Want a quick summary of offsite construction’s daily news? Inflation. Labor shortages. Supply-chain issues. Fuel prices. Rising demand. Higher wages. Costly new technology.
Given that, it’s hardly surprising that many in offsite are feeling “not so good” about our industry. Many owners, managers and production people came through 2008 and are wondering about where all this is going. Will there be another bubble? A housing recession? When will the other shoe drop?
With all that worry and concern voiced by industry veterans, offsite construction seems to be heading in a radically different direction: up.
Let’s take a step back and things begin to look different.
Various parts of our industry are almost too good to be true. Demand for housing, especially for the affordable market and homeless projects has never been higher. Even with the continuous price increases and surcharges being passed onto builders, developers and housing authorities by offsite factories, demand has only dropped slightly.
Wage growth for the bottom of the economic pyramid has been notable for the first time in a generation. In fact, wage growth for the bottom of the economic pyramid has actually been rising faster than inflation. Production line and warehouse labor is seeing huge increases in hourly wages and benefits. Truck drivers are now being paid over $100,000 a year in many states.
Have you noticed all the complaining about filling up a car with gasoline that can cost more than $60 today? Guess what…everyone complains but everybody does it. And every time you shop for groceries, your total rises 5-10%. How have we been able to keep buying as prices rise?
Americans have always found ways to survive. Eating at restaurants is slowing down while restaurant delivery services are growing. Amazon can’t build distribution centers fast enough. Grocery stores will even deliver to you. Every time something is delivered to your front door, there’s less gasoline being used in your car. We adapt.
Unlike past economic inflation periods, today’s inflation is directly a product of more people with more money consuming more goods and services all at once after a pandemic year of selective consumption. That means that inflation now is a by-product of both government spending that cushioned the economic pain of the pandemic and of everyone from the working-poor to the very rich having more income. Inflation today is a by-product of a strong system, not a harbinger of a troubled one.
But this narrative doesn’t reflect what owners and management are actually thinking. Many are waiting for the signs they saw and probably ignored in 2007 to once again show up. Very few veteran owners and managers have felt good about the future since 2008.
In spite of all that, new offsite and modular factories continue to pop up across the country, many of them dedicated to projects of 40 or more housing units with automation and robotics finding their way into many of them. The owners and investors in these new factories don’t have the same reservations as industry veterans and are pouring millions and millions of dollars into our industry.
Are we heading for bad times in the offsite construction industry? Probably, but not soon.
Robert Kennedy, in a speech in Cape Town in June 1966, said: “There is a Chinese curse which says ‘May he live in interesting times‘. Like it or not we live in interesting times.”
Related Articles:
- What Defines The “Capacity” Of A Modular Factory?
- The “Capacity Bubble” Continues To Hurt The Entire Construction Industry
- Interesting Facts About Home Buyers Since The Pandemic Started
Gary Fleisher is the Editor in Chief of Modular Home Source and Offsite Builder. Email at [email protected]
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