Atlanta's First Modular Apartments To Open Downtown
For the first time, an Atlanta apartment building will be constructed in a factory far away, shipped to the city and assembled in an effort to build more affordable housing by cutting down on construction costs.
Place Properties is set to develop the prefabricated apartment project in Downtown Atlanta, on land adjacent to the former Atlanta Constitution newspaper building at 143 Alabama St.
The 112-unit apartment project is the first of its kind in Metro Atlanta. Modular blocks of the apartment complex will be assembled in a factory off-site, trucked to the downtown lot and stacked into a building like a puzzle. The method — a rarity even in the U.S. at this point — would allow Place to offer lower market-rate rents as well as reserving some of the units as affordable housing, Place Properties CEO Cecil Phillips said.
“You can't do that using traditional construction because costs are so high,” Phillips said.
The project is part of a larger redevelopment of 143 Alabama in a joint venture with Atlanta-based Pope & Land Enterprises. Pope & Land purchased the building and site last week from the City of Atlanta for $2M. In turn, Pope & Land is transforming the 67K SF building into a loft office project with street-level retail and a rooftop restaurant. The buildings will share parking.
On its parcel, Place Properties will develop the apartment building with units renting for an average of $1,050/month, Phillips said. About 30 of those units also will be set aside as affordable housing, which will have rents at 80% of the area's median income. In this case, that would average around $900/month, Phillips said.
Phillips said he has been eyeing modular construction for a decade, especially as underlying construction costs continue to rise, mainly due to labor costs. The industry is plagued by fewer available construction workers in the field, making those who are available more expensive to hire. Developers have to raise rents on apartments to justify the cost of traditional construction.
“This is a structural change in the cost, and it's going to be tough to overcome,” Phillips said.
Current average rents in Downtown Atlanta are more than $1,500/month, and more than $1,700/month metrowide, according to Haddow & Co.
Labor costs may be the biggest factor in overall savings using modular construction. But it is not the only factor, National Multifamily Housing Council Vice President of Construction, Development and Land Use Policy Paula Cino said. Development time is often shorter for modular projects, and there is generally less on-site waste produced in their development, she said.
While modular construction has been around for years, it has not caught fire in the multifamily industry at this point.
“We've been building the same way for 10,000 years,” Phillips said. "Find the site, find the materials and bring the labor to the site."
As the cost of construction has contributed to the growing issue of housing affordability, especially in urban centers, developers will have to consider modular construction more often if they are to keep rents tamped down, Phillips said.
Place Properties is eyeing building modular at up to 90% of its future project pipeline, including plans for a multifamily project that will be part of MARTA's King Memorial Station transit-oriented redevelopment, he said.
“I'm not Nostradamus, but I think it will catch on,” he said. “I think the cost structures are just going to force the industry to change. Until we can do 3D-printed buildings, I think modular is the affordable solution.”
Cino said developers in her organization are eyeing modular construction more now as well. But at the same time, some places cannot justify modular construction, whether it is the complexity of the development site, resistance by local municipalities to approve them, local codes that prevent their construction or even the distance from the modular plant. If the apartment segments have to be trucked long distances, any cost savings can quickly be negated, Cino said.
“I think it's a process,” she said. "It's definitely something that is under consideration."
“I believe that developers, including perhaps AMLI, will gravitate towards more modular components because the shortage of skilled labor in the construction industry has become severe,” Tague said. “It’s probably no easier for an owner of a modular manufacturing facility to find skilled labor either, but robotic machines are increasingly reducing the number of workers needed at manufacturing facilities like that.”
Still, there is a disconnect between many multifamily developers and modular construction companies that could keep a lid on mass adoption at this point, Tague said. Modular developers work best when they have a uniform design they can simply stamp out for developers.
“That objective runs contrary to the average developer’s belief that his project should offer different floor plans for many different family sizes and styles of living,” he said.