Offsite vs. Onsite Construction Part 1
Armstrong: Over 300,000 skilled laborers are retiring from the con- struction industry annually which is fueling the ever-rising cost of general labor and increasing the difficulty in finding skilled labor. This coupled with the increasing cost of raw materials and energy are all favoring off-site construction and its efficiencies of scale in the production process. Semler: Pre-Covid I saw a significant increase in offsite construction, and particularly modular construction at the 2020 International Builder Show. At that time, it was primarily driven by the lack of labor and overall costs. At the 2022 IBS costs were off the charts — the broken supply chain, rapidly increasing costs, and the lack of labor has driven builders and developers to seek offsite modular construction and it has only gotten stronger. Economics is making everyone look at better and more ef- ficient ways to build. How Has Inflation and the Cost of Fuel to Ship to a Location Affected Construction Costs Overall? Ochs: Inflation and the cost of fuel have definitely played a part in our ability to meet growing demand, but we’ve been able to keep going throughout at a steady pace. We’ve mitigated most issues with supply due to the fact that we can buy in bulk, and order truckloads of materi- als. We’re also in an area where skilled labor is still reasonable. Weber: Inflation affects every aspect of our economy – especially the construction industry. Mortgage rates for homeowners affect everyone regardless of the construction technology. An initial advantage for offsite construction could be due to the speed at which a home can be “completed” when interest rates are on the rise. For example, if you wait 6 - 8 months for a stick-built home to be completed in an economy where interest rates are going up, getting an “offsite” home constructed faster allows closure on the loan at a lower interest rate which may determine if the mortgage is still affordable. Perry: Shipping costs occur regardless of whether you’re shipping pre-construction materials or manufactured items, but an advantage of offsite construction is that materials are purchased in bulk by the manufacturer who has the capacity to store them in their warehouse. Essentially, you’re getting in front of the materials shortage by secur- ing your materials and leveraging the power of bulk buying. Armstrong: It’s cheaper to ship a finished assembly once as opposed to shipping miscellaneous parts multiple times on separate vehicle deliveries for an on-site project. Offsite remains more economical, especially in light of rising fuel and shipping costs. Semler: Overall costs for shipping modules have increased marginally, however the real savings is in the alternative of using offsite construc- tion. Fuel price increases multiplied across every subcontractor and materials supplier who has to make trips to or deliver to job sites scat- tered across a given environment have skyrocketed. Fuel prices that have doubled increase onsite construction costs drastically. Interest in Offsite Construction is Exploding with Develop- ers, Owners, and Contractors Actively Exploring Options.
Offsite Vs. Onsite Construction– Economy, Impacts & Future In Part I of a two-part series, industry pros weigh in on the economy and its impacts on the construction industry, specifically offsite con - struction, and forecast the future for this construction approach that’s gaining prominence. Offsite construction is the manufacturing, planning, design, fabrica- tion, and assembly of building elements that are transported to a final construction site location. Offsite construction can be used for all building types including residential, educational, health care, and com- mercial, but offers distinct advantages. All construction methods and delivery systems are heavily impacted by current economic conditions. We’ll explore how offsite construc- tion is becoming ever more viable given today’s economic outlook and challenges, and present why it’s coming into its own. We’ve assembled a team of experts representing the construction, engineering, and build- ing systems industries to weigh in on what may make offsite construc- tion the perfect option for your next project. Meet the Panelists: Brian Sielaff, M.S.C.E., P.E., P.Eng, CEO, Tamarack Grove Engineering Mikel Ochs, President-Operations,Whisper Creek Homes Michael H. Weber, IOM, CGP, CSI, National Business Development Manager, The Euclid Chemical Co. Devin Perry, Executive Director, Business Improvement Programs, National Association of Home Builders Jack Armstrong, BSChE, Executive Director/COO - SIPA (Structural Insulated Panel Association) Ken Semler, President & CEO - Impresa Modular How Have You Seen the Economy Drive Interest in Offsite Construction? Ochs: I’ve noticed a significant uptick in builders looking to incorpo - rate off-site construction methods into their building programs. Con- sumers are also educating themselves on the benefits as everyone looks to solve the housing and construction issues we’re facing. Weber: Labor shortages, speed of construction, volume pricing, and the poor quality of what is being site-built have all been factors. Roof and floor trusses and wall panels have been around for a long time, but they’re now being embraced by builders who are feeling the pinch of not having the time — or workforce — for traditional on-site, stick- frame construction. Perry: Up to 2020, the overriding concern for builders was the labor force. The pandemic introduced materials and supply chain issues, and neither the labor shortage nor materials shortage is going away anytime soon. This has worked to broaden the pool of available construction methods to include the feasibility of moving construction offsite.
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