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18 November 2019

Considering the Next Phase of Offsite Construction in New Zealand

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After settling into my new role at PrefabNZ over the last three months, I have asked lots of questions and listened to what the industry is saying. While there is a general consensus that the sector is at a tipping point, the thing to remember is that if the industry steps forward, the momentum continues at pace. But if the industry stands still or steps back, that momentum pauses or goes backwards. From my point of view, there are many reasons to believe that the sector is only going from strength to strength.

First, there are many businesses and builders already embracing offsite (some have been for decades). Their challenge is to move frame and truss up the value chain before they arrive on site. Then there are a host quiet achievers, existing businesses getting on with the job. Their challenge will be to increase capacity and improve productivity. Then there are a number of new entrants in the market that are looking at offsite as an extension to an existing traditional build firm or those in the start-up phase. There is also a range of firms on the sidelines developing businesses cases and assessing the market for opportunities. Many firms had been waiting on Kiwibuild to deliver scale (and were subsequently disappointed). Now with the set-up of Kainga Ora some businesses may push forward with their plans, however, I suggest that their business models should stack up independently of any central agency volume.

Secondly, the stars are aligning in New Zealand for a better construction industry. In addition to the setup of Kainga Ora (part of the Ministry of Housing & Urban Development) there is also the Building Act Review, the Review of Vocational Education, the Government’s new Procurement Guidelines that focus on value instead of the lowest cost and also the new Construction Sector Accord which aims to deliver better behaviour in the sector. However, in my view, great ideas get 1 point out of 10; it is the successful delivery of those changes that account for the other 9 points. It is now up to the industry and government agencies to make those good ideas work.

Thirdly, there are global trends that are gaining traction and New Zealand will benefit. Amazon and other tech backed companies are looking at the construction sector and developing product offerings and business models, welcome to the age of PropTech. Not all will be successful but some will and they are destined to take a slice of the construction pie. Local operators don’t need to panic but should be mindful of the change and look to embrace it. Any offshore solution must always follow the same rules and regulation; a level playing field is imperative. For switched-on Kiwi companies, there will be opportunities for collaboration, to access offshore capital and the sharing of IP between international and local businesses. And there is no reason it cannot work the other way with innovative offsite construction becoming an export market worth exploring.

So for the offsite sector, the present is positive and the future is bright. The industry is changing and will continue to do so.

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