Monday, February 1, 2021

The Modular Commercial Industry is Ready 2021

Even though a recent International survey of Off-Site commercial construction companies showed 12% had little or no confidence they could survive the next three months, the other 88% said they are looking at a good 2021.



Some off-site factories said they are not seeing new contracts coming in as they saw earlier in 2020. The “wait until the election is over” attitude by investors and developers hampered many new factory contracts being signed.


Planning production schedules is becoming harder than ever. Just when a factory thinks they have its production schedule solidly in place, developers are either slowing down the process on their end or the factory itself can’t keep up the pace needed to support the timetables they agreed to in their contracts with developers, investors, and builders.


Given the small profit margin of many construction contracts, a significant number of contractors may not be able to withstand the financial impact of COVID-19.


Contractors are experiencing increased costs to meet the COVID-19 requirements for more thorough and frequent cleaning of offices and job sites, a greater supply of hand-washing facilities, and additional staffing requirements to learn new safety guidelines and to perform temperature checks, and other activities required or recommended to maintain a healthy work environment.


Many commercial modular factories are experiencing diminished labor productivity caused by a number of factors, including increased employee absenteeism triggered by illness and quarantine issues as well as the lack of skilled and even unskilled labor.


Materials are becoming more expensive as a result of global manufacturing shutdowns (e.g., goods made in China), closure of ports, and general material transportation delays within the United States. Soon building materials produced using petroleum will begin shooting upward with President Biden’s new push for sustainable power.


While operating costs are increasing, revenue streams are declining as is profit. The once-heralded long-range projects that were signed by commercial modular factories are now coming back to bite factory butts. A lot of contracts had caps on how much rising material costs could be pushed onto the customer.


While many projects are continuing, some nervous or financially-distressed upstream owners/general contractors are slowing down payment processing or declaring bankruptcy, affecting the contractor’s ability to take delivery of the factory’s completed modules.


The other 88%


While the above represents about 12% of the commercial off-site market, what about the other 88%?


They see sufficient work for the remainder of 2021. Most have moderate to high confidence that the U.S. market will provide sufficient new business opportunities this year and they expect their revenues to stay the same or increase. 


Most expect to keep the same number of employees plus about a third say they will be hiring more production line and skilled labor.


Most contractors, developers, and investors indicate that cost fluctuation has a high or moderate impact on their business with lumber being their biggest concern but they say they are already anticipating that in their costs. 


Gary Fleisher, the Modcoach, writes Modcoach News and Modular Home Coach blogs as well as the best site for off-site consultants, Modcoach Connects

Contact Gary at modcoach@gmail.com


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