Tuesday, July 17, 2018

A Developer Shares His Angst about Building on the West Coast

My phone rings and on the other end is a small developer in California asking for my help in locating a modular factory to build several developments in the San Francisco area.

He explains that he has talked to every modular factory that serves his area and discovered they either couldn’t be bothered to build 4 unit townhouse projects on scattered lots at this time or the price was astronomically high. Yeah, who would have thought San Francisco costs were so high……

I wasn’t able to give him any names that he hadn’t already tried so I told him he may want to look at a panelized factory like Entekra which serves that market.

His response, while not surprising, was that panelized might save a couple of days in the framing stage but once completed he was at the mercy of every electric, drywall, HVAC, plumbing contractor, etc and using them brought his project above even the highest affordable threshold.

I was sorry I couldn’t help him but life is sometimes cruel for small developers.

This scenario is being repeated along the entire West Coast from California through Oregon and Washington. There are not enough modular factories serving the small builder or developer.

Factories like Kasita and factory OS are dedicated to large affordable projects, not to small custom townhouse developers.

The cloud in my crystal ball is beginning to clear a little and if what I suspect could happen look for one or more foreign modular home factories to begin popping up on the West Coast with semi-custom automation, their own delivery fleet, set and finish crews and possibly even financing. Then they would begin the invasion of the Midwest and East Coast.

These will not be the disruptive force we’ve all been waiting to appear but simply efficient and cost effective competitors that could drive many modular factories to close their doors over the next 10-15 years.

The US has now become the low hanging fruit for foreign investment in housing.


Anonymous said...

Welcome to California, the home of huge affordable housing projects and expensive manufactured homes. Why your caller wants to try and build small multifamily projects as an independent developer in the San Francisco area is a total mystery. Those days have passed.

Derek Huegel said...

We are Wolf Industries Inc., a new company in WA state that serves that area. The previous comment is right in line; though we might still be interested in looking at those project. Our specialty is small one unit mod's.

Gilbert Meier said...

Real affordability can only be obtained with a new modular building technology using advanced composites. A few unique components and a smart way of putting them together very quickly (1 min per square foot). The result; A small 2-room house for $14,750. Layouts can be designed in increments of 4ft. You can see this new building technology at: http://mmc-3.com