Prefab Construction Industry

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01
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Part
01

Prefab Construction Industry Market Summary

INTRODUCTION

Prefabricated construction, defined as construction in which 2/3 or more of the construction process is finished off-site, and finished pieces are then shipped to the site for assembly. Prefabricated construction includes prefabricated systems (wood drying, cutting, and processing would be done off-site), panelized systems (completed panels are constructed off-site), and modular systems (entire modules of a house are completed off-site). Prefabricated construction allows construction projects to be finished in as little as half the time of a regular construction project, and they are constructed according to state-wide building codes.

CURRENT INDUSTRY TRENDS

Currently, there are only a small number of homes in the United States that are prefabricated, with only two percent of new homes constructed in the modular fashion.

The 2014 Survey of Construction shows that in 2014, only 10,334 single-family, panelized/precut homes and 10,560 single family modular homes were started. In 2014, most modular homes built in the United States were "concentrated in the East North central, South, and mid-Atlantic regions of the country."

In 2016, the North American prefabricated construction industry stood at $10.2 billion US dollars, with the United States making up the vast majority (seventy-five percent) of this figure.

INDUSTRY FORECAST

The prefabricated housing industry is expected to grow in the United States. By 2020, it is estimated that shipments from the United States will reach 123,500 prefabricated units valued at $7.3 billion dollars. The US demand for manufactured housing, the largest part of the prefabricated housing industry, is projected to reach eighty-five thousand units in 2020. Demand for precut, panelized, and modular housing is expected to rise by 5.6% per year through the forecast period as well.

Modular Building Institute (MDI) has stated that modular building construction comprised three percent of all North American commercial construction in 2017, with that number expected to rise to above five percent in the next five years. This compares favorably to the Permanent Modular Construction (PMC) data from 2011-2014, which shows that only one percent of commercial construction took advantage of modular tactics. The commercial construction market is currently the market that takes advantage of modular housing most frequently, followed by the industrial, healthcare, and education markets.

CONCLUSION

The prefabricated construction industry has been slow to grow in the United States due in part to a problem of perception. Many people believe that prefabricated housing to be of inferior quality that therefore would not last long. Furthermore, many people are uneasy with the lack of concrete in modular housing, since past construction projects tended to rely on concrete.


Part
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Part
02

Prefab Construction Industry Competitive Landscape

By available financial reports, Katerra currently holds a better share of the US prefabricated construction market at 1.6%. Clayton Homes, with its 2016 revenue of $50 million comes next at 0.65%; while Newmans Homes and Project Frog comes third and fourth at 0.085% and 0.046% market shares, respectively. North America's prefabricated construction market was sized at $10.2 billion in 2016, of which the United States had 75% of the market, or $7.65 billion. Katerra uses sustainability efforts to reduce cost of projects and this serves as what differentiates them from others; while Clayton Homes attempts to standout by offering an enticing promise of delivering affordable, stylish, and custom-built homes. Project Frog employs the attractive combination of speed, flexibility, and simplicity as its competitive advantage, while Newmans Homes boasts of offering more options at a cheaper price.

Methodology

The prefabricated construction industry is still a maturing one and as such, many companies operating in the industry are privately held. This implies that they are not obligated to make their financial reports public, thus, making it difficult to source useful information for developing a comprehensive competitive landscape. Due to the above impediment, our extensive research did not produce any precompiled quantitative sources for a deep dive competitive landscape. Hence, we resorted to press releases, authoritative and credible articles sourcing for competitors in this industry.

Ultimately, from the credibly identified companies listed in major industry rankings, we settled for the top ones whose revenue figures were within our research reach. Finally, using the market sizing of the industry, we triangulated it with each company's revenue to arrive at their respective market shares. As requested, we have included all the required competitive details in this attached spreadsheet.

Triangulation

North America's prefab construction market was sized at $10.2 billion in 2016, with the United States having 75% of the market, or $7.65 billion ($10.2 billion * 75% = 10.2 *0.75 = 7.65).

Next, the 2016 revenues of each company profiled in this request were sourced, hence, triangulating both their respective 2016 revenues with the United States market value, we arrived at their respective market shares. The calculations are listed below.

1. Katerra$125,000,000/$7,650,000,000 = 1.6%
2. Clayton Homes — $50,000,000/$7,650,000,000 = 0.65%
3. Newmans Homes — $6,500,000/$7,650,000,000 = 0.085%
4. Project Frog — $3,500,000/$7,650,000,000 = 0.046%

Conclusion

North America's prefabricated construction market was sized at $10.2 billion in 2016, of which the United States had 75% of the market, or $7.65 billion. Katerra currently holds a better share of the US prefabricated construction market with 1.6%. All requested details are available within the attached spreadsheet.

Part
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Part
03

Blokable

Blokable’s potential customers come in all shapes and sizes, from the individual to multi-national conglomerates. Buyers in this space on the western side of the United States most commonly are investment groups, governments, non-profits, corporations, and individuals. These customers are highly concerned with cost control, then the creation of green living spaces and customization options.
OVERVIEW
Prefabricated (prefab) housing has just begun to explore its potential as far as market size and customer base. Prefab offers flexibility and control as far as labor. It can greatly speed up project site completion times by not requiring skilled workers to be at any particular place at any point in time. On-site construction gets more expensive the more in demand labor is in the region of construction. Prefab removes this supply and demand pressure, by offering constant work to skilled labor in one area. There is a vast array of building types that fit the profile to use prefab building blocks in their construction such as long-term and short-term living (apartments, single family homes, dorms, elderly-living, hotel spaces), teaching spaces (any type of school), any space that does not require regular modifications are suited to use prefab construction. This opens up the customer base to many industries globally. Below is a review of where prefab construction is starting to take off and where it is likely headed.

WHY PREFAB
The main reason for prefab as suggested above is that it controls the cost of construction labor. Other important factors are that prefab companies are using green materials and installing renewable energy options into their units. Again, having construction occur in the same area with the same demand for supplies, helps to control supply costs (buying in bulk) in addition to labor costs.
CURRENT PREFAB CUSTOMER BASE

REGIONS
Right now, the prefab market is the largest in Asia. The Chinese economy has been moving from an investment-based economy to a consumer-based economy. This means that rather than the continuation of building factories for people to work in, the population is moving to work in jobs that serve others locally. In addition, the one child per-household law was lifted in 2016 after 25 years. That means two things, that the population will grow and less skilled labor exists on the market today. Overall, construction in China will be focused on building out from the cities. Much of this construction will be in the form of residential areas as well as areas of business. The rest of the Asia-Pacific region are in a similar situation. Cities are overpopulated and outlying areas need to be developed to accommodate for sprawl. Sprawl is also occurring in Africa, it is not to the same extent of most of the Asian-Pacific, it is still a concern.
The customers of these regions will primarily be investors looking to build residential communities, governments or private organizations looking to build schools as well as businesses that build up and into these new communities.
Another area of the world that has been noted as users of prefab construction is the European Union. Many European countries are concerned with saving money, consolidating labor and building green spaces, all at a low cost. These things are happening across Europe as they are in Asia now.

COMPANIES
Companies like Google and Marriott have also jumped on prefab. Marriott expects to add seven more offsite builders to their hotel projects this year. In 2017, they reported that they signed 50 select hotel deals in North America alone that use prefab rooms. Marriott’s International Chief Development Officer, Eric Jacobs, noted that “construction is the next frontier for innovation, and modular is leading the way.” Marriott’s first modular hotel was opened in 2017 at the 97-room Folsom Fairfield Inn & Suites in Folsom, CA.
Google announced in 2017 that it would be developing a site with 300 modular homes to help combat the housing crunch in Silicon Valley. There are many companies and investment groups working on similar projects. For example, the Kootenai Health group in Idaho is looking to build a hospitality center for families of sick patients to stay. A group called Clayton Homes is working to create residential developments using prefab homes geared towards getting millennials into their first homes. Fremont California is a local government sector using prefab construction for new school spaces.
LIKELY CUSTOMERS OF BLOKABLE
Blokable customers are likely to be groups or individuals around the world. It appears as though Blokable prefabs are geared toward residential building space. That means their customers are likely to be individuals, governments, non-profits, investment groups or corporations interested in solving residential housing problems in a particular area of the world. The location of their customers will depend on their overall rates and the cost to ship to location. This is not unreasonable due to the fact that Connect:Homes has devised a way to cut shipping costs all over the world by 90%, this opens up Bloable’s customer base to the world if they so desire.

FACTORS IMPORTANT TO BLOKABLE CUSTOMERS
Cost control is the number one factor for exploring prefab construction. Cost control related to labor, building materials and overall time to complete the project. As mentioned above, prefab construction controls the cost of labor by consolidating the area that labor occurs in. This reduces the demand for skilled labor in regions that may not have it available at the time. The next important pieces to potential customers are using green materials and level of customization of the units. As mentioned above, Europe has jumped on prefab construction options as a way to save money and build green spaces for less. Offering units that are customizable, the more purposes they may serve. This opens them up as possible hotel rooms, school rooms or residential living spaces.
CONCLUSION
Ultimately prefab construction greatly cuts construction costs by controlling the cost of labor and reducing the cost of supplies. This makes green space creation less expensive than it once had been. It also allows for projects to be completed ahead of schedule. The likely customers of Blokable are individuals and groups that are concerned with saving money and green building. These customers can be hotel chains, governments, non-profits, investor groups, large corporations, and individuals.

Sources
Sources