As advances in smart home technology continue to condition homeowners to want more energy efficient living, others are rethinking the idea of ‘home’ entirely through modular construction. But where does that leave the HVACR residential contractor? Here are five points for small shops to consider carving out a new niche in modular construction.
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“Typically, we are using 9,000 BTU mini-splits in the tiny houses. Most of them are rated up to 300 square-feet, which is pretty decent coverage in most tiny houses. Sometimes they even have a little bit of a higher rating for the BTUs,” explains Paul Beckmann of Wind River Tiny Homes. “Some HVAC manufacturers will market to tiny homes but there are other manufacturers who will really kind of disclaim the use of mini-splits in tiny homes. That’s because the mini splits aren’t really designed to be jostled while (the house) is on the road.”
1. There is still money to be made in the residential construction market
As HVAC contractors chase bigger projects and profits in the commercial and industrial markets, there is a general belief that the residential construction market is somehow shrinking. But that’s just not true. Homes have to get built somehow, and contractors who can serve and adjust to the changing needs of this market will carve out a comfortable niche for their business. A new report from Mace, an international consultancy and construction firm, says growth in the North American construction market from the residential sector is set to continue in 2019. But it’s important to note that the residential sector might have a different look in the years to come: enter modular construction in the form of tiny homes and shipping container houses.
2. Homes are getting smarter
A recent Visual Networking Index report by Cisco Systems Inc names smart homes as one of the key drivers of IoT connectivity growth over the next couple of years.
Out of an expected 28.5 billion devices to be connected to the web by 2022, the report predicts about 14.6 billion of them will be Internet of Things (IoT) devices driven from smart home technology. That means more smart thermostats, HVAC systems, and other appliances such as microwaves, smoke alarms and security systems. But more importantly, they will all need to communicate in a cohesive fashion that will enhance the user’s living space.
The Mayflower by Wind River Tiny Homes was originally built for $105,000 with all the upgrades and details in the home, including an off grid solar system and premium appliances and fixtures. Farmhouse sink, Butcher block counters, custom welded open shelving, seaglass subway tile, oven drawer dishwasher, and French casement window.
3. Modular and manufactured homes are on the rise
Over the past five years, an IBSWorld research report measured prefabricated home manufacturing in the US has grown by 8.6 percent, reaching $10 billion in revenue last year. A summation of the report reads: “The (modular) industry caters to more marginal homebuyers, and therefore experienced a long-delayed recovery over the past five years from the recession the traditional housing market had left behind. Rising home prices during the period priced more buyers out of the traditional housing market and raised demand for prefabricated homes.”
This 24’ tiny home is built 10’ wide to accommodate a bed on the main level while still keeping a spacious feel.
4. Understanding modular motivations and metrics is key
Price isn’t the only driver of modular construction, explains Paul Beckmann of Wind River Tiny Homes in Chattanooga, Tennessee. “I would say there is a really broad range of motivations,” he says. “You have your younger people who are sort of in transition and they want temporary housing that they own. Then you have semi-retired people where the tiny house allows them to retire a little bit earlier. Then you have another category of people who are just sort of doing (tiny homes) conscientiously to reduce their carbon footprint, impact on the environment and to prevent all the waste that goes into the construction industry.”
SG Blocks began with a shipping container construction in Charleston, South Carolina, and “grew from there,” explains Scott Hill.
To date, Wind River Tiny Homes has built 30 homes since its initial launch as a company in 2014. They have about five employees. They handle the initial construction of the home — which includes custom welding and fabricating — in-house, then ship the finished product nationwide.
The next steps are where contractors are needed most, Beckmann says.
“The main hurdles are financing and local zoning and permitting. I would say that 60 to 70 percent of people that reach out to us either have trouble finding a place to put the tiny house or how to finance it,” he explains. “So, industry wide, if those problems were solved, then you would have more volume of tiny homes.”
A typical tiny home is about 24 to 30 feet long and between 200 and 270 square-feet. But demand for larger but still space conscious homes has ushered in the era of the shipping container domicile. Although property restrictions may restrict some shipping container homes in length, their ability to be stacked makes it easy to vertically build.
The Six Oaks shipping container home construction in Santa Cruz, California. See more shipping container projects from SG Blocks at sgblocks.com.
“Even though shipping containers from China go seven high or more, once you have a project over five stories, that’s a trigger to go over to volume metric modeling,” explains Scott Hill, vice president of operations at SG Blocks. “With volume metric modeling you can actually design the structure as you need it. That’s why you are able to go higher.”
Whereas most tiny homes utilizes mini-splits, shipping container constructions generally utilize VRF systems and require an experienced contractor to do mainline work. that can turn a steady profit for an experienced contractor.
“All I need you to do is set the VRF on the roof and do mainline work,” he says. “Some people will walk away from it, saying it’s not worth my time. But they’re really making a mistake. We are partnering with a nationwide construction management firm to do all of our core and shell and what I call “podium work.” And what will happen is, if these subcontractors are willing to bid these jobs, then we will take them from job to job to job and they will be doing the same mainline work on five jobs.”
He adds, “The first project for a mechanical subcontractor, it’s really a lot of brain damage. But once they do the first one, then they see how easy it is. Then it becomes repetitive. They get it.”
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5. Small shops can capitalize on modular constructions
The biggest differentiator between the conventional residential construction market and modular construction? Labor. Less labor makes the modular market perfect to add to a small-scale shop or contractor’s list of services.
“Well, first of all, the whole reason you go into modular construction now is because there is a lack of labor in the market place, right? No kid is going into the construction trades anymore. They all want to be tech hackers or whatever. So the problem is, even in conventional construction, there is a lack of labor in the market,”says Scott Hill explains. “The quality control is better with modular construction your schedule is better with modular construction and of course once we educate developers on what that means.”
On the contractor side, modular construction is around the same price as conventional construction, Hill explains. “But it saves you time and there is no punch list at the end of a job.”
He adds, “So, for your (readers), if they are really interested in doing this, I would tell them to look up the names of all the modular fabricators, go knock on their doors and say we’d like to work in your factory doing the interior fit out. In doing that you can really build a niche for yourself.”