Prefabricated Wood Buildings and Components

SIC 2452

Companies in this industry

Industry report:

Companies that primarily make prefabricated wood buildings, sections, and panels make up the prefabricated wood buildings and components industry. Manufactured and mobile homes delivered to a site are not part of this industry. Companies that assemble panels and components on-site are classified in various construction sectors.

Industry Snapshot

The prefabricated wood components industry includes many products, including premade panels and sections for chicken coops, farm buildings, geodesic domes, marinas, sauna rooms, hotel rooms, and decks. The industry is fragmented and entrepreneurial and is represented by a wide range of companies. By far the largest segments of this industry are modular single-family homes, multifamily units, and institutional buildings including hotels and motels, schools, hospitals, and prisons. According to Dun and Bradstreet, prefabricated wood buildings represented a nearly $3 billion industry in the United States in 2009.

Organization and Structure

The advantage of prefabricated wood building products is that they save builders money. Because large pieces of the structure come from a factory and are designed for quick and easy assembly on-site, builders reduce on-site costs, such as labor, workers' compensation, and insurance. Assembly-line production also allows prefab manufacturers greater quality control.

The largest segment of the prefab wood products industry is single-family homes. Homes built using prefab units are called component, or prefabricated, housing. Typical prefab housing products include roof trusses, wall frames, and floors. Many builders also use pre-made wall units complete with insulation, plumbing, wiring, ventilation systems, and doors.

Builders of both detached and attached homes with prefab products use a systems approach to building, which is a hybrid of site-built and manufactured housing. The four types of systems-built housing include precut homes, for which all lumber and materials come to the site already cut; panelized homes, for which the main wall panels are shipped to the site, often with plumbing and wiring already installed; sectional or modular homes, which are 80 to 90 percent complete when they leave the factory and have cabinets and flooring already installed; and log homes, which are factory-made kit homes.

Background and Development

Assembling wooden building components off-site has been practiced for centuries. The modern concept of prefabrication, which mass produces uniform panels and components, dates to the early 1900s. Builders of that period, often the homeowners themselves, bought lightweight, premade frames and trusses to simplify construction. The use of gasoline-powered trucks in those early years boosted sales of prefab products and allowed manufacturers to build larger, heavier components.

The fledgling prefab industry grew during the post-World War II economic boom. As the economy and population grew, housing starts soared. In addition, government housing programs, such as the Veteran's Administration Home Loan Guarantee Program of 1944, prodded demand for new construction. Single-family housing starts went from 139,000 per year in 1944 to 1.9 million in 1950.

During the 1950s and 1960s, as the postwar economy thrived, families flocked to the housing market in a buying frenzy. Thousands of tract subdivisions were built on the edges of urban America, typically offering quality detached homes for less than $10,000 in the 1950s, with mortgage payments of less than $100 per month. To keep up with demand, both residential and commercial builders sought more efficient production methods, including prefabrication.

New construction techniques and standard components made construction more viable during the 1950s, 1960s, and 1970s. New federal and state regulations were enacted, for example, mandating structural integrity and uniform building practices. Plywood, plastics, and aluminum, which all eventually went into wood prefab units, also increased sales.

Although demand for new construction remained high through the 1980s, several factors, including higher construction costs, slowed demand compared to past decades. As housing affordability and home ownership rates fell, many builders used component construction to cut costs. At the same time, higher quality components gave the industry a share of upscale markets. In addition, demand for heavy-duty commercial and industrial units rose.

Industry sales rose to nearly $2.5 billion by 1987, reflecting average annual growth of more than 12 percent between 1981 and 1987. Although commercial and residential construction markets stalled in the late 1980s and early 1990s, prefab industry revenues fell only marginally as the search for less expensive production methods escalated. Sales slipped to about $2.3 billion in the early 1990s, but demand rose with better construction markets in the mid-1990s. The industry shipped goods worth $2.7 billion in 1995, down slightly from 1994.

According to the U.S. Census Bureau, the total value of product shipments in this industry increased by roughly 18 percent between 1997 and 2000, reaching $3.58 billion. More than half of that figure came from prefabricated stationary wood buildings shipped in three-dimensional assemblies, rather than in panel form, as packaged units, or as components. Three-dimensional assemblies, including both residential and nonresidential buildings, proved to be the area of greatest growth in the industry. Other areas experiencing notable growth included prefabricated wood buildings shipped in panel form, particularly for structures other than single-family homes (although shipments in that area also increased). Shipments of multifamily residential units and nonresidential units, including motels and hotels, also increased significantly.

Rapid growth in residential construction meant increased sales for several segments of this industry. In mid-1999, ENR reported a very tight market for premade wall panels as demand threatened to outrun supply. As a result, prices rose sharply in 1999, although industry experts also forecast an eventual drop in price as the market corrected itself. Traditional builders increasingly used panels for custom-built residential construction, as technological improvements in computer-aided design made the number of design options nearly limitless, which was once a drawback of using premade panels. Other benefits of prefab wall panels include savings in cost and time.

The growth of the modular home industry was dramatic through the end of the century. The widespread acceptance of manufactured homes, with one in three new single-family home starts being fully factory-built, suggested the potential for increasing growth of modulars as well.

As modular homes became more popular, bigger and more expensive houses became increasingly common in the industry. A sign of the growing acceptance of modular homes was the construction of one of the largest single-family homes ever built from prefabricated segments. Made by Westchester Modular Homes, the mansion in Greenwich, Connecticut, was 9,000 square feet. The house was 80 percent complete upon leaving the factory and was shipped to the site in 20 boxes. According to the builder, using prefabricated segments took at least three months off the building schedule and reduced the final cost of the home 10 to 12 percent. In such larger, more upscale projects, the actual cost of materials may not be less than it is for conventional site-built homes, but the amount of time saved, which could be years, still translates to a substantial cost savings.

Log Homes.
Aside from more demand for prefabricated traditional homes, one large, growing segment of the industry was log homes. Log homes represented close to 7 percent of custom homes built in the United States in the late 1990s. Exports of prefabricated log homes also increased. Like modular homes, log homes became more upscale. Because they use 10 to 20 percent more wood than traditionally built housing, the wood favored for their construction is increasingly scarce. Red cedar, which is especially popular in Southeast Asian markets, became increasingly difficult to obtain. Some makers have looked to other woods, including plentiful pine, to meet the demand.

Offices and Schools.
A shortage of office space also was a boon to manufacturers in this industry, as vacancy rates fell below 5 percent in some major cities. Modular office space allowed maximum flexibility for a business's growth and restructuring. In addition, the need to rewire or install additional wiring for rapid changes in technology made modular and panel-built offices an increasingly popular choice. Along with this trend, smaller panels came into favor in the United States for their increased flexibility.

Prefabricated building manufacturers aggressively pursued the school-building market, but modular construction accounted for less than 1 percent of all new construction of educational facilities. Manufacturers battled old stereotypical images of mobile trailers as temporary annexes to the brick-and-mortar school buildings. Some educational architects became proponents of using modular solutions and successfully lobbied school systems to adopt them. Advantages of using prefabricated buildings for school use included minimal disruption to classes and the ability to later disassemble the structure and reassemble it at another site. The nationwide push for smaller classroom sizes also was a positive factor for the industry.

One of the most notable educational projects was the construction of Bedford, Massachusetts-based Middlesex Community College, an entire college campus constructed from modular buildings encompassing more than 126,000 square feet. According to a report in School Planning and Management, which is a major advocate for modular building, "The new buildings, each two and three stories, are designed to model true New England neo-Georgian architecture with its classical brick exteriors and quoin work on the corners, and a running Flemish bond, as well as roof dormers, brick chimneys, and cupolas."

In 2005 the total value of U.S. shipments in prefab buildings surpassed $530 million, according to the U.S. Census Bureau. With a strong economy pushing construction booms in both residential and nonresidential building, prefabricated wood buildings and components manufacturers experienced steady growth in many areas, most notably in larger, upscale homes and upscale log homes. Apart from the economy, factors influencing the growth of this industry included the availability of wood, cost comparison with other alternative materials, such as metal and cement, advancements in design technology, and a move toward smaller classroom sizes in education. A more accepting attitude toward prefabricated wood buildings and components, which was the result of improvements in quality and flexibility, also was a key factor in driving sales for this industry.

A housing slump in the mid-2000s impacted the prefabricated wood building industry along with the traditional housing industry. Home buyers, tempted by low mortgage rates, found themselves overextended when those interest rates began to rise, fueling downsizing and foreclosures. The result was a glut of available housing. However, the prefab housing market was expected to emerge in the 2010s with renewed vitality. The industry began to lose its image as a shoddy and cheap substitute for quality housing. Increasingly, consumers were recognizing the upscale, customized potential of prefab housing. Overall, pricing remained lower than comparable site-built homes, while the advantages of computer-driven design and indoor manufacturing conditions helped many home buyers to look at prefab housing.

Current Conditions

According to Dun and Bradstreet's 2009 Industry Reports, 1,950 establishments employed 33,781 workers in the prefabricated wood building industry in the late 2000s. About 94 percent of establishments employed fewer than 100 people. Because the production of prefab buildings, unlike traditionally built housing, is not dependent on weather conditions, there were manufacturers in every state. Pennsylvania was the number-one state in terms of number of establishments operating in the industry, with 139, followed by North Carolina with 101 and Wisconsin with 100. Texas, however, which was home to 78 firms in the business, accounted for $647.9 million of the total $2.9 billion in sales. Pennsylvania had $304.7 million in revenues; California, $221.7 million; North Carolina, $113.6 million; and Minnesota, $111.6 million.

Many industry experts saw an opportunity in the slow U.S. economy of the late 2000s. The fact that prefab buildings were less expensive to construct boded well for the industry. As stated in Professional Builder, " Builders and homeowners alike are seeing the benefits that factory construction ... can provide."

Industry Leaders

In the late 2000s, top U.S. firms engaged in the manufacture of prefab wood buildings, including homes and other structures, included Cavco Industries of Phoenix, Arizona, with $105.4 million in 2008 sales and 660 employees; and Skyline Co. of Elkhart, Indiana, with 2008 sales of $166.7 million and 1,300 employees; and Horton Homes Inc. of Eatonton, Georgia, with annual sales of $145 million and 1,450 employees in the mid-2000s. Several industry leaders in this sector also had revenues from mobile and manufactured homes.

Workforce

The industry employed many assemblers, fabricators, and woodworkers in production. Given the tight labor market in the industry and the overall economy, prefabricated buildings have been a blessing to contractors, as they require very little on-site labor. The 2005 Aggregate Report from the U.S. Equal Employment Opportunity Commission indicated that, of 28 reporting units in the prefabricated wood buildings industry, men greatly outnumbered women by a ratio of 6.9 to one, and whites outnumbered minorities by 6.4 to one.

Research and Technology

Most technological advances centered on prefab housing's advantages of low cost, ease of construction, and uniform quality. Prefab makers also developed products to compete with traditional construction markets, such as high-rise buildings. For instance, component makers in Japan marketed sections and panels for medium-rise apartment buildings as high as five stories tall.

Japanese companies were leading technological advances in other areas of the industry as well. Shimizu Corp.'s Smart System, introduced in 1993, was designed to cut the number of man hours required to complete a 20-story office building 30 percent. The Smart System uses a network of nine computer-controlled cranes that scale the frame of the building and automatically attach components.

Technological developments that competed with the wood component industry included advances in wood substitutes. Producers in Saudi Arabia, for example, mass-produced prefab aluminum houses and buildings. Similarly, manufacturers in Poland shipped prefab metal and reinforced plastic components. As of 2005, metal building systems continued to dominate the U.S. prefabricated industry (by a margin greater than 50 percent), with wood, plastic, and cement systems competing for the remainder of the market.

Another trend in the industry involved "green" construction practices. Michelle Kaufmann, called the "high priestess of green prefab design" by Earth 2 Tec, touted the environmental benefits of prefab building through her firm, mkDesigns, which she sold to Blu Homes in 2009. Blu Homes has developed a hybrid prefab building system in which the structures are completely built in the factory and are then collapsed, or "folded" into modules for shipping. Maura McCarthy, cofounder of Blu Homes, commented on the firm's partnership with Kaufmann in a October 2009 Residential Architect article: "We're hoping we can couple the factory-building technologies and shipping efficiencies that help us make our product less expensive in general with her [Kaufmann's] products," she said.

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News and information about Prefabricated Wood Buildings and Components

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