’s only a matter of time before most of them embrace the efficiency and speed of offsite.
Homebuilders and commercial project owners are very aware of how much it costs them for every extra day it takes to complete a project. They how much their construction loan costs per day. If it is an income producing property, they know how much income they are losing. Homebuilders also see the competitive advantage of completing homes sooner.
Saving on construction time is now important than the cost of your building products.
2. It Reduces Costs
In traditional construction projects, the costs of labor and materials can fluctuate due to site-related factors like weather conditions. Working offsite eliminates many of those fluctuations, making costs more predictable and manageable.
Offsite operations can also take advantage of economies of scale. When you’re doing everything onsite, you can only work on that single building and nothing else. At an offsite factory, workers can mass produce multiple components that can be used in different construction projects. That means more output at lower labor costs.
On top of that, builders who use offsite construction will spend less time and money on site preparation and cleanup.
The costs of using offsite are frequently higher than traditional job site costs. Offsite reduces overall costs by saving time and improving quality.
3. Helps Solve the Labor Shortage
The labor shortage in construction is still here and it’s not going to get any better for several years,. A large number of experienced workers are hitting retirement age and there are too few workers entering the industry to replace them.
This makes offsite construction especially attractive, since it allows builders and contractors to complete more projects with fewer workers. The factory setting also makes it easier to train workers in a wide range of skills, meaning they’ll need fewer specialized laborers.
4. The Quality Is Superior
When construction takes place in a controlled factory setting, there are fewer errors and defects are easier to handle. It also gives builders and contractors more control over the building process, which helps them reduce waste and get more consistent results.
Offsite also allows for more rigorous quality control. Each component can be built following precise specifications and the same team of workers can oversee the entire process from start to finish. Tolerances are also tighter and the potential for costly repairs from installation errors is also dramatically reduced.
5. Offsite Construction Is Green Construction
Many of the things that make offsite construction more efficient also makes it more environmentally sustainable.
First, you’ve got less waste. That means fewer materials are used and discarded.
Since every project starts at the same site (the factory), leftover materials are more likely to be saved and used on other projects instead of being thrown out once the job is done.
Finally, the faster building process and the reduced amount of time spent preparing and cleaning up the site all result in fewer carbon emissions.
6. It’s Safer
Even with all the progress that’s been made over the years, construction is still a high-risk industry. Building offsite is one way to make the job safer.
Moving most of the work to a factory setting means less work happening at heights. It means a reduced risk of accidents from heavy machinery. It eliminates all the hazards that come from working in heavy rain, snowfall, or extreme heat.
Reducing the number of workers needed onsite also makes it easier for construction companies to keep those workers safe.
The result is fewer safety incidents, fewer OSHA investigations and reduced insurance premiums. That alone will make more and more construction companies want to move to modular construction.
7. It’s Flexible
One assumption people make about offsite construction is that it boxes you in. Because builders are working out of a factory, they’re limiting themselves to small or specific types of projects.
That couldn’t be further from the truth. Offsite is remarkably flexible.
Single factories can also be used to produce multiple types of modules and panels. That means the same site can put together condos, townhouses and single family homes or a number of different commercial buildings.
8. Offsite Is a Competitive Advantage
We’re going to hit a tipping point with offsite construction, and I think we’re going to hit it sooner rather than later.
At this point, it’s still treated as a relatively new approach. Many builders are reluctant to make the leap from onsite to offsite. Some of them are doubtful that offsite will ever be big business.
That won’t last. Once it becomes clear that offsite companies are outcompeting them, traditional builders will see the writing on the wall. You just can’t survive in the long run by doing things less efficiently, at higher cost and with a lower quality output.
Traditional construction companies will have to adapt. When they do, offsite won’t be a niche approach anymore – it will be the way a large percentage of construction projects get done.
Don’t Ignore Offsite
Building materials companies that ignore offsite construction will become less and less relevant. They’ll lose sales as distributors and contractors start to cater to offsite clients instead of traditional companies.
Don’t get left behind. Start paying attention to offsite construction now and make inroads into that market. It won’t be long before it becomes a very significant part of the construction industry – and when it does, you’ll have already laid the groundwork to take advantage of that shift.