Moc2014 Wood Products Kiel Miller

The Market Case for Wood
Prefabricated Structures
MOC 2014
Dave Fell, Francois Robichaud, Kiel Miller
May 8th, 2014
FPI: Construction Value Pathways 2013

What is the building of the future
In searching for the seeds of breakthrough and disruptive innovations this
Construction Value Pathways project came up with 3 directions for
FPInnovations research
Key Opportunities
Focus on systems rather than line item improvements and replacements
Shift labour costs into materials and systems in order to create growth
Make wood a front of mind system in the concept stage
2014 FPInnovations. All rights reserved. Copying and redistribution prohibited. FPInnovations, its marks and logos are trademarks of FPInnovations.
Agenda
STATE OF THE HOUSING
MARKET
JAPAN AS A PROXY
THE NORTH AMERICAN

CONTEXT
CANADIAN & AMERICAN HOUSING
THE STORY ON CANADIAN STARTS

Canadian Housing Starts
250
70%
Starts for 2013 were

slightly off year over
year falling to 187,00
Up 26% from the low of

2009 of 149,000 starts
Driven by multi famil

which is up over 50% in
that time period and
represents over 60% of
all starts
After an initial rebound

in 2010 single family
have either declined or
been stagnant
60%
200
150
40%
30%
100
% Multi Family
Housing Starts (,000)
50%
20%
50
10%
0%
2013
2012
2011
2010
2009
Multi Family
2008
2007
2006
2005
2004
2003
2002
2001
2000
Single Family
% Multi Family
Source: CMHC
THE STORY ON AMERICAN STARTS

American Housing Starts
2,500
60%
Overbuilt in the first 5

years of the
millennium, starts
crashed a staggering
76% from over 2.0m in
05 to 554,000 in 09
Since the low in 09

starts have recovered
66%; but still below the
rational mark of 1.35m
Like us canucks the

recovery has been
driving by the
multifamily secotor,
which now represents
30% of starts
50%
2,000
1,500
30%
1,000
20%
500
2013
2012
2011
2010
2009
Multi Family
2008
2007
2006
Single Family
2005
2004
2003
2002
2001
2000
10%
0%
% Multi Family
Source: US Census
% Multi Family
40%
AN UNEQUAL RECOVERY
American Housing Starts by
Type
North American Construction Start Index
Construction Chart Index (Base 2000 = 1.00)
2.50
Increase
MF
Share
(2013),
12.7%
2.00
MF
(2000),
19.1%
1.50
Canadian Housing Starts by Type
1.00
Increase
MF
Share
(2013),
19.9%
0.50
2013
USA - MF
2012
2011
2010
USA - SF
2009
2008
2007
CAD - MF
2006
2005
2004
CAD - SF
2003
2002
2001
2000
MF
(2000),
39.2%
Source: CMHC, US CENSUS, FPI
SF
(2013),
68.2%
SF
(2013),
40.9%
THE HOUSING DEMANDS OF THE

FUTURE
As we move to 2025 we will see:
they will have a greater portion made in factory than
onsite
they will be built within a shorter cycle-time
they will have significantly higher energy performance
they will use more engineered wood products per SQFT
they will use panelized solutions for structural walls,
structural floors, and siding
they will use easier to recycle materials
Precision products will be needed to support

prefabrication and energy efficiency
8
JAPAN
DRIVERS OF JAPANESE ADOPTION

JAPANESE PRECUT POST & BEAM
FRAMING
Land Price
Rapid asset appreciation from 1985-1991
Land prices increase upwards of 150%
Greater Tokyo lots modestly located sold
for up $3.5 in todays $USD
Skill Shortage
Age of Japanese Construction Worker
14%
12%
10%
8%
6%
4%
2%
0%
65+ yrs
60-64 yrs
55-59 yrs
50-54 yrs
45-49 yrs
40-44 yrs
35-39 yrs
30-34 yrs
25-29 yrs
Source: BOJ, Tenryu
10
PRECUT BEGAT FACTORY HOMES

Pro longed period of deflation
from 1998-06
JAPANESE FACTORY BUILT HOME
1.35
1.30
1.25
1.20
1.15
1.10
1.05
1.00
2010
2004
1998
1992
1986
1980
Housing Quality Assurance

Act
Established in 2000
10 year liability on a buyer or seller of new
residence
Source: BOJ, Sekisui Heim, Emerald
11
PREVALENCE OF JAPANESE
FACTORY HOMES
1,400
18.0%
1,300
16.0%
1,200
14.0%
1,100
12.0%
1,000
10.0%
900
8.0%
800
6.0%
700
4.0%
600
2.0%
500
0.0%
2013
2012
2011
2010
2009
Prefab Starts
2008
2007
2006
2005
2004
2003
2002
2001
2000
Housing Starts
% Multi Family
Source: Japan Lumber Journal
12
% Multi Family
Japanese Prefab Housing Starts
Factory Homes
have in some
shape or form
been around since
the reconstruction
period following
WW2
They are viewed

as a high end
housing option
Consistently
represent between
~15% of all starts;
127K starts in
2013
TODAY PREFABRICATED MARKET

JPN
Sekisui House is the largest prefab builder in

Japan; Constructing over 30,000 factory built
homes in 2013
From the signing of the contract, you can be in
your new finished house in ~40 days
Big 8 Factory
Home Builders
Sekisui House
~21%
80% of a house in constructed in factory
Develop Building Materials:
Received & Inventoried
Time is concentrated
in the Suppliers raw
material chain and
areas outside
Sekisuis control
Build Module:
Ship and Erect House
Finish (utilities, inspection)

0
10
15
20
25
Source: Sekisui House, Wall 2008
13
30
35
40
45
NORTH AMERICA
14
PREFABRICATION OCCURS IN 2 MAIN

STREAMS
Structural Components Industry
Has turned to a full systems provider (roof, floors walls)
Is looking for adding value (closed panels, building
materials distribution, installation)
Prefab Homes Industry

Is ready to deliver frames instead of finished homes, to
serve builders in addition to homebuyers
Looking for greater volumes in urban markets
In the future, convergence between the two

industries
15
2014
2014 FPInnovations.
FPInnovations.All
Tous
rights
droits
reserved.
rservs.
Copying
Reproduction
and redistribution
et diffusionprohibited.
interdites.Les
FPInnovations,
marques et les
its logos
marksde
and
FPInnovations
logos are trademarks
sont des of
marques
FPInnovations.
dposes de FPInnovations
DISTRIBUTION IS CHANGING
External Consolidation
amongst builders and the
rapid expansion from big box
home centres constrained
revenue growth amongst the
traditional prodealer segment
Industrialization of Prodealers
Wall Panel
In effort to avoid competition

from big box chains and offer
a differentiate value added
product to builder, prodealers
invested heavily in
prefabrication and turnkey
construction services
Floor Truss
Roof Truss
0%
10%
20%
Install
In the USA more than 50% of

prodealers operate a structural
component manufacturing line
Source: Robichaud, 2014
16
30%
Manufacture
40%
50%
60%
PREFAB & MODULE WALLS
The Use of Prefab Walls in Modules in Site Built Construction
The Washington metro market has the highest acceptance of prefab wall panels
In addition Cleveland and New York utilize a significant amount of modules

Total
Dallas - Fort Worth
Charlotte - Gastonia
Chicago - Naperville
Atlanta - Sandy Springs
Los Angeles - Long Beach
Tampa - St Petersburg
Seattle - Tacoma
Cleveland - Elyria
Greater New York City
Boston - Cambridge
Minneapolis - St Paul
Detroit - Warren
Washington - Arlington
0%
5%
10%
15%
Prefab Wall Panels Using Lumber
17
20%
25%
PREFAB FLOOR DECK USAGE
The Use of Prefab Floor Decks for Site Built Construction
Usage rates were negligible in the early 2000s but have grown significantly in several markets
The Orange shaded indicates more sophisticated metros the have an above average adoption of prefab
walls
Total
Seattle - Tacoma
Charlotte - Gastonia
Chicago - Naperville
Los Angeles - Long Beach
Dallas - Fort Worth
Atlanta - Sandy Springs
Cleveland - Elyria
Washington - Arlington
Greater New York City
Boston - Cambridge
Detroit - Warren
Minneapolis - St Paul
Tampa - St Petersburg
0%
2%
4%
6%
8%
10%
12%
The Use of Prefab Floor Decks in Site Built Construction
18
14%
16%
18%
REVENUE & MARKET SEGMENTATION
Roof Trusses drive the structural components dealers

revenue; followed by floor truss at 15% and distribution at
9%; prefab walls while not a large contributor have made
large strides in PQ and BC
Non
Residential:
~17%
SF ~74%
MF ~26%
Reflecting the reliance on roof truss for revenue turnover is

driven by single family
100%
80%
60%
40%
20%
0%
Roof Truss
Open Web Floor

Truss
Distribution
Prefab Walls
(Opened)
Prefab Walls
(Closed)
19
Other
Residential:
~83%
At last, a look at future Product

Development: Panels
Panel based construction is the future:
several product options can be developed
Combining insulation and structure
Prefabricated platform framed walls
with increased value
Next generation SIPs
Innovative composites of wood with
concrete, magnesia competing
gypsum?
Light weight CLT for residential
construction
Engineered and prefab floor systems are
the future: need product development
Next gen studs are demanded
Fibre based insulation from two streams:
panel mills and pulp mills
For more information contact:
kiel.miller@fpinnovations.ca
Follow us on
www.fpinnovations.ca
MOVING INSTALL COSTS

Component
$.Sqft Inst.
$/Sqft Mat. $/Sqft Total
Exterior Wall Framing
1.49
0.64
2.13
Wood Siding
Insulation
Total Solution
Opportunity
4.18
0.30
$5.97
1.63
0.24
$2.51
5.81
0.54
$8.48
In a divide of simple operating

concerns labour represents ~70%
of costs
Materials,
30%
Labour,
70%
22

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The Market Case for Wood

FPI: Construction Value Pathways 2013

THE NORTH AMERICAN

CANADIAN & AMERICAN HOUSING

THE STORY ON CANADIAN STARTS

Starts for 2013 were

Up 26% from the low of

Driven by multi famil

After an initial rebound

Housing Starts (,000)

THE STORY ON AMERICAN STARTS

Overbuilt in the first 5

Since the low in 09

Like us canucks the

Housing Starts (,000)

North American Construction Start Index

Construction Chart Index (Base 2000 = 1.00)

Canadian Housing Starts by Type

Source: CMHC, US CENSUS, FPI

THE HOUSING DEMANDS OF THE

Precision products will be needed to support

DRIVERS OF JAPANESE ADOPTION

Source: BOJ, Tenryu

PRECUT BEGAT FACTORY HOMES

JAPANESE FACTORY BUILT HOME

Housing Quality Assurance

Source: BOJ, Sekisui Heim, Emerald

Source: Japan Lumber Journal

Housing Starts (,000)

Japanese Prefab Housing Starts

They are viewed

TODAY PREFABRICATED MARKET

Sekisui House is the largest prefab builder in

80% of a house in constructed in factory

Develop Building Materials:

Received & Inventoried

Ship and Erect House

Finish (utilities, inspection)

Source: Sekisui House, Wall 2008

PREFABRICATION OCCURS IN 2 MAIN

Prefab Homes Industry

In the future, convergence between the two

In effort to avoid competition

In the USA more than 50% of

Source: Robichaud, 2014

PREFAB & MODULE WALLS

The Use of Prefab Walls in Modules in Site Built Construction

In addition Cleveland and New York utilize a significant amount of modules

Prefab Wall Panels Using Lumber

Source: Robichaud, 2014

PREFAB FLOOR DECK USAGE

The Use of Prefab Floor Decks for Site Built Construction

The Use of Prefab Floor Decks in Site Built Construction

Source: Robichaud, 2014

REVENUE & MARKET SEGMENTATION

Roof Trusses drive the structural components dealers

Reflecting the reliance on roof truss for revenue turnover is

Open Web Floor

Source: Robichaud, 2014

At last, a look at future Product

For more information contact:

MOVING INSTALL COSTS

$/Sqft Mat. $/Sqft Total

Exterior Wall Framing