Yesterday I had an interesting question posed to me if I thought modular housing’s future will reach 10% market share with all the positive media coverage touting its benefits.
He also asked why he couldn’t find any numbers for modular housing starts in the Southwest or the West Coast.
Second question first. Neither the West Coast or the Southwest have much of modular presence, minuscule actually, as both of these areas are Manufactured Housing strongholds, especially the Southwest. Standard modular is priced too high in comparison. Tract builders and Manufactured Housing dominates the West. It will be years before any major inroads will be made in either area. Fact of life folks.
As for his question about the future of modular housing’s reaching 10% of the total, that elicited a response from me that he wasn’t expecting.
Assuming there will be 800,000 new single family home starts in the US this year and modular’s share is 2%, as he stated to me, that means that only 16,000 will be modular. Since no one actually knows the true number of modular factories in the US, I told him my best guess was 50 true modular plants. Each factory would have to produce 320 homes or approximately 1,000 modules. WOW!, that’s really not a realistic number for most factories.
Based on my calculations, In order to raise modular’s share to 10% would require an additional 200 factories to be built. If the cost of building a factory, acquiring the equipment, trailers and beginning materials as well as hiring the initial staff and paying them for the 3 months after the factory is completed until the first house rolls off the assembly line is about $5,000,000, that would require an initial investment of $1.0 Billion Dollars!
IMHO, that is an unsurmountable amount.
A small regional site tract builder for example could start up with no building investment, no equipment investment and a small staff. The only real investment would be cost of land and development and the 3 or 4 seed spec houses, all of which could cost less than $1,000,000 that would be eliminated as houses in the development are sold, hopefully leaving a nice profit and the initial investment paid off.
All it will take to reach a 10% market share is an enormous amount of money and a lot of new factory and sales people. Both of which are currently in short supply. Plus new builders; something else in short supply.
To prove my point, here is a recent article about FullStack Modular’s startup, a new multifamily and commercial factory opening in Brooklyn, NY with aspirations of going not only national but global:
FullStack Modular, LLC, the turnkey modular prefabricated solution for developers of multifamily buildings, hotels, and dormitories, announces the closing of a $6 million Series A round of funding. The investment is led by McCourt Global and includes real estate industry leaders Lawrence Benenson, Lloyd Goldman, Jonathan Grunzweig, Jonathan Langer, and Daniel Levene.
The funds will be used to scale production of FullStack Modular’s 100,000 square foot design and construction facility in the Brooklyn Navy Yard, as well as facilitate company growth with an eye towards expanding to the west coast and abroad
“We are excited to have this powerful group of investors involved in our business,” said FullStack Modular CEO and Founder, Roger Krulak. “Our company is transforming the real estate construction business and the way mid and high-rise buildings are created. Our fully integrated design-build process incorporates innovative technologies such as Building Information Modeling [BIM], design for manufacturing, and lean construction management. The result is a process which is faster and more cost effective than conventional building, generates far less waste, enables safer site conditions, and is less disruptive to the surrounding neighborhoods.”
“Roger and his team at FullStack Modular are bringing innovative technologies and processes to an industry long in need of greater efficiency,” said Drew McCourt, President of McCourt Global. “We’re pleased to support FullStack Modular as it scales its business and leverages growth opportunities both here in the United States and abroad.”
CLICK HERE to read their story.
Watch for the upcoming article about modular’s future in Professional Builder.
