Onsite construction costs will only rise in the near future, but still, over 90 percent of developments will continue to build onsite.
“The biggest obstacle is that people don’t understand the impact of what factory-built modules can have on projects,” says Howard Koenig, CEO of ZETA Design + Build.
ZETA specializes in offsite modular design and building, working with developers, architects, general contractors, and union members to produce more energy-efficient buildings. The micro-apartment building that was sold earlier this month in San Francisco, 38 Harriet, was designed and manufactured by ZETA in a warehouse offsite.
“I think that people do what they know how to do. People repeat the past, and people repeat their designs. Not all architects are familiar with modular design and panelized construction and modular pieces,” Koenig said. “Oftentimes they just repeat the kinds of projects and the kinds of design they’ve been using. And they don’t think about using modular.”
“We’re not just the typical modular manufacturer,” Koenig said. “We are doing next-generation manufactured homes—we do have a factory, and we have some industry-leading products, micro-units that really transform cost and lifestyle for folks, as well as our friendliness towards unions.”
One of the top reasons developers turn to offsite building is cost.
“The economies, the pressures people have to build quicker, to build faster, at a lower cost—it’s going to drive more people who want a better product, cheaper, to take a strong look at second-generation modular, because we’re very different from first generation modular,” Koenig said.
Oftentimes in presenting to or working with a developer, Koenig says, what he’s doing is problem-solving. “Examples like this happen every day,” he said. “We go into a project and they’re having trouble making the project financing work and things can’t get built.”
“We can work with you to how the cost is [lowered]—having it moving faster, lowering operating cost by 5 to 10 percent, and lowering construction costs by 10, 20 percent. And you do new spreadsheets with those kinds of things, and when they do them, they’re amazed because now projects make economic sense,” Koenig said.
As modular manufacturing improves and becomes more efficient, Koenig sees the use of offsite building growing.
“The [cost of] the fabrication component’s going to rise dramatically over the next three years, maybe reaching 20 to 25 percent overall construction spend,” Koenig said.
The mission of ZETA, however, is sustainability—environmentally and market-wise.
“We have sustainable benefits in literally every direction,” Koenig said.
ZETA has won multiple awards for the net-zero-energy housing it builds, but also devotes resources to researching more energy-efficient materials to incorporate. Because the modules are transported from the factories to the site, ZETA has really looked into lighter and easier-to-work-with materials. For example, the wood used is kiln-dried and precision-cut so that there is no wasted wood.
Many projects in the Bay Area also hold off construction until after the rainy season, whereas the controlled environment of a factory enables the project to start sooner.
“We have more access to the raw materials, they deliver it just in time, there’s no waste of the raw materials,” Koenig said. “The processes to build are systematized, and we bring tremendous economies to scale. We work five days a week despite the weather.”
The factories are increasingly becoming training grounds for union workers as well, with Massachusetts and Sacramento already working with apprentices.
“We’re starting out with the carpenters, but eventually we plan on involving other building trades as well, creating quality jobs,” Koenig said. “The company philosophy is really one we’re proud of. We’re building more sustainable housing at lower cost and making it more accessible. So we’re very pro-environment, we’re very pro-worker, we’re very pro-citizenship of trying to promote newer and better products to get more housing out there and lower the cost of housing.”
Lowering the cost of housing is an ultimate need in the Bay Area.
“The market is, for multifamily residential, smoking-hot in the bay area. There’s huge increases in rent, there’s huge increases in demand, and we expect that’s gone up and to remain for several years,” Koenig said.
The micro-units, then, provide a more affordable option for a large group of San Francisco residents, Koenig said.
“That housing ranges anywhere from student housing all the way through people who are new entrants to the workforce,” Koenig said. “They’re 250 to 300 square feet, but they’re beautiful units, they’re quality units, and it provides a real first step to have people having their own place in an affordable way. So we’re trying to bring down the average cost of rentals in San Francisco.”
“We like to try to view ourselves as sort of a transformative force and like a whole construction industry and changing the way people go about it, and we think we’re having a big impact,” Koenig said.