moc2014 wood products kiel miller

Dave Fell, Francois Robichaud, Kiel Miller

May 8th, 2014

MOC 2014

The Market Case for Wood

Prefabricated Structures

© 2014 FPInnovations. All rights reserved. Copying and redistribution prohibited. ® FPInnovations, its marks and logos are trademarks of FPInnovations.

FPI: Construction Value Pathways 2013

“What is the building of the future”

In searching for the seeds of breakthrough and disruptive innovations this

Construction Value Pathways project came up with 3 directions for

FPInnovations research

Key Opportunities

Focus on systems rather than line item improvements and replacements

Shift labour costs into materials and systems in order to create growth

Make wood a front of mind system in the concept stage

2


Agenda

STATE OF THE HOUSING MARKET

JAPAN AS A PROXY

THE NORTH AMERICAN CONTEXT

3


CANADIAN & AMERICAN HOUSING

4


THE STORY ON CANADIAN STARTS

• Starts for 2013 were

slightly off year over

year falling to 187,00

• Up 26% from the low of

2009 of 149,000 starts

• Driven by multi famil

which is up over 50% in

that time period and

represents over 60% of

all starts

• After an initial rebound

in 2010 single family

have either declined or

been stagnant

5

0%

10%

20%

30%

40%

50%

60%

70%

-

50

100

150

200

250

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

% M

ult

i F

am

ily

Ho

us

ing

Sta

rts (

,000)

Canadian Housing Starts

Single Family Multi Family % Multi Family

Source: CMHC


0%

10%

20%

30%

40%

50%

60%

-

500

1,000

1,500

2,000

2,500

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

% M

ult

i F

am

ily

Ho

us

ing

Sta

rts (

,000)

American Housing Starts

Single Family Multi Family % Multi Family

THE STORY ON AMERICAN STARTS

• Overbuilt in the first 5

years of the

millennium, starts

crashed a staggering

76% from over 2.0m in

‘05 to 554,000 in 09

• Since the low in ‘09

starts have recovered

66%; but still below the

rational mark of 1.35m

• Like us canucks the

recovery has been

driving by the

multifamily secotor,

which now represents

30% of starts

6

Source: US Census


-

0.50

1.00

1.50

2.00

2.50

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Co

nstr

ucti

on

Ch

art

In

dex (

Base 2

000 =

1.0

0)

North American Construction Start Index

CAD - SF CAD - MF USA - SF USA - MF

AN UNEQUAL RECOVERY

7

Source: CMHC, US CENSUS, FPI

SF (2013), 68.2%

MF (2000), 19.1%

Increase MF

Share (2013), 12.7%

American Housing Starts by Type

SF (2013), 40.9%

MF (2000), 39.2%

Increase MF

Share (2013), 19.9%

Canadian Housing Starts by Type


THE HOUSING DEMANDS OF THE

FUTURE

8

As we move to 2025 we will see: they will have a greater portion made in factory than

onsite

they will be built within a shorter cycle-time

they will have significantly higher energy performance

they will use more engineered wood products per SQFT

they will use panelized solutions for structural walls, structural floors, and siding

they will use easier to recycle materials

Precision products will be needed to support prefabrication and energy efficiency


JAPAN

9


DRIVERS OF JAPANESE ADOPTION

10

• Rapid asset appreciation from 1985-1991

• Land prices increase upwards of 150%

• Greater Tokyo lots modestly located sold

for up $3.5 in todays $USD

Land Price

Skill Shortage

JAPANESE PRECUT POST & BEAM

FRAMING

0%

2%

4%

6%

8%

10%

12%

14%

25-2

9 y

rs

30-3

4 y

rs

35-3

9 y

rs

40-4

4 y

rs

45-4

9 y

rs

50-5

4 y

rs

55-5

9 y

rs

60-6

4 y

rs

65+

yrs

Age of Japanese Construction Worker

Source: BOJ, Tenryu


PRECUT BEGAT FACTORY HOMES

11

Pro longed period of deflation

from 1998-06

• Established in 2000

• 10 year liability on a buyer or seller of new

residence

Housing Quality Assurance

Act

JAPANESE FACTORY BUILT HOME

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

19

80

19

86

19

92

19

98

20

04

20

10

Source: BOJ, Sekisui Heim, Emerald


PREVALENCE OF JAPANESE

FACTORY HOMES

• Factory Homes

have in some

shape or form

been around since

the reconstruction

period following

WW2

• They are viewed

as a high end

housing option

• Consistently

represent between

~15% of all starts;

127K starts in

2013

12

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

% M

ult

i F

am

ily

Ho

us

ing

Sta

rts (

,000)

Japanese Prefab Housing Starts

Housing Starts Prefab Starts % Multi Family

Source: Japan Lumber Journal


TODAY PREFABRICATED MARKET

JPN

• Sekisui House is the largest prefab builder in

Japan; Constructing over 30,000 factory built

homes in 2013

• From the signing of the contract, you can be in

your new finished house in ~40 days

• 80% of a house in constructed in factory

13

Sekisui House ~21%

Big 8 Factory Home Builders

0 5 10 15 20 25 30 35 40 45

Finish (utilities, inspection)

Ship and Erect House

Build Module:

Received & Inventoried

Develop Building Materials:

Time is concentrated

in the Suppliers raw

material chain and

areas outside

Sekisui’s control

Source: Sekisui House, Wall 2008


NORTH AMERICA

14

© 2014 FPInnovations. All rights reserved. Copying and redistribution prohibited. ® FPInnovations, its marks and logos are trademarks of FPInnovations. © 2014 FPInnovations. Tous droits réservés. Reproduction et diffusion interdites. Les marques et les logos de FPInnovations sont des marques déposées de FPInnovations

PREFABRICATION OCCURS IN 2 MAIN

STREAMS

Structural Components Industry • Has turned to a full systems provider (roof, floors walls)

• Is looking for adding value (closed panels, building

materials distribution, installation)

Prefab Homes Industry • Is ready to deliver frames instead of finished homes, to

serve builders in addition to homebuyers

• Looking for greater volumes in urban markets

In the future, convergence between the two

industries

15


DISTRIBUTION IS CHANGING

16

0% 10% 20% 30% 40% 50% 60%

Roof Truss

Floor Truss

Wall Panel

Install Manufacture

• External Consolidation

amongst builders and the

rapid expansion from big box

home centres constrained

revenue growth amongst the

traditional prodealer segment

• In effort to avoid competition

from big box chains and offer

a differentiate value added

product to builder, prodealers

invested heavily in

prefabrication and turnkey

construction services

• In the USA more than 50% of

prodealers operate a structural

component manufacturing line

Industrialization of Prodealers

Source: Robichaud, 2014


PREFAB & MODULE WALLS

17

• The Use of Prefab Walls in Modules in Site Built Construction

• The Washington metro market has the highest acceptance of prefab wall panels

• In addition Cleveland and New York utilize a significant amount of modules

0% 5% 10% 15% 20% 25%

Washington - Arlington

Detroit - Warren

Minneapolis - St Paul

Boston - Cambridge

Greater New York City

Cleveland - Elyria

Seattle - Tacoma

Tampa - St Petersburg

Los Angeles - Long Beach

Atlanta - Sandy Springs

Chicago - Naperville

Charlotte - Gastonia

Dallas - Fort Worth

Total

Prefab Wall Panels Using Lumber



PREFAB FLOOR DECK USAGE

18

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Tampa - St Petersburg

Minneapolis - St Paul

Detroit - Warren

Boston - Cambridge

Greater New York City

Washington - Arlington

Cleveland - Elyria

Atlanta - Sandy Springs

Dallas - Fort Worth

Los Angeles - Long Beach

Chicago - Naperville

Charlotte - Gastonia

Seattle - Tacoma

Total

The Use of Prefab Floor Decks in Site Built Construction


• The Use of Prefab Floor Decks for Site Built Construction

• Usage rates were negligible in the early 2000’s but have grown significantly in several markets

• The Orange shaded indicates more sophisticated metros the have an above average adoption of prefab

walls


REVENUE & MARKET SEGMENTATION

19

0%

20%

40%

60%

80%

100%

Roof Truss Open Web FloorTruss

Distribution Prefab Walls(Opened)

Prefab Walls(Closed)

Other


• Roof Trusses drive the structural components dealers

revenue; followed by floor truss at 15% and distribution at

9%; prefab walls while not a large contributor have made

large strides in PQ and BC

• Reflecting the reliance on roof truss for revenue turnover is

driven by single family

SF ~74%

MF ~26%

Residential: ~83%

Non Residential:

~17%


At last, a look at future Product

Development: Panels Panel based construction is the future:

several product options can be developed

▫ Combining insulation and structure

▫ Prefabricated platform framed walls with increased value

▫ Next generation SIPs

▫ Innovative composites of wood with concrete, magnesia… competing gypsum?

▫ Light weight CLT for residential construction

Engineered and prefab floor systems are the future: need product development

Next gen studs are demanded

Fibre based insulation from two streams: panel mills and pulp mills

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MOVING INSTALL COSTS

22

Component $.Sqft Inst. $/Sqft Mat. $/Sqft Total

Exterior Wall Framing 1.49 0.64 2.13

Wood Siding 4.18 1.63 5.81

Insulation 0.30 0.24 0.54

Total Solution

Opportunity

$5.97 $2.51 $8.48

Labour, 70%

Materials, 30%

In a divide of simple operating

concerns labour represents ~70%

of costs

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