LOS ANGELES—“Land prices are a highly inflationary environment in cities like L.A. lots of municipalities have added significant fees the last few years. But if you concentrate just on construction costs, the main issue we are having is a labor force issue.” That was according to Don Mackenzie, head of west coast development for UDR Inc.
Mackenzie spoke on the development panel at RealShare Apartments on Thursday morning, an event which drew nearly 2000 attendees to the Westin Bonaventure in Downtown L.A. “There were about 12 million people in the construction trades business in 2006, and in 2010 it came down to about 9 million so there was a big exodus … they couldn't get a job,” he explained. “Also, their children, who might have come into the trade, did not. … We didn't have the younger people who could come in at a lower price. So, it continues to be quite a battle.”
So the challenge with construction cost isn't an issue of how to buy all the commodities, Mackenzie added. Instead, it is an issue with the labor and “how we are going to put everything into the building.”
Another issue, he said, is that subcontractors are booked out two years in advance, “which has certainly affected precon scheduling and our overall approach to constructing sites.”
But there was one global trend starting to happen that might serve as a solution to the problems, he explained, and that is modular construction. “A lot of progress has been made in the modular technologies.”
It is really the best way to approach the labor issue, Mackenzie said. “It puts it into a controlled environment at different labor rates. That is what is coming…in five to 10 years, you will see almost all projects being built in a modular form.”
The box itself, which obviously has to fit on a truck, he said, doesn't necessarily have to be the same shape as the apartment unit. “In today's technology, you can create door openings and connections between the boxes.” He added that most people walking through a building would likely not be able to tell whether a building was built modular or not.
From a design perspective, panelist Daniel Gehman, studio director of Humphreys & Partners, Architects LP, noted that if you are thinking modular, you must conceive that it is a modular project from the moment you start, “We want to get the marketplace excited about modular and create an opportunity for a different sort of living.”
One worry for Mackenzie was whether or not the institutional market would come around and not see modular construction as a stigma. “You will end up with a stick built project that can be constructed perfectly on the assembly line, indoors.”
Stay tuned for more stories in the next few days from the RealShare Apartments conference, which is produced by ALM's Real Estate Media Group, which also publishes Real Estate Forum and GlobeSt.com.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
