Industrialized Construction Could Change the Game for Multifamily Developers

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Jul 25, 2024, 08:49 ET

New England-based HFA architect cites potential savings from rapidly evolving and more efficient approaches to construction and procurement

FRANKLIN, Mass., July 25, 2024 /PRNewswire/ -- Multifamily developers stand to reap huge savings by adopting more efficient approaches to procurement and construction, advises the leader of HFA Architecture + Engineering's development design studio in Franklin.

In a July 10 column for Multi-Housing News, HFA's Aksel Solberg (AIA, NCARB) points to the specific potential for so-called "industrialized" construction to yield savings in areas like concrete, insurance and construction-loan interest rates in the multifamily residential sector.

These methods typically involve working with a specialty firm that will purchase raw-steel coils, convert them into studs at the factory and deliver them to the site for assembly and installation. While prefabrication is involved, Solberg observes, it is not exactly the same thing as "modular construction."

"Industrialized construction also centers on the aggregated benefits of taking an upstream approach to the supply chain," he writes. "That's because the specialist company acts as the procurement hub, not only for precut or prefabricated core-and-shell components, but also, in some cases, for things like electrical panels, plumbing supplies and HVAC equipment."

In the piece, Solberg asks the reader to imagine a smaller multifamily developer building a midrise project in a secondary market. Typically, this involves shouldering the high cost of a concrete-and-steel podium and topping it with wood-stick framing.

To leverage industrialized construction, the developer instead teams with a specialist company that acts as the structural engineer and procures and provides prefab components for the core and shell. The steel studs, Solberg notes, "can be snapped together on site like LEGOs." Precut drywall could be part of the picture as well.

The developer avoids the high cost of that concrete-and-steel podium and of cutting drywall and wooden studs on site. "And because those prefab steel studs are classified as noncombustible," Solberg notes, "the project's insurance premiums are a fraction of those associated with conventional, stick-framed construction."

When it comes to construction loan interest rates, by some estimates the accelerated schedules made possible by industrialized approaches can save up to $40,000 for every $1 million financed in carry costs alone. On large industrialized projects leveraging panelized structures made of light-gauge steel, the initial risk insurance savings can reach seven figures, Solberg writes.

Meanwhile, build-to-hold developments often see additional returns throughout the life of the investment.

Bentonville-based Industrialized Construction Solutions (ICS) is one example of a specialty firm focused on these methods. Solberg cites ICS's success in making costs and construction schedules more predictable for multifamily developers in Arizona and Nevada, as well as national chain drugstores, QSRs and retail banks. On an industrialized project, he writes, "the developer's single procurement contact relies on strong relationships with suppliers of standardized equipment to source project components with shorter lead times and deliver and install them faster."

Need for precision

Solberg notes that making these projects run smoothly requires an extraordinary amount of precision and close coordination by the entire AEC team. He encourages multifamily developers to look for firms with expertise in Design for Manufacturing & Assembly, or DFMA.

On an industrialized project, "the master architect will start coordinating with a company like ICS from the outset, and with a much-higher level of detail than is standard," Solberg explains. "Getting the GC's project manager involved at the design stage is another important best practice. Doing so can further speed up delivery and installation of items with long lead times, like a 600-amp electrical panel."

Especially in today's environment, the architect concludes, "both large and small developers would do well to start a conversation with their AEC teams about the potential to 'go industrial.'"

The full column is available at:

https://www.multihousingnews.com/making-proformas-pencil-by-going-industrial/

Media Contacts: At Jaffe Communications, Elisa Krantz, (908) 789-0700, [email protected]

SOURCE HFA Architecture + Engineering