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Cracking the code? Hints Forest City modular factory will change from high-rise residential to building components

A 12/14/15 article in the trade magazine Building Design & Construction ((BD & C) is headlined Undaunted, Forest City pushes ahead on modular construction, with the subtitle, "The president of its FC Modular division says new projects are under consideration, even as competitors falter or fall by the wayside."

Time will tell, but there are signs that the future of modular will not be towers like the B2 high-rise at Dean Street and Flatbush Avenue, but rather more modest efforts from the modular arm of Forest City Ratner,

That's why I consider overblown the observation, in a Real Deal profile of former Forest City executive Melissa Burch, regarding Forest City's "once-faltering experiment with modular construction."  Heck, they're still making interior repairs on modules that were supposed to have been delivered complete. That's hardly steady.

The BD & C also hints at some major changes in factory output, from modules aimed at high-rise apartments in New York City--remember, Forest City claimed to have "cracked the code" regarding high-rise modular--to less ambitious components for non-residential projects that could go outside the city.

So too does a Real Deal article, The Future of NYC Real Estate, that cites Susan Hayes, president of FC Modular, in paraphrase as anticipating that modular will "become a mainstream method for multi-family homes, hospitals and dormitories in the next five to 10 years."

The business is in flux

Yes, as noted by BD &C, some longer-established modular competitors have struggled. Capsys, in the Brooklyn Navy Yard, has closed after losing its lease, and Deluxe Building Systems in Berwick, PA, is on the rocks.

FC Modular might seem to be faltering too; on 11/30/15, it offered a 90-day warning that it may lay off some or all 220 workers (194 of them union) from its Brooklyn Navy Yard factory once modules are finished for the B2 tower at 461 Dean Street, next to the Barclays Center.

However, "FC Modular has every intention of moving forward," Hayes, said in the magazine's paraphrase. Of course "every intention" is weasel language that could encompass multiple outcomes.

While Hayes claimed to have projects in various stages of development, she wouldn't offer details, and acknowledged “we’re not getting 75 RFPs a week for modular.”

That's vague, but it does contrast significantly with Forest City Ratner CEO MaryAnne Gilmartin's March 2014 claim that the company was "beseiged" with interest from developers.

Of course, since then, B2 has been delayed for two years, Forest City and former partner Skanska USA Building have filed dueling lawsuits over cost overruns, and water infiltration and mold have required internal repairs to modules.

Changing the emphasis from residential

“The difference today for FC Modular is that we are not an indoor construction company; we are [instead] an assembly plant with the same quality controls and standards for excellence as any other factory,” Hayes told the magazine.

The difference is not quite clear, but the statement that FC Modular can now "meet what our clients want," as well as Hayes's statement that modular will be “a bigger deal” in nonresidential building, suggests that the factory may produce modules for retail, institutional, or office use.

That might keep FC Modular open, and it might amortize some of the significant research and development costs in Forest City's modular venture. But remember, Forest City initially aimed to revolutionize high-rise residential construction in New York City.

That said, the 1/6/12 Opportunity Brief Forest City presented to potential partners described the potential for not one but three levels of prefabrication: preassembled components, subassemblies, and modular construction.
From the Opportunity Brief caption
So, Hayes's statement suggests that the "assembly plant" will focus on preassembled components and subassemblies rather than more finished pieces of a building.

Three target markets, including bathrooms and data modules

The Opportunity Brief, excerpted below, noted three--not one--target markets. They included Multi-Story Housing Modules, which could be sold within a 500-miles radius of New York City; Prefabricated Bathroom PODS for hospitals, hotels, and housing, which could be sold nationally; and Telco/Data Center modules, which could be sold globally.

I think those were all rather optimistic--the transportation cost/time is such that the market for housing is likely limited to a much narrower range than 500 miles, while the other markets are also likely smaller. However, large potential markets remain. So we'll see.

The Real Deal article indeed backs up that conclusion, quoting (in paraphrase) Joseph Maraia of Lend Lease as saying said prefab bathrooms could save 10 percent, but "the difficulty in transporting large prefabricated materials throughout the city will likely impede the proliferation of full-building modular construction. "

From the Opportunity Brief


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