Live Roundtable Takeaways: From Steve Basten

Steve Basten is a senior manager at John Burns Real Estate Consulting who does forecasting and analysis of the building products industry. While Basten participated in think tank discussions at the November Live Roundtable event in Denver, he also came away with some thoughts on what lies ahead for the industry:


  • When it comes to smart cities, the developer’s business model is more important than the technology. Also, if we aren’t already the go-to firm on smart city strategies for developers, we should try to figure out how to get there. We toured the Panasonic lab at Peña Station and it’s incredible what they have done with this greenfield. There are many amenities including city-wide WiFi, which will enable autonomous vehicles. It’s important for us to understand the needs of the stakeholders in these communities because this model will definitely repeat in other markets.
  • You can supply $230,000 single-family detached product in expensive markets if you have the right business model. Oakwood Homes (owned by Berkshire Hathaway) is leveraging its panel plants to bring truly attainable SFD product to market in Denver. They sold half of their community without a model. (They could have sold 100%!) A lot of builders are starting to see Oakwood as a real threat at the entry-level price point.
  • Private equity continues to invest in automation / offsite. The president at Williams Robotics told me they are raising several hundred million to begin manufacturing labor-saving robotics, which will sell to panelizers, prefab / modular builders, and other offsite construction providers.
  • Modular (volumetric) construction continues to penetrate the apartment market. I imagine you’ll see BFR operators start to look at offsite production too as those products are usually highly standardized / repeatable.
  • HVAC is the final frontier in factory-built apartment efficiency challenges. To make volumetric modular factory-built apartments more energy efficient (and ultimately more cost efficient) you need an HVAC system that recovers heat (it needs to be a completely isolated mechanical system). Having a system that recovers heat eliminates the need for a central hot water system. Also, because none of the construction materials sees moisture during construction, there is a better inherent air tightness. But that air tightness creates a greater need for air filtration (like the products Panasonic makes).
  • The number of smart platforms that are coming to apartments is exciting. The technology that exists in hospitality is increasingly being applied to apartments. There is a value stream to property managers to unlock doors remotely, control hot water heaters, HVAC, leak detectors, etc.
  • Micro-grids are becoming increasingly more important in masterplans especially in places where utilities are increasingly shutting off power due to fire risk (CA).
  • We’re still a ways away from truly connected “smart” homes (smart means cost-savings here). The National Renewable Energy Laboratory is partnering with startups and larger companies to develop whole home systems that truly optimize energy use and provide an ROI for homeowners. It’s a problem that needs to be solved from all angles, and the right system needs to benefit both the homeowner and the utility.
  • HVAC shipments to data-centers at risk. NREL’s HP super computers are all cooled by water. It’s extremely efficient and as more companies become comfortable with pumping water through their servers, shipments of HVAC and other construction products applied currently will decline. 
  • Solar programs vary greatly by region. As we learned through our Sun Street study, there are many things that impact the ROI of solar regionally. In places like Hawaii, where it’s often cloudy but 30% of homeowner power comes from solar panels, the grids face major management issues.
  • BMC ready-frame is at risk of displacement (when the shift to offsite comes). BMC does not supply panels because it cannot support the cost of the verticals (plumbing and electrical). Their core competency is materials distribution and framing kits. The offsite providers who create more value for the builder at a similar cost to the ready-frame kits will probably win the spec.
  • We need more distribution consolidation before the shift to offsite makes economic sense in lower density markets. The largest single barrier to offsite is how fragmented and inefficient the building materials distribution industry is. When Henry Ford began manufacturing automobiles, he put 5,000 car manufacturers out of business not solely because he built the assembly line, but because he built the distribution model (dealerships).