Everything on Modular (Off-Site) Construction

Land & New Construction
7yFollow

Everything on Modular (Off-Site) Construction

Michael S.
Rental Property Investor · Woodcliff Lake, NJ · Member since 2017 · 42 posts · 26 votes

Hi everyone,

First off I hope I have this in the proper category because quite frankly, modular construction falls under many categories including real estate technology, real estate development, commercial real estate, new construction, etc. This thread/topic is primarily focused on the larger more commercial aspect of modular manufacturing. Prefabricated single family homes have been built for decades but the new focus throughout the world has been on large multifamily apartment, hotel, medical and student facilities. Essentially any type of building that encompasses multiple units that can be repeated in a factory environment. 

My name is Michael Sgambati and I am the national business development manager at one of the most innovative and technologically advanced modular manufacturing companies in the world, Kuvella Modular Designs and my purpose here is to EDUCATE and hopefully answer any and every question when it comes to off-site manufacturing processes. I will share the benefits and advantages of this sub-sector, some obvious and some not so obvious but my main goal is to educate on the advantages of utilizing this new alternative building method because it has serious benefits in terms of supplying more affordable housing to a stagnant industry and has the means to reduce waste in ways you cannot even imagine. Modularization is just a much GREENER technology all around. So much so that the U.S Green Building Council has implemented a new standard of green certified housing knows as LEED or Leadership in Energy and Environmental Design. 

The U.S. Green Building Council (USGBC) also recognizes the inherent materials advantages using prefabrication and off-site construction techniques. In its LEED for Homes rating system, the USGBC awards points under its materials and resources sections MR 1.2 and MR 1.3. “Projects with a precut framing package (e.g. modular homes, kit homes) are awarded MR 1.2 and MR 1.3 (detailed framing documents) automatically.” Additionally, LEED for Homes includes a credit specifically for off-site fabrication – MR 1.5. MR 1.5 states “this credit should only be awarded if the walls, roof, and floors are fabricated off-site.” Modular manufactures are very happy that LEED recognizes this construction technique which will help combat the industry's stigma of "shipping container style mobile homes". 

Here is where I will talk not only on the green aspects of modular technology but everything else in between. The disadvantages, the advantages, the fabrication and assembly techniques, the recent projects and developments throughout the world and so fourth...

I hope we can have meaningful discussions and debates about this topic and everyone fines something of value that comes from this thread. 

Have a great day!

Michael

3Reply
51 views

Most Popular Reply

Mark Creason
Real Estate Lender and Broker · Dallas, TX · Member since 2013 · 966 posts · 500 votes
7y

I am attaching 3 pictures of modular houses I built about 10 years ago.

5Reply
See this reply in the discussion

17 Replies

Jump to latestLatest
  • Michael S.
    OP
    Rental Property Investor · Woodcliff Lake, NJ · Member since 2017 · 42 posts · 26 votes
    7y

    Modular 101:

    What is modular construction?

    In the simplest terms, it is the assembly of building components produced in a controlled environment into modules from which the finished modules or units are shipped to the building site and installed and set by cranes and interconnected to construct the finished building.

    The number one reason why this alternative method of construction is beneficial is the speed of which the finished building is constructed. Here's why the construction schedule is so compressed:

    1. Assembly of components are being built off-site while permit planning and approvals are taken place on-site.

    2. Assembly of components are being produced off-site while site works and building foundation is being poured on-site.

    3. With traditional construction, before the walls are set, the floors have to be in position and before ceilings and rafters are added the walls have to be erected. However, in a controlled manufacturing plant, floors, ceiling, roof, rafters and walls are all being built simultaneously. This alone shaves off months of construction time, typically resulting in a 40-50% schedule reduction.

    This reason alone is one of the main benefits to using off-site construction. Not only is the construction process enormously streamlined which saves on cost but the very fact that the developer/builder is able to get the building occupied faster is hugely beneficial as well for obvious reasons.

    There are a number of other advantages of modular construction which I will get into at a later time. There are also disadvantages too. One of them being the barrier to entry in your specific jurisdiction. Local zoning laws make it extremely difficult for municipalities to green light modular building simply due to the unknowns associated with this newer technology. I will also get into the details of this and how to combat these building regulations later on.

    If you are in the industry and would like to participate in some of the reasons modular benefited your project or made it more challenging, please share here.

    4Reply
  • Mao Pmn
    Silver Spring, MD · Member since 2018 · 14 posts · 1 vote
    7y

    Hi Mike interesting topic and thanks for sharing. I have read that their is a issue on resale potential on modular/prefabricated housing. I understand the advantages of the technology and processes plus in some areas land being cheap.  The concern is financial advantages/disadvantages in the real estate investor project cycle.  

    0Reply
  • Michael S.
    OP
    Rental Property Investor · Woodcliff Lake, NJ · Member since 2017 · 42 posts · 26 votes
    7y
    Originally posted by @Mao Pmn:

    Hi Mike interesting topic and thanks for sharing. I have read that their is a issue on resale potential on modular/prefabricated housing. I understand the advantages of the technology and processes plus in some areas land being cheap.  The concern is financial advantages/disadvantages in the real estate investor project cycle.  

    Hi Mao this is a fair question but the answer is a very clear and easy one to answer because finished modular buildings, the PMC type (permanent modular construction) are to be valued like normal constructed buildings. Not at all are they to be classified as anything different once they are complete. In fact, typically modular buildings are more sustainable and durable with higher quality craftsmanship that traditional stick-build construction which should increase the value but than it goes against what I previously mentioned on how these are valued just as you would a normally constructed building.  It is quite possible that a temporary, prefabricated home made out of recycled sea-containers might be valued differently than a traditional mobile home but I am not sure of that. Let me know if you have any other questions. 

    0Reply
  • Mark Creason
    Real Estate Lender and Broker · Dallas, TX · Member since 2013 · 966 posts · 500 votes
    7y

    I am attaching 3 pictures of modular houses I built about 10 years ago.

    5Reply
  • Michael S.
    OP
    Rental Property Investor · Woodcliff Lake, NJ · Member since 2017 · 42 posts · 26 votes
    7y

    Modular pros and cons - Pt. 1

    Yesterday I explained in the most simplest terms what modular or off-site construction is and gave the leading example as to why builders, developers and architects are attracted to this alternative method which is simply SPEED. 

    As I mentioned before, I am in business development and project management for a modular manufacturing company. I see the advantages and I also see first hand how modular isn't always a natural fit for certain products. In fact, on a weekly basis I find myself turning down potential contracts because some development plans I get are just not suited for modular. Though it can be done and we can make money, I usually steer them in a better direction that would be more conducive to traditional stick-built construction because modular just wasn't economically feasible for that specific project.

    I hope to talk about some of those reasons it just wouldn't work as well as why I think in most cases, in most new products, in most regions and in most development situations, modular makes sense all day.

    First I'm going to start with THEORY pros and cons, than later we will get into APPLICATION pros and cons.

    Theory

    Pro #1 - Less waste - With conventional, on-site construction, it is practically pre-calculated in the budget that there will be a surplus of material left over. This material whether it can be used for another project or not is considered waste. There are lots of things that are classified as waste on a job site. Excess building materials, trash and wasted resources (poor work flow sequencing due to poor management) just to name a few.

    When materials are ordered, most of the time the GC tries to be as accurate as possible in ordering the correct quantity but he or she knows that in most cases because of damage or accidents, he or she will slightly over estimate the quantity. Sometimes, even if the order is perfect and every bit of material is planned to be used without any leftover or any need to order more, unexpected climate changes can screw that all up and ruin material because on a traditional construction site, it is hard to protect tools and materials from certain weather conditions.

    Now picture a completely different environment like a factory with an assembly line. Every piece of material is carefully calculated and has a predetermined destination. There is almost never any surplus of material unless done purposefully. In modular construction, there is so much careful consideration in the planning and pre-construction phase that there is usually never a need to over-estimate product. 

    On top of this, the fact that every worker has there specific station and duty in a very controlled and safe and out of the natural elements environment, that the chances of damaged, unused product is very slim. Think of modular like a major auto manufacturer. They build the same cars over and over and over. They know exactly what materials and how much of it are going to be used every single time. It is nearly the same in a modular manufacturing plant. Even though not every project will be the same, the materials, tools and product never leave the factory, are all stored in a protected environment and will all be used at some point safely stored away. 

    And a byproduct of this is that there is less trash. Less material needing to be ordered equals less garbage and translates to an environmentally greener building process. LEED friendly and approved which is a win win for everyone.

    Next up is Pro # 2 - Less Site Disturbance...

    0Reply
  • Michael S.
    OP
    Rental Property Investor · Woodcliff Lake, NJ · Member since 2017 · 42 posts · 26 votes
    7y

    Those look great. Modular has come so far since a decade ago too. The machining solutions, BIM software and design software used to build large multi-unit buildings is insane. Are you still developing?

    0Reply
  • Don Gouge
    Johnson City, TN · Member since 2017 · 209 posts · 367 votes
    7y
    I have very closely looked at many modular homes in the last few years and have been impressed with the quality and appearance. I think a quality modular home can easily stack up favorably against a traditional stick constructed home. The drawback I see to modular construction is the public perception. The bottom line is what is the buyer's perception and are they willing to pay as much for a modular home as they are for a traditional stick built home? You don't have to "apologize for" or educate the public about a stick built home because that's what the layman is familiar with. Most people are more willing to go with the status quo with a huge purchase rather than taking what they preceive to be a risk.
    1Reply
  • Don Gouge
    Johnson City, TN · Member since 2017 · 209 posts · 367 votes
    7y
    I have very closely looked at many modular homes in the last few years and have been impressed with the quality and appearance. I think a quality modular home can easily stack up favorably against a traditional stick constructed home. The drawback I see to modular construction is the public perception. The bottom line is what is the buyer's perception and are they willing to pay as much for a modular home as they are for a traditional stick built home? You don't have to "apologize for" or educate the public about a stick built home because that's what the layman is familiar with. Most people are more willing to go with the status quo with a huge purchase rather than taking what they preceive to be a risk.
    0Reply
  • Michael S.
    OP
    Rental Property Investor · Woodcliff Lake, NJ · Member since 2017 · 42 posts · 26 votes
    7y
    Originally posted by @Don Gouge:

    I have very closely looked at many modular homes in the last few years and have been impressed with the quality and appearance. I think a quality modular home can easily stack up favorably against a traditional stick constructed home. The drawback I see to modular construction is the public perception. The bottom line is what is the buyer's perception and are they willing to pay as much for a modular home as they are for a traditional stick built home? You don't have to "apologize for" or educate the public about a stick built home because that's what the layman is familiar with. Most people are more willing to go with the status quo with a huge purchase rather than taking what they preceive to be a risk.

    It's just like any other disruptive industry. It will take time for the negative stigma of prefab homes to turn around and for the public to be more acceptive of this technology, just like Uber did with Taxi's and Facebook did with Social Media. It's all a matter of time. The more the media and major publications covers modular, the more mainstream it will become. 

    1Reply
  • Michael S.
    OP
    Rental Property Investor · Woodcliff Lake, NJ · Member since 2017 · 42 posts · 26 votes
    7y

    Frequently Asked Questions - Pt. 1

    How many units can be finished per month? 

    - The typical facility, depending on how large, efficient and experienced they are should be able to complete two units per day, and on average should be able to complete a large project in 21 days in the plant.

    Will my city approve of a modular building? Do zoning restrictions apply for modular built buildings?

    The answer to this will differ from city to city, state to state and different jurisdictions. I can really only answer for the state of California since that is where I am based but I'm sure this answer does apply to most cities. With California, zoning requirements that apply for traditional buildings also apply for modular. No difference there. However, per the California Housing Community Development (HCD), for a modular building, the manufacturing facility is required to hire a third party DAA (Design Approved Agency and QAA (Quality Assurance Agency) to inspect the design, quality and other aspects of the modules. Once the modules are signed off by the inspection agencies, they are shipped and installed from which the city will send their local inspectors to make sure things are put together and are built to standard code.

    What are transportation costs like?

    Of course every project is different and this depends on where the modules are being shipped from but figure about 10-15% of the total cost is dedicated to transport.

    Feel free to ask me any questions

    1Reply
  • Account Closed
    Developer · San Diego, CA · Member since 2012 · 133 posts · 114 votes
    7y
    Originally posted by @Michael S.:

    Will my city approve of a modular building? Do zoning restrictions apply for modular built buildings?

    The answer to this will differ from city to city, state to state and different jurisdictions. I can really only answer for the state of California since that is where I am based but I'm sure this answer does apply to most cities. With California, zoning requirements that apply for traditional buildings also apply for modular. No difference there. However, per the California Housing Community Development (HCD), for a modular building, the manufacturing facility is required to hire a third party DAA (Design Approved Agency and QAA (Quality Assurance Agency) to inspect the design, quality and other aspects of the modules. Once the modules are signed off by the inspection agencies, they are shipped and installed from which the city will send their local inspectors to make sure things are put together and are built to standard code.

    36 States in the US have a State-Modular program similar to California's where the state or third parties acting on behalf of the state are responsible for the approval and inspection of the off-site components of the project.

    1Reply
  • Michael S.
    OP
    Rental Property Investor · Woodcliff Lake, NJ · Member since 2017 · 42 posts · 26 votes
    7y
    Originally posted by @Account Closed:

    36 States in the US have a State-Modular program similar to California's where the state or third parties acting on behalf of the state are responsible for the approval and inspection of the off-site components of the project.

    Excellent Pedro! Thanks for that. Look forward to speaking more 

    0Reply
  • Donovan Daley
    Broward County · Member since 2018 · 7 posts · 1 vote
    7y

    I have look into modular homes over the years and is intrigued by the prospect. The public does have a negative view because of lack of knowledge. I recently read on article where Miami Dade County is looking towards allowing modular homes on non-conforming vacant lots to help alleviate the shortage in affordable homes. These are vacant lots that are too small for an investor to build a house. I would be interesting in doing rental units with modular homes.

    0Reply
  • Account Closed
    Developer · San Diego, CA · Member since 2012 · 133 posts · 114 votes
    7y
    Originally posted by @Donovan Daley:

    Miami Dade County is looking towards allowing modular homes on non-conforming vacant lots to help alleviate the shortage in affordable homes.

    This would be allowed anyways. There's nothing stopping anyone from placing a modular home on a vacant lot in the State of Florida. Can you link an article? 

    There's a difference between Modular and what's commonly called "Manufactured" Housing which is another name for mobile homes. I haven't felt a stigma surrounding modular housing in a long time. Dwell magazine has done a good job of getting a generation interested in modern architecture and the allure of prefabrication. They've featured modular homes on their cover from Michelle Kaufmann, Marmol Radziner, Livinghomes, Connect Homes among others in addition to publishing a yearly volume just dedicated to modular homes.

    2Reply
  • Michael S.
    OP
    Rental Property Investor · Woodcliff Lake, NJ · Member since 2017 · 42 posts · 26 votes
    7y

    The ultimate secret to a successful multi-unit modular project:

    It's quite simple yet often looked over...

    In order to meet the modular benefits of cost, schedule, quality and risk, engaging the modular manufacturer early in the design process is fundamental to a successful project.

    It really is imperative to have solid decision making and upfront planning when deciding to go modular.

    It's not like stick-built where decisions can be made well into the project. If owners are delaying decisions until last minute or changing their minds, pre-assembly won't be successful. This is why modular is associated with cost savings. It's not that building off-site is necessarily cheaper, but modular construction is conducive to a greater control of the cost compared to traditional on-site construction. This is attributed to less change orders in module projects. 

    To be optimally effective, modularization needs to be looked at upfront, preferably during the pre-conceptual or early conceptual design phase.

    1Reply
  • Justin Haberman
    Penrose, CO · Member since 2019 · 22 posts · 5 votes
    7y

    Michael,

    Thanks a lot for your insight on this topic.  We are under contract for a parcel of land zoned high density and we re looking at possibly putting 10 build and hold units on.  Not including utilities hook ups we are looking at $136 sq/ft. for conventional building.  What kind of price ranges can we expect for modular multi family?  I have spoke with Clayton homes who advised that 2 story modular homes have had issues.  Is this true or a deterrent because they don't do 2 story homes? 

    Thanks!

    0Reply
  • Huy Ly
    Philadelphia, PA · Member since 2015 · 22 posts · 1 vote
    6y

    Hi Mike!

    I am looking to build a modular home, and gone through a lot of pros and cons. However, it is very hard to find if a modular home is required to be disclosed by the seller or the home is listed as modular in the tittle or deed. Since all of the marriage joint is sealed by drywall, it is no way for the home appraisal to determine. Some people say, there is a stamp under the kitchen sink or electrical panel. What if the house is completely gutted down, those clues would be gone. After the rehab, everything just look like a regular stick-built home. Is there reliable source to find out how the home is built? Is it required to be disclosed in any type of way?

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free