Sunday, October 25, 2015

Capsys Closing its Doors at the Same Time Polish Modulars Invade NYC

Pioneering modular manufacturer Capsys will shutter in March after almost 20 years in business, founder Nicholas Lembo announced recently.

The company’s end highlights the challenge rising rents pose to the industry. Capsys, which produced modules for developments such as the micro-apartment building 335 East 27th Street in Manhattan and the townhouse complex Atlantic Center in Fort Greene, had been on the hunt for a new location since 2010, when it learned its long-term lease at the Brooklyn Navy Yard would not be renewed.

The company is paying around $4 per square foot under its lease – far below average rates at the Yard. “New York City is too expensive, the only spaces that I found were out far out in New Jersey and Pennsylvania,” Lembo said. “The rent there is very inexpensive, but the problem with that is if we move the plant there, we would not be able to retain any employees and would be starting a new business.” Capsys, founded in 1996, was the only modular manufacturer in New York City for almost a decade.

Today, Forest City Ratner’s modular factory is Capsys’ neighbor at the Navy Yard.

Most modular manufacturers are based outside of major cities, where rents are cheaper. For example, DeLuxe Building Systems, which built modules for the Inwood apartment building The Stack, is based near Scranton, Pennsylvania. But transporting modules overland is expensive and time-consuming.

“What gave us an edge is by manufacturing these things locally we could ship units locally,” Lembo said.

The cost advantage of producing locally eroded after the city tightened restrictions on the transportation of modules, which now require a pricy police escort. But ultimately, it was the rising cost of manufacturing space that spelled Capsys’ end.

Rents at the city-owned Navy Yard are below market, providing a haven for numerous manufacturing companies that would otherwise be priced out of the city. But prices today are a far cry from what they were in the 1990s, when Capsys first signed its lease.

At Building 77, a new manufacturing building at the Yard, space reportedly goes for $20 per square foot and up. Capsys’ end casts doubt over the future of modular manufacturing in New York as overseas producers are beginning to make inroads here.

Polcom, a Polish manufacturer, is building modules for a new hotel in Williamsburg in Poland and will ship the units across the Atlantic.

“It was cheaper to transport from Poland by boat than to do it by truck from Indiana,” the hotel’s developer Charles Blaichman explained.

Lembo said Capsys will complete its current and final project, the 800-home affordable housing project Nehemiah Spring Creek in East New York, before closing. More than 40 employees currently work at the Capsys factory, according to a spokesperson – down from a high of more than 80.


Barry said...

Is labor in Poland that much less than the United States? I cannot believe it when the comment is made that it is cheaper to ship in modules from Poland than to buy them here in America. Unbelievable!!!!
And of all places to put up a Polish built modular hotel....Williamsburg, the heart and soul of Colonial America.

Anonymous said...

It's not the issue of labor costs. It's the outrageous cost of transportation.

Anonymous said...

If one looks at their production system they are shipping open web steel frames that can be containerized and assembled like legos. It probably is one part system/design; one part labor; and one part transport. Can't wait for the trade war babble from the unions and builders.

Anonymous said...

As one of the above states, its not the labor costs but instead the shipping costs. Shipping from NC to VA for 2 carriers is about 6000.00 so you can see what it would cost from Indiana. And it sure isn't the fuel costs that are doing it.

Anonymous said...

I would be interested in knowing how the NYC Inspection process is going to work for this project. Since inspections need to be done in the factory, I would assume that they will have to fly over to inspect.
When adding all the cost together I have a hard time understanding how it will be less expensive to build over seas and then ship them.
Lets just look at logistics alone. They build at the factory in Poland, crane them onto trucks and then off load them onto the ship. When they arrive in the US, they need to be off loaded and shipped to the site. Loading and Off Loading is the most costly part off the transportation process and they are doing it twice.

Anonymous said...

So far everyone is missing the point that these modules are being built to be containerized for shipping into the harbor for local transport in container size units to the site. If you read the Real Estate Weekly article discussing the plan Polcom experience and expertise was not the cheapest per se but the transport costs as containerized mods changed the dynamic.

Unknown said...

There is certainly much more to this story than is reported here. If the rent for Capsys was doubled that would add less than $4.00/SF to building cost if they are building two modules per day. The fact that they have reduced from 80 to 40 employees is a much bigger issue. They are not getting enough volume. Add to that the cost of labor at the Navy Yard. It has previously been reported that they utilize union trade labor. I suspect that this adds $10 to 15/SF to their cost.
High labor cost and low volume are likely the real problem and they are directly related.