Monday, July 8, 2019

Is Investment in Modular Construction About to Explode?

Is modular construction always a better choice for residential and commercial construction? Not always. Sometimes the cost of transportation or the exorbitant state review costs for modular construction can negate the advantage of some modular projects

But there is one indisputable truth that all on-site construction faces that modular doesn’t. Skilled labor and in fact all construction labor is seeing radical shortages in on-site building.

Some see modular construction technologies and other labor-saving advances as good bets because of the nation’s shortage in skilled construction labor. A 2017 survey found one-third of contractors nationwide have turned down work because they don’t have the labor.

Modular construction — in which parts of a building are built off site for on-site assembly — is now seeing endorsements by site builders tired of fighting the labor shortage problem.

Investment in the total construction sector totaled $6.1 billion last year, nearly double what was invested in 2017 and a 1,632 percent increase from the $352.1 million invested in 2016, according to the Wall Street Journal.

So far this year, around $4.3 billion has been invested in construction tech, putting 2019 on pace to break last year’s record.

With modular’s current appeal, watch for more of those investors looking at modular as their best bet.

Modular and Prefab factories are popping up like dandelions in Europe and now we are seeing modular factories opening all over the Rockies and West Coast. Mostly doing multi-family, commercial and cookie cutter apartments to meet the demand for affordable housing.

The Midwest and East Coast regions haven’t seen those huge investment dollars just yet but it will happen soon as the affordable housing crisis creeps into both regions.

When is comes to huge investments nobody can ignore what Berkshire Hathaway’s Clayton Homes is doing in the site built sector buying up regional builder after regional builder across the US.

Builder recently posted an article about Clayton Homes expanding its footprint in the Carolinas with the purchase of Shugart Homes.

I sincerely hope I’m wrong but is their game plan to buy up hundreds of thousands undeveloped building lots owned by site builders across the country and with the continuous backing of HUD Secretary Ben Carson, open all R1 developments to HUD manufactured housing? And if he succeeds, who will be the big winner? It just might be Clayton Homes sitting on thousands and thousands of R1 lots in their own developments.

Warren Buffet is quietly making some of the biggest investments in construction our nation has ever seen and all under the Clayton Homes brand. Add to that all those Berkshire Hathaway real estate offices across the nation, all those HUD and modular home street dealers and with his mortgage brokerage companies, he will soon have total vertical integration from raw land through building homes to financing and selling homes. And his real estate company will handle all the resales and that financing.

Like I said, I hope I’m wrong about this, but it sure seems that if the Modcoach can see it coming…...well, you get the picture.

Gary Fleisher (the Modcoach) is a housing veteran, editor/writer of Modular Home Builder blog and industry speaker/consultant.

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