Construction is generally considered to be the world's largest industry, and yet, it is well known that its productivity levels suck. Over the last half century, the industry has experienced something in between meager and negative productivity growth.

It is for this reason that, for as long as I can remember, people have been trying to figure out how to turn development and construction into something more repeatable and less custom -- something like a product.

Now, there can be a bit of a stigma associated with this moniker. Architects don't often like to think of their work as being a product and references to modularity can sometimes evoke feelings of cheapness (think manufactured homes).

But I think all of this is quickly changing. And at the end of the day, we are going to need to start building like this if we have any hope of making housing more affordable within our cities.

Here's an example.

Back in 2021, I wrote about a new modular housing company called Juno. They had just broken ground on their first project in Austin (a five-story 24-unit building), and they were in the media talking about how they had more or less reduced the building down to 33 standardized parts.

The multi-family space has since softened in Austin, and I don't have any inside knowledge of how this project went, but the building is now complete and being leased up. And regardless, I think it's an important case study to look to. This is where our industry is heading.

Construction is an essential sector of the economy, responsible for building and maintaining the physical infrastructure that underpins our society. However, it's no secret that construction productivity lags behind other sectors of the economy, such as manufacturing and information technology. So why is this the case?

One of the main reasons for the productivity gap is the unique nature of the construction industry. Unlike other sectors, construction projects are often one-off, bespoke endeavors, making it challenging to achieve the economies of scale that are typical of manufacturing or technology. Each project requires a different set of skills, tools, and materials, which can be costly and time-consuming to source and manage. This leads to a lack of standardization and efficiency, which can hinder productivity.

Another factor that contributes to low productivity in construction is the reliance on manual labor. Despite the increasing use of technology and automation, much of the work in construction still relies on physical labor, which is subject to human limitations and the potential for errors. This can result in delays, rework, and additional costs, all of which impact productivity.

Moreover, the construction industry faces challenges in terms of supply chain management and workforce development. The industry relies heavily on a complex network of suppliers, subcontractors, and laborers, all of whom must be coordinated and managed effectively. This can be difficult, particularly in light of the current labor shortage and skills gap in the industry.

To address these challenges, the construction industry needs to embrace innovation and new technologies to improve efficiency, standardize processes, and reduce waste. There is also a need to invest in workforce development and training to upskill the existing workforce and attract new talent to the industry.

In conclusion, the construction industry faces unique challenges that make it challenging to achieve the productivity gains that are typical of other sectors. However, with the right investments in technology, training, and process improvement, the industry can overcome these challenges and continue to build the infrastructure that our society relies on.

Maybe you didn't notice. But if the above doesn't sound like me and my writing, it's because today's blog post is brought to you by ChatGPT (AI). The prompt I used was, "write a short blog post about why construction productivity lags other sectors of the economy."

On some level, it's unsettling that AI can now, almost instantaneously, spit out a blog post like this. It would now be pretty easy to set up a daily blog, like this one here, and use ChatGPT to populate it each day.

But of course, while that might be interesting initially, it would quickly become a banal baseline. Anyone and everyone could copy what you're doing. AI is going to change a lot. But our jobs remain the same: find new ways to create value and be remarkable.

So here's the thing. The whole reason we are all talking about how to build more sustainably is that there isn't often a quantifiable ROI for doing so. If building a net-zero building cost less than building a regular building, everybody would be building one. But that is not the case, which is why our industry, and others, are grappling with how to justify the added costs, even though we all know it's absolutely the right thing to do.

The questions we are asking ourselves look something like this: If I spend X% more on this build, what kind of rent premium could I command? And in some cases this premium is quantifiable and in some cases it matters a great deal. For instance, in the case of a new office building, you might need to spend the extra money so that you can attract the right tenants. While in other cases/asset classes, you might feel as if there's no rent premium and nobody will ever pay more.

But I like how Seth Godin thinks about it in this recent post: people never pay extra. If you're paying more for an electric car, for example, you aren't actually paying extra. What you are paying is a price that you feel is fair for what you are receiving. And what is it that you're receiving? Well, in this case, you're getting an electric car, but you're also buying in Seth's words, "sustainability, community awareness, cachet, status, safety, quiet, and the feeling of being an early adopter."

These things have value to some people. And as long as you can deliver on your promises, extra isn't extra at all. But perhaps more importantly, this early adoption can help encourage change. Electric cars are becoming cheaper and cheaper, and I think it's pretty clear that they will soon replace combustion engine vehicles. This model of starting at the top of the market and then moving down seems to have worked.

Now, the auto industry isn't perfectly comparable to the building industry. They have been good at improving productivity and bringing down costs, and we have been awful at it. Depending on how you measure it, construction productivity growth over the last half century is sitting somewhere between flat to some negative number. But I don't think this dubious achievement changes Seth's message. Think about what you're offering. Maybe extra isn't extra.