Future of construction market. What to expect and how to survive?

Matej RevajOpinion

(Part 1 – Offsite manufacturing)

Construction sector is traditional and conservative. We saw a lot of innovations and improvements in all other sectors in the past years. The automotive industry is becoming more and more efficient thanks to the substituting missing skilled labor by machines. Mobile commerce and apps like Apple Pay and Google Wallet will revolutionize the way we pay, and the 5G network will kick off the internet of things.

The construction sector is one of the slowest in leveraging technological innovations. With all these technological improvements in recent years, construction remains traditional. Traditionally ineffective. Something needs to change, and multiple offsite manufacturing companies are stating that their solution is a better way to build.

Slow start.

It has been quite a while since we heard about modular construction and offsite manufacturing as an alternative to the traditional construction and design bid build process. Is this future and more efficient way of building? It definitely is. It is faster and that is the main benefit because, as we know, time is money. But modular construction is, even after all that hype, still niche, attracting only innovators of the industry. In order to move from the early innovators to the early adopters, offsite manufacturers have to solve multiple challenges.

Proving Cost Efficiency.

Offsite manufacturing is relatively new and fast-growing. These are already well-known facts. The most important fact is, it is not cheaper in direct comparison with the conventional construction. Offsite manufacturing is promising cost benefits thanks to faster construction. The construction industry is conservative, and therefore the majority of the stakeholders will wait until the cost efficiency will be proven in practice.

Efficiencies in industrial processes are much higher than in the field processes and once this new segment of the industry is established, off-site manufacturing will eventually become cost-effective also in direct comparison with the conventional method.

Demographical trends and restricting immigration policies will also help. Field labor will become more expensive. But until then meeting the construction schedule and time savings will be the main benefit and the way how to prove efficiency.

Efficiency in factories.

The biggest challenge for offsite manufacturing is to industrialize all processes including design and engineering. This will achieve efficiency of the entire solution including manufacturing in the factory.

Offsite manufacturing is utilizing systems that are already proven in the automotive industry such as efficient supply chain management, replacing human labor with machines, higher work specialization, and economies of scale.

Offsite manufacturing processes are not completely new, and it may seem that implementation should be fast. However, that is not completely true. Offsite manufacturing is an industrial process that is very different from onsite construction and is lacking construction experts and expertise blending industrial manufacturing and construction.

The automotive industry is producing large quantities of the same products providing much-needed economies of scale for high costs of the predevelopment phase. and these products are usually designed by the same design teams who are strongly connected with the manufacturing.

As Henry Ford famously said, “Any customer can have a car painted any color that he wants so long as it is black.“ On the other hand, construction projects are characteristic by their uniqueness. It is rare to have two projects with identical designs. Construction projects are designed and managed by engineers and designers with construction experience and these are completely disconnected from the manufacturing and industrial expertise. Good coordination of all stakeholders with outreach to industrial engineering and manufacturing is the key to a smooth production process.

Education is the key.

Engaging designers, developers, general contractors, and owners and educating them about the offsite manufacturing processes will be crucial in moving from the innovators to the early adopters. All involved should understand that uniqueness and never-ending changes are killing all the benefits of this method. Offsite manufacturing companies should learn how to manage stakeholders, their expectations, and also teach them how to get out the most from this method. Because this method is not for everybody.

What to expect? Move from Innovators to Early Adopters.

It will take some time but offsite manufacturing will eventually take off and capture a portion of the single-family and small to medium size multifamily markets. We can expect small multifamily projects to be delivered by the end of this year in the DMV area.

The bigger multifamily projects will be delivered by the end of 2020. I am expecting that offsite manufacturing starts to attract early adopters in late 2020 and in 2021. The financial results of completed projects and the ability to meet construction schedules will determine the speed of adaptation.  

There is more.

Another market trend is shaping the future of construction. It also enables to deliver projects faster than conventional design bid build construction process. Stay tuned for part 2.


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