Innovations In The Pre-Fabricated And Modular Construction Sector – Real Estate – United States – Mondaq

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Co-author byPeter SeltenrightCo-Founder& COO (PrefabPads LLC)

Gould & Ratner presents the next installment of ourConstruction Interview Series. As a continued effort to keep ourclients informed of new building techniques and processes, we willcontinue to periodically sit down with leaders at some of the mostinfluential companies in the construction industry to discuss theirinsights on relevant and pressing topics of interest in theindustry.

Patrick Johnson, a partner in the firm's ConstructionPractice, recently discussed the creation of PrefabPads as well asnew design methodologies in the construction industry focusing onpre-fabricated and modular construction with Peter Seltenright,Co-Founder and Chief Operating Officer of PrefabPads LLC.

Founded in 2022, PrefabPads, is focused on manufacturing anddistributing innovative prefabricated homes to the United Statesunder the My Cabin brand. Although the designs are purposely smallin footprint they provide the feel of an actual home rather thanthat of a traditional tiny home or recreational vehicle. The focusis to provide an affordable living space built with high-endmaterials and a structure that will last.

Pat: Peter, thank you for sitting down with meto discuss this interesting topic and your new endeavor. Could youtell me a little more about this new journey of yours withPrefabPads? What interested you in the prefabricated and modularconstruction sector?

Peter: Pat, thank you so much for having me.I'm always excited to chat about this new business and theproduct we're building. The long answer is that I come from afamily in construction and design of high end homes in northernMichigan so building is kind of in my blood. I had been working intech for years but I had been following the trends in prefab andmodular building, especially when it comes to quality design insmaller structures.

When Covid hit I could see the shift to remote living, morepeople looking to escape into nature, but also the need forhousing. I first explored the idea of a boutique nature resort withmy co-founder, Hemang, where we would place 8-10 very cool prefabcabins on a property for short term rental. We just couldn'tfind the property we wanted in the location we had in mind and ourfavorite designs seemed to be stuck in Europe. We then got prettylucky and found this brand, My Cabin, in a Dwell article and Iimmediately reached out to the founder. He put his trust in us tobring the My Cabin brand to North America and here we are now in30,000 sq ft of factory space in Waukegan, IL building out the MyCabin product.

Pat: Regarding the units themselves that youare currently distributing, what is unique about them and who doyou foresee as being your target customer or user? Since these arelargely prefabricated, is there any ability to customize from thefactory?

Peter: Well we were a bit naive and thought wecould just import the materials from Europe and build from theirplans right away. We quickly learned that we needed to go into anextensive engineering process to bring the units to US code. Wethen made a decision to ensure these are top of the line cabinsstructurally and also with materials and finishes. It's notthat in Europe they're building a substandard product, but weknew for the US market that high-end materials that last would beappreciated and the increased price of the units would be worthit.

While these units may have a rather traditional shape andlayout, what's really unique is that we've convertedthese to what we feel is the most structurally sound and high-endcabin on the market for this price point. Our cabins can meet130mph wind loads and comply with seismic requirements, andinsulation levels for every state in the country. It's alsojust a beautiful Scandinavian design with tons of natural light andspace. While our competition focuses on compliance with RVregulations or ease of shipment capabilities which restricts layoutconfigurations, our prefabricated design is much wider making youfeel like you're in a real home.

Our target customers range quite a bit. On one end you havesomeone trying to take advantage of Additional Dwelling Unit(ADU) regulations and placing a unit in theirbackyard for an extra bedroom or an office, we also have customerslooking for a few units for a remote property as a vacation homeand/or a rental property, and then we have conversations withdevelopers looking to build out their resort property. We'reable to cater to all of it due to our pre-fabricated designprocess.

In terms of customization, it's limited but that'sby design in a manufacturing environment like this. The dimensionsof the unit can't change as we don't want to get intoengineering changes for all projects but we can work with customerson finishes or non-load bearing items. Right now, we have twofinishes for the exterior siding color and can offer differentflooring finishes, and cabinet colors. Our design also affords usthe ability to remove kitchens and bathrooms if customers preferblank spaces and even small customizations with windows.

Pat: I have talked previously about thebenefits of using prefabricated and modular construction methodsbut I am curious as to what your thoughts are on the topic?

Peter: There are plenty of advantages to thismethod. The obvious ones are speed and price. We can build theseunits in a month and have them to you in two months (if materialsare arriving on time). Our fabrication process also allows us totake advantage of bulk ordering materials to bring price down andthe pre-fabrication process also reduces material waste in theprocess. Additionally, a key advantage is a controlled buildingenvironment. With everything happening indoors, we're able toensure that no moisture gets into the structure before it'sclosed up and finished and always be building year round. So whilewe're building the cabin, the customer can be installingtheir foundation in a parallel path, which really speeds thingsup.

Overall the pre-fabrication process is environmentally friendlyand allows us to produce structures in a fraction of the time andat lower prices than a traditional stick-built home. But Iwon't say that it's all advantages. In order to makethis work we have to limit customization and we have to makechoices on the units to meet code in nearly all states. But at thesame time, the repetition of building these over and over makes usexperts on what we do compared to stick-built that essentiallyreinvents the wheel and brings in new processes and methods foreach project.

Pat: What are your thoughts on trends in thisindustry and do you think these trends will continue in the future?From your perspective, has the pandemic impacted your business atall?

Peter: It's certainly a hot industryright now and it will continue to grow as traditional builders arebacked up, building costs are up, and there's a housingshortage. We are seeing a ton of competitors popping up all overthe world and more and more in the US but you tend to see a lot ofconcepts and renderings, not an actual project built at a highscale. This industry certainly addresses the housing shortage andthe difficulties of getting things built right now but we stillhave issues with outdated zoning ordinances. ADUs are still notallowed across the country, many places have restrictive minimumsquare footage rules or even restrictions on the number ofdwellings on a property.

I think these restrictions are holding the industry back alittle bit ,but I am hopeful with all the interest this sector isseeing that these outdated codes can be updated to conform to thisnew type of construction.

Pat: Do you see any specific regions/statesutilizing these types of units more than others? Why do you thinkthis may be?

Peter: It's certainly clear thatCalifornia and the West Coast seem to be the early adopters, ingeneral they have less regulations against smaller square footageand more acceptance of ADUs. It also doesn't hurt that a lotmore of that population really wants sustainable products both inhow they're built and how they operate on the land. Most ofthe companies in our industry tend to be out there addressing thatdemand. But this will spread across the country and demand isreally taking off in the East in places like upstate New York andNorth Carolina, which is exciting for us being in a location thatcan more easily address those customers.

Pat: With the trends of people leaving citiesand things like glamping taking off, are you seeing demand fromdevelopers and hoteliers?

Peter: Yes, there's a major trend towardsunique escapes and nature focused retreats. I think we'reseeing the old campgrounds and cabin properties being updated withbetter rental units and concepts that connect people with nature inunique ways. We're seeing a lot of glamping ideas with safaritents or RV concepts and I think that now that we'reproducing unique cabins with lots of glass and exposure with thefeel of an actual stick built home rather than that of a trend,I'm certain we'll see more of a shift towardsstructures like ours.

Pat: Have you seen any pushback from anytrades/municipalities on the use of prefabricated/modularconstruction techniques?

Peter: Yes, as I previously had mentionedthere's an unfortunate misunderstanding of the product and alack of willingness to go against their outdated zoning ordinances.There's also a common confusion between modular andmanufactured homes. We build modular homes to US building code withpermanent foundations. While they're small, these are realhigh-end homes. Manufactured homes are mobile homes but it'sa confusing term as modular homes are built in a manufacturingfacility.

Pat: Many construction industry professionalsare experiencing material shortages and delays with constructiondue to a myriad of issues such as labor constraints and supplychain bottlenecks. Has your business been affected by any of theseissues from? What steps have you taken to minimize theseimpacts?

Peter: It has certainly made things moredifficult but I have been pleasantly surprised with theavailability of items that we need. Although that doesn'tcount windows and doors, the costs and lead times for those areincredibly frustrating given what has been happening in theconstruction industry. But outside of that, we have luckily had noissues with lumber, siding, flooring, cabinetry, etc.

Our method is to prefabricate the framing of the units but placelarge orders for finish materials as orders come in and those leadtimes work with our schedules. The one exception is the need topre-order windows and doors and to take on that cost upfront.

Pat: Materials selection has becomeincreasingly important and we have seen unique and specialtymaterials being specified on recent projects. Have you seen yourclients making similar requests with their designs and how doesthis impact the prefabricated nature of your product?

Peter: Customers seem educated about materialsand sort of test us on what we use. Fortunately, our choices ofhigh-end materials has made this almost a non-issue. We alreadybring in a design with European style tilt and turn windows anddoors and really high end wood paneling inside and out. Wecertainly listen to the requests of our customers and if we see acommon trend, we try to address that with changes to the product webuild moving forward. When we first started, we had to take a lotof feedback on the design from Europe and make it more US-friendly.For example, we couldn't have a tiny bathroom sink or nowashing machine for our design. Those kinds of things requiredthought and edits to the flow of the units. Fortunately, we seem tobe meeting the requests for specialty materials.

Pat: We have clients with projects all acrossthe United States. Is this sort of design methodology moreapplicable to any specific geographical region, project site, orclimate zone in your opinion?

Peter: Our designs seem widely accepted acrossall parts of the country and we have tried to create a product thatcan be installed almost anywhere. I would say that any of the hotreal estate markets seem to have multi year waits for builders sonaturally we're a great option as a quick solution. Prefabbuilding is going to succeed in those areas where wait times andcosts have gone through the roof. Also, anyone looking for an addon to their main residence would really benefit from ourmethodology. No one wants a construction site on their property fora full year just to build a few hundred square feet. Why not put inan easy foundation and have a modular unit delivered in a matter ofmonths.

On the flip side, it's only fair to note that we do havesome limitations. A prefab builder has a big challenge in creatinga product for all 50 states when addressing extreme areas likeFlorida coastal zones that require 150-180 mph wind loads,it's really not possible to expect to use our same productunless we create a completely new product for those areas. Rightnow, we don't want to do that because it would either besomething with a less desirable design or requires a design thatsignificantly increases cost while reducing aesthetic appeal. Forour design, climate zones are easier to handle and we decided toaddress that with extreme insulation that also provides betterenergy efficiency for all customers.

Pat: Although these units are largelyprefabricated off site, there is likely some additional work to becompleted prior to final completion. What additional work typicallyneeds to be completed on site before these units are ready fortheir intended use? What benefits does this provide over a moretraditional ground up construction type project of a similarfootprint?

Peter: I really do wish we had the operation tobe our customer's contractor across the country and toprovide an all-in-one service but that's just not a reality.Our customers need to work with a GC to install the pier foundationwe have designed and route their electric, water, and sewage to thecorrect locations per our design and their site layout. The greatthing about this is that they can be doing that work whilewe're building their units instead of waiting to do thatbefore construction can begin. Beyond site prep, thecustomer's GC will also need to coordinate the installationonce the truck arrives with the unit(s). This might seem dauntingbut it's really just a crane that lifts the completed unitoff the truck and it places it on the foundation where the finalconnections are made. Installation happens in a day and thenit's move-in ready.

Of course other additional work could be customizationscustomers decide to make after the unit is installed on theexterior or interior. That could be building connections betweenunits, which is yet another benefit of utilizing our pre-fabricateddesign process, or installing their own kitchen design.That's their choice.

Pat: Are there any other issues you thinkshould be considered when contemplating using a prefabricated ormodular construction type structure as opposed to a moretraditional ground up construction?

Peter: Customers need to be comfortable withminimal customization, that's the obvious drawback. Anotherkey item that could be challenging is financing. At this squarefootage it can be challenging to find a bank that will be open to ahome loan due to lack of comps. They also seem to struggle tounderstand modular vs manufactured and how exactly our constructionprocess works, which might prevent them from offering a trueconstruction loan.

Pat: Finally, before we wrap up, I wanted totouch briefly on green design. It has become quitecommon in my experience for a design to incorporate certain greencomponents, whether that be through solar panels, reflective windowpanels, innovative heating and cooling systems. I was curious whatyour thoughts were on green design. Since your unitsare largely prefabricated, do they have any greendesign aspects? Is there any ability to modify during theprefabrication process to make the unit moregreen?

Peter: We kind of ended up with agreen design without even really focusing on it. Ourhigh insulation levels, very efficient windows, energy recoveryventilation in the units and reduced building waste has all givenus a product that I would consider sustainable and highlyefficient. We're doing some initial research on LEEDcertification and I don't think we're far off. Over thenext year we also plan to address off-grid installation ideas.Solar is a no-brainer and rather simple to add and plug into ourproduct. Other items like rain water collection, gray watersystems, composting toilets, etc. are all things we'd like tobe knowledgeable on for our products. My goal is to have cleardirection on how that will work with our product line so thatcustomers know their options and what they can do.

Pat: Peter, thank you again for sharing yourknowledge and experience, especially as it relates to theprefabricated and modular construction industry. I believe thatdemand for these types of structures will only increase in thefuture and think it is important to stay abreast of innovative waysto meet this demand. Best of luck with this new endeavor andperhaps we can speak again soon to see how things are progressingin the industry.

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