Building During a Labor Shortage: A Modular Case Study w/ Best GEN Modular [podcast transcript]

John McMullen

So what can you tell me about that project specifically?

Michael Heitsman

It’s going to be market-rate apartments here in Rapid City. It’s 51 modular boxes, 42 apartment units consisting of six studio apartments, 16 one bedroom apartments, and 20 two bedroom apartments. It's actually designed based around our own plug and play concept that we developed with us having no architecture in house and with our experience there we really approached this project to create a concept and a design that we could easily just go into any new development and plug and play or adapt the project to fit the need of the performer of the specific site, that kind of thing. So we have a studio, a one bedroom, a two bedroom, a three bedroom, even a four bedroom unit, as well as fitness entry, common area circulation, that all fit within the same parameters and grid. So you can literally pull one piece out and stick another one in you can have a two bedroom that sits over a one bedroom and a studio or vice versa. So we don't have to stack our same unit types above each other. We don't have to do all the typical things you they're really kind of strange you with modular, we're a lot more flexible with it.

We approached it really as a team concept and we got the guys in the factory on board to really think about how the how the factory builds, and how they're doing things to influence the design. Then we got our contractor and our subs on board early on in the design to say, Okay, let's think about this from an end game. What does it look like when it sets? What are we doing in the factory versus what do we do on site? So it's really helped.

John McMullen 

I was reading about the BG Flats project and some of the other projects that you guys have done. The BG Flats is housing, it's more of a suburban setting. And I was going to ask what's the what's the biggest difference between the BG Flats project and maybe some of your previous projects that were not in suburban areas?

Michael Heitsman

I guess it really there's not a huge difference other than we've been really strategic about not settling, just because we've always done it. So our big thing in a company is to always be improving and always be adapting and always be innovate and try things and see if it works. So with this one that we actually took concept of, 'Okay, let's look at this from what all can we do in a factory to really simplify the site?' I mean, we went so far down to look at all the details for the exterior finish for the roofing, the finish roof membrane, for parapets, all that kind of stuff to see. Okay, what else can we do in the factory to save us time on site. So when you get into more of the rule development, it's harder to get subs out there. So if we can do more in the factory than we have no, doing the rural side, and that harder to get to sites is a lot easier.

John McMullen

Gotcha. And speaking of rural settings, this is a bit of a sidebar, I was watching the video on your website that was showing the setting of the Holiday Inn and seven days, which is really great video to watch. But I noticed it was really windy in the in the time lapse video that you created. And so just my own curiosity, how do you account for that wind, when you're setting mods with a crane?

Michael Heitsman

You make sure you have a good group. That project was set by Hayes Modular, which is another very good set crew. It takes a good crane operator, a good team and good communication. So we didn't set that. So that that project we were the architects for and we were the modular factory for but it was a different developer and different GC and texturing owner under developer GC that did it that we've worked with in the past. This is their second modular project. And they're just really getting good at it from their own standpoint of doing the site work and development side of it. Okay, but they brought Hades modular and to set it and I think they did have to take one day off because of it was just way too windy. But otherwise, that they were able to make it, make it go at it.

John McMullen 

Very good. I was just curious. So back to BG flats: Tell me about the history of that project. How did it come about and what was the design process and the construction process like for that project?

Michael Heitsman

The project started, Brandon has been doing real estate development, like I said for 25 plus years. So he's got a couple properties here and several properties here in Rapid both land and eco building. And we started to have a gap in our line there at the factory. So we decided to go ahead and proceed with doing our own apartment complex. To help fill that gap is really originally why we decided to move forward with it. So we kind of pushed the design. But what was great about it because we have design and construction and everything in house, we were able to really talk through it and you get the design done quicker, solve our problems ahead of time, a lot of issues that always come up and then again, because we have design instruction in house when things did come up, we were able to solve them a lot faster. Actually one example that we have as you know, the industry right now is struggling with labor, labor material, everything.

We started out with a design doing a facade on the project, or we cannot find an effective installer to come and do it that wasn't months out or trying to charge us a ton to do it. So we decided, Okay, let's go back to the drawing board. And so we literally sat down because we have everything in house and sketched out on some trace paper, design and utilizing LP siding, and came up with a new contemporary kind of look, that still looks good, feels good and goes after the look, we were going for it. And we were able to do in a couple hours, and we were able to adjust pricing and get us up on board and not lose any time the schedule actually saves schedule time and utilize a product we knew we could get at a price we could fit within our budget.

John McMullen 

So now that the modules are being stacked, is there a timeline for finishing the project?

Michael Heitsman 

Yeah, I think they're hoping to be opened by August, running out by August.

John McMullen 

Okay. Very good. You mentioned some of the challenges that you had during the process of design. Are you anticipating any other challenges to complete the project or does everything look smooth ahead for you?

Michael Heitsman 

Well, I wouldn't say smooth. We're still running into problems and delays every day, even just getting lumber on site to do some of the minimal side components. Even finding work has been a struggle, we've been trying to hire guys for a long time to run the different parts of our construction. So with the amount of work we've done in the factory, and how modular friendly it is, and how site friendly it is, now that it’s set as long as the guys we have hired don’t leave, then I think we'll be okay.

John McMullen

So it’s a good time to segue; I think you're speaking of challenges. And this has sort of been a recurring theme through just this conversation of a shortage of labor. The construction industry as a whole has been challenged by labor shortages over the past several years. So what's your take on that? How has Best GEN been impacted by that directly? Where do you think we go from here?

Michael Heitsman 

Well, I think the one struggle Best GEN has just with where we're located reasonably around the country, is here in the Midwest. You don't have the same construction costs that you do out in California. And so out there, when you're paying $300 a square foot plus to build a hotel you can charge more for the boxes, while a lot of our customers here in Colorado, Minnesota, South Dakota and Nebraska, they can build a cheaper. So that's one thing that we're up against. And then the labor itself finding the people to come in, as you said, it's been two or three years of this labor shortage. And we see it all the time. With our company we've had to offer, and we've wanted to full benefits, and just go above and beyond with extra incentives to get people on board. We pay a good salary. We have sign on bonuses, we have all these other things we've had to do and incorporate to get people in the door. We've been good about when we finally get talent, keeping them do whatever it takes to keep them.

John McMullen 

Do you feel that the labor shortage has affected you guys? You're based in South Dakota, has the labor shortage affected you guys in your area of the country any differently than other parts of the country that you've noticed?

Michael Heitsman 

I say it's all about the same. For me, I haven't noticed any different than when I talked to other developers and other factories and VCs out there. from Arizona to California, everyone's struggling with it. So I don't think it's better or worse around here. It's just some that everyone has to try to solve and figure out how to get past.

John McMullen

So, this may not be something that we solve here and now, but--in your view, just from your experience in the industry--how can we as an industry address that overall shortage?

Michael Heitsman

Some things that we started doing here the company is is attacking the Problem early on, I go into the high school and talking with kids and try and actually doing things where we can find good talent may actually pay for them to go to the technical school or go to the technical colleges and find them some good talent there and say, Hey, now we'll all pay for your school. If you commit to staying with us for five years, or some after that fact, I think, to solve the issue, companies are going to have to get innovative like that. I think, for me, I was I was pushed growing up that you had to go to college, you had to go get a four year degree. And it's how I don't believe that's the case, I think there's several other avenues to go and be extremely successful without having to go to a four year degree. So if you have a skill or something you're passionate about something you love to do, then then go and do it. Or if there's something you're good at doing, just go do it.

John McMullen

Right. So I think that's great, especially going into schools, I know of several other members of MBI have started similar initiatives at their local colleges, community colleges, high schools, technical schools. So that's, that's great. I'm thrilled to hear you guys are doing that. I think it's the right way to go.

Changing gears one more time, from a development point of view, what advice can you offer newer modular companies, or those who are exploring modular construction?

Michael Heitsman

If you're wanting to get into modular construction, just find a good team to work with. There's, there's some really great contractors out there that know what they're doing. There's some really great architects out there that know what they're doing. And, you know, really investigate that and dig into that. And the architects can design, you know, whether it's site built or modular. And so if you find a good one that you can work with, then you can go kind of either route with that one, that's one thing that we do, that we started doing early on from a design standpoint is we, we take a project and if we went under contract with you for the design, we do a pretty much a module package to assess it to see if it made sense for modular. And if the owner came back and decided after that, then that he didn't want to go monitor, then we would just transition our whole team to do site build, and it wouldn't cost anything else. So or if they want to stay modular, we keep going modular, but I think the issue is, you know, a lot of developers go into it and just design our standard building that's not modular, that then might be able to be built modular, but it's not efficient, modular. And then they'll just get an architect to draw something up. And then they'll go talk to a modular factory and say, Hey, can you build this? Well, most backers out there will be able to figure out how to build it. It just doesn't always make sense. At that point does it makes sense to go modular? If it's done right, with the right team, and thoughts from the beginning, modular can…there's so many advantages to it. I think people also get hung up on Well, I got to do a, you know, Lego block building that everything is identical and stacks on top of each other. And it's just this square rectangle thing. And that's not base.

I mentioned the innovative aspect of what we do. And we've really pushed the limits on that from the design to the factory to the construction, and we've designed some two-story clearstory space. We designed a bank, we design a credit union that has a two story lobby that has one box that opens up to a box on top of it. You can design stuff on that is pretty common for cantilever thing. We patented, I think we have five different patents have on some unique things we've come up with, we can span like 30 to 40 feet within our box to span over pools, so you don't have the additional steel for the site component. And so you can save a lot of money there. But it also gives you the flexibility to have open spaces underneath it without all the columns or open boxes up next to each other without all the columns inside it. So there's a lot of flexibility in it. If you know what you're doing, and you can think through it. So early on, I'd say find an architect, find a GC, find a factory, and just create that partnership and just have good open communication.

John McMullen

Excellent advice. Thank you. What's the rest of the year look like for Best GEN? I know you've got your BG Flats going up now, but beyond that what's on the horizon?

Michael Heitsman

On the horizon, we're actually getting ready to do some townhouses. Then we're transitioning into a senior living project, and probably not a multifamily thing. So we're pretty busy. There we are. And that's our Watertown factory. We're actually getting ready to open a Southwest plant. I can't get too much into the details on that we're, we've toured a couple different buildings. And I think our CEO is flying down there and a week or two to walk through another one. But we have several projects were out on the West Coast that we're looking at building out of our new facility that we're getting ready to open

John McMullen

Very cool. I really appreciate your time today. My congrats again on the BG Flats project. It looks fantastic. I hope you don't run into any more trouble before your opening in August. My name is John McMullen and this has been another episode of Inside Modular, The Podcast of Commercial Modular Construction. Until next time.