{"id":23222,"date":"2017-11-15T17:39:21","date_gmt":"2017-11-15T22:39:21","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/factory-assembled-skyscrapers-an-episode-of-the-jetsons-or-the-future-of-real-estate\/"},"modified":"2017-11-15T17:39:21","modified_gmt":"2017-11-15T22:39:21","slug":"factory-assembled-skyscrapers-an-episode-of-the-jetsons-or-the-future-of-real-estate","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/factory-assembled-skyscrapers-an-episode-of-the-jetsons-or-the-future-of-real-estate\/","title":{"rendered":"Factory-assembled skyscrapers: an episode of The Jetsons, or the future of Real Estate?"},"content":{"rendered":"

While Amazon deploys delivery drones, the construction industry remains largely unchanged over the past 50 years, resulting in a 10% decline in construction efficiency since WWII.[1]<\/a> Current megatrends such as rising land prices, rapid urbanization, and the housing affordability crisis have spurred some real estate developers to digitize construction. Forest City Realty (\u201cFRC\u201d), a multi-billionaire developer, first disrupted the industry through high-rise modular construction\u201432 stories later, 461 Dean Street is the world\u2019s tallest prefabricated apartment building. Its construction showcases the evolution of FCR\u2019s supply chain\u2014and what can go wrong for early adopters of new technology.<\/p>\n

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Contrary to traditional on-site construction, modular construction involves prefabricating units off-site before stacking them on-site, Lego-style. As part of their master-plan to develop 6,000+ apartments near the Barclays Center, FCR set up a modular factory in the Brooklyn Navy Yard. FCR estimated this would result in cost savings of 20%+ along with saving 4 months on construction.[2]<\/a> More broadly, the newly automated process would result in safer conditions (e.g. eliminates unpredictable weather), less waste and noise, and would prevent projects from being labor constrained. Instead of waiting for phased building occupancy towards the nearly-completed stage of a building, tenants would immediately move into finished prefabricated units, creating a prototyping- feedback system where developers could tweak factory design to produce better (and higher priced) future units.[3]<\/a><\/p>\n

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FCR first engaged SHoP Architects to create a virtual model, which then passed to the contractor, who translated it into 3D construction documents to Skanska, the Construction Manager. Skanska was responsible for overseeing the factory process, transporting, and assembling the units on-site.[4]<\/a> The supply chain radically shifted from a linear process into parallel processes. Instead of building floor by floor, the building was constructed all at once, in-factory (e.g. while construction workers were still digging the foundation of the building, electricians were able to work on wiring the units).[5]<\/a><\/p>\n

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Despite technical innovations, Skanska abandoned the project two years later, alleging that FRC\u2019s flawed design caused alignment issues. Counter-suing, FRC claimed the builder botched the process. FCR and the architects conceived of the design, but the contractor had to then translate their work into building instructions. Though FCR spent at least $3.5 million in R&D at the onset, Skanska alleges that narrow design tolerances resulted in tiny errors that, in practice, were compounded through stacking hundreds of pieces.[6]<\/a> This highlights the difference between the design and construction models\u2014the challenge in modular construction is that developers must shift to a manufacturing model, where the design, development, and construction teams all collaborate from the beginning to understand how pieces will fit together.<\/p>\n

Prefabrication requires not only for FCR to develop new technology\u2014but also for every member of its supply chain to change his process. The system necessary to pull off high-rise modular construction must shift from a linear sequence (architects providing the design to engineers, who hand off plans to builders, who then engage contractors) to an integrated design-development construction process. I believe this starts with all the different parties incorporating a much more in-depth prototyping system. Further, there must be greater transparency throughout the supply chain\u2014if defects occur on the factory floor, the design and contractor teams must stay involved and react quickly to change the blueprint going forward. Using multidisciplinary teams would improve the process by incorporating expertise from non-construction industries. Finally, though the industry\u2019s transformation relies on private companies placing their \u201cbets\u201d on adopting new technologies, their adoption can be further encouraged by governments.<\/p>\n

After four years of litigation, delayed construction, and monetary write-offs, FCR completed 461 Dean Street in 2016\u2014two years behind schedule. Shortly thereafter, FCR sold its modular construction business, FC Modular, which is currently active for low-rise construction. Though FCR\u2019s attempt to digitize construction \u201cfailed\u201d to materialize cost savings, experts estimate that within 10 years, full-scale digitization can lead to up to 21% of cost savings, or as much as $21 billion a year globally.[7]<\/a><\/p>\n

Google just reportedly invested $30 million in a modular housing start-up to provide affordable housing for its employees in Silicon Valley.[8]<\/a> FCR\u2019s CEO called the failure of 461 Dean Street \u201cthe growing pains of innovation\u201d\u2014 what kinds of firms can\/should take on real estate innovation, and which player within the supply chain should lead the charge? Would modular construction change things for consumers (tenants)\u2014or would cost savings merely increase developer profits? As technologies like 3-D printing and modular construction grow, what are the implications for the built environment and city planning?<\/p>\n

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(746 words)<\/p>\n

[1]<\/a> New York Modular. Ryan E. Smith, Peter L. Gluck, Mimi Hoang, Chris Sharples & James Garrison. Journal of Architectural Education Vol. 71 , Iss. 1,2017, https:\/\/gluckplus.com\/sites\/default\/files\/press_item\/files\/New%20York%20Modular-small.pdf, accessed November 2017.<\/p>\n

[2]<\/a>\u00a0Predicting Our Future, “NYC Goes Modular,” March 29, 2017, podcast,\u00a0https:\/\/www.predictingourfuture.com\/4-nyc-goes-modular, accessed November 2017.<\/p>\n

[3]<\/a> Velamati, S 2012, \u201cFeasability, benefits and challenges of modular construction in high rise developments in the Unites States: A developer\u2019s perspective\u201d, PhD thesis, MIT, https:\/\/dspace.mit.edu\/bitstream\/handle\/1721.1\/77129\/825120099-MIT.pdf?sequence=2, accessed November 2017.<\/p>\n

[4]<\/a>\u00a0Diana Budds, “Prefab’s Moment of Reckoning,”\u00a0Fast Company<\/em>,\u00a0 Dec 13, 2016,\u00a0https:\/\/www.fastcodesign.com\/3066177\/prefabs-moment-of-reckoning, accessed November 2017.<\/p>\n

[5]<\/a>\u00a0Stinson, Elizabeth, “The World’s Tallest Modular Building May Teach Cities to Build Cheaper Housing,”\u00a0Wired<\/em>, Nov 23, 2016, https:\/\/www.wired.com\/2016\/11\/cities-can-learn-worlds-tallest-modular-building\/, accessed November 2017.<\/p>\n

[6]<\/a> Forest City Realty Trust, 2011 Annual Report, p. 51,\u00a0http:\/\/ir.forestcity.net\/phoenix.zhtml?c=88464&p=irol-reportsannual, accessed November 2017.<\/p>\n

[7]<\/a> Shaping the Future of Construction. World Economic Forum. p. 23,\u00a0http:\/\/www3.weforum.org\/docs\/WEF_Shaping_the_Future_of_Construction_full_report__.pdf, accessed November 2017.<\/p>\n

[8]<\/a>\u00a0Laura Kusisto, “Google Will Buy Modular Homes To Address Housing Crunch,”\u00a0Wall Street Journal<\/em>, June 14, 2017,\u00a0https:\/\/www.wsj.com\/articles\/google-bets-on-modular-homes-to-fill-housing-demand-1497448838, accessed November 2017.<\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

Rising land prices, rapid urbanization, and the housing affordability crisis have spurred some real estate developers to digitize construction. Forest City Realty’s bet on high-rise modular construction showcases the evolution of their supply chain\u2014and what can go wrong for early adopters of new technology.<\/p>\n","protected":false},"author":9714,"featured_media":23253,"comment_status":"open","ping_status":"closed","template":"","categories":[428,3617,775],"class_list":["post-23222","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-construction","category-modular-housing","category-real-estate","hck-taxonomy-organization-forest-city-realty-trust","hck-taxonomy-industry-construction","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nFactory-assembled skyscrapers: an episode of The Jetsons, or the future of Real Estate? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/factory-assembled-skyscrapers-an-episode-of-the-jetsons-or-the-future-of-real-estate\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Factory-assembled skyscrapers: an episode of The Jetsons, or the future of Real Estate? - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Rising land prices, rapid urbanization, and the housing affordability crisis have spurred some real estate developers to digitize construction. 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