Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

Tag: productization of housing

  • Architecture as a product

    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.

  • Real estate is a project-based business

    A friend of mine just sent me this blog post from the venture capital firm, Shadow Ventures. They specialize in the built environment (i.e. real estate and construction) and the post is called, “What McKinsey gets wrong about the built environment.” Here’s one of the points that they make:

    We are project based. While we are much larger, the most similar business is the movie industry. Project based, different source of funding/budget every time, the team changes (but we have our faves).

    This is very true. Oftentimes what happens in real estate is that you start with an opportunity. Something like, “buy this building, fix it up, and then sell it for more.” If the opportunity sounds compelling, a common approach is to then “get control of the asset and figure out how to capitalize it.”

    What this means is a conditional deal so that you can (1) do your due diligence and (2) figure out how to pay for it. This gets back to the three-legged stool that we’ve spoken about before. To do real estate stuff you basically need 3 things: a piece of real estate, relevant experience, and, of course, some money.

    This speaks to the entrepreneurial nature of real estate. But it also speaks to why it is maybe unfair to evaluate the architecture, engineering, and construction (AEC) industry as you might the automotive industry. The auto industry doesn’t capitalize and make each car slightly differently.

    This is one of the many things that makes real estate unique. And it’s why we have seen an enduring effort to figure out the “productization” of housing. It’s about being less project based.