People have many reasons for utilizing containers. The most predominant reason is the architectural capabilities. Modern architecture enjoys clean, straight lines. It’s new and different enough to make a statement. Ultra high-end clients see it as desirable. While we are welcome to work with you on this, the financing and cost usually tanks the project enough that the client backs out.
Our desire for container construction comes from the efficiency. My last name is Krieger. I am of German origin. If there was any way to describe my father it would be one word: Efficiency. Containers are the most efficient product in the world. There are an estimated twenty million containers globally. They are massed produced with tight margins. If there was a way to make them cheaper it would have already been done. In the last decade people have tried and failed to change the paint, flooring, connection designs, and more. It turns out that the standard model can’t be much improved on.
The most efficient product in the world is then utilized to ship items to America. Asia, specifically China, builds a majority of containers. The United States has an extreme trade deficit with China, especially for 40′ containers. The US produces mostly industrial goods, which are heavier. 20′ containers can handle a similar amount of total weight capacity, so our heavy machinery are shipped out in 20′ containers. China makes bulk, light products. Think of pens and rubber duckies. They are shipped to us in 40′ containers. Thus, when the container arrives it has nowhere to go. The large freight companies sway between selling the containers at reduced rates and shipping them back empty. Rates to ship goods to China are actually below cost most days.
The next consideration when working with containers is their durability. Most construction in the US is made of materials that are relatively cheap both in price and quality. Containers are designed to handle extreme conditions- salt water misting, machinery lifting and moving interior loads, and security to keep out thieves during storage and transit. The walls are made of corten steel, which is rust proof. The floors are a 1.5″ thick marine grade plywood, which is roughly twice the thickness of standard residential subfloor. Even the paint is an oil base.
Low-income and affordable housing is nearly unanimously created through skimping on quality and material quality. Concrete siding (off-brand Hardie Plank) that it literally breaks if handled by one person and picked u p in the center. The lumber quality in the market at large has been reduced to fast growth pine that is delivered wavy and knotted. The model for these homes is to build them cheap, take in the cash flow, and escrow for maintenance. This is especially the model of mobile homes- the ultimate affordable housing product.
Containers create a unique circumstance where the construction can be a higher quality matched with a lower price. Containers themselves are bought significantly under the cost to produce them and cannot be significantly damaged by tenants.
The final thought is the most overlooked aspect of real estate- longevity of the asset. Mobile homes themselves are depreciating assets. Financially they can be fully depreciated over a timeline. We also will depreciate our homes on the tax rolls, but the solid foundation with a rust-proof metal box simply doesn’t depreciate in the same way as a normal home. I expect these homes to last significantly longer with less maintenance than standard construction. The market has hyper focused on the “flip” mentality. Developers usually are flipping assets to lower cap-rate investors and walking away in the first few years. While this makes sense financially, the asset quality will inevitably degrade because the user is not the builder. Lipstick on a pig works.
Whatever opinion we have of the market, I encourage my investors to google “Soviet Bloc Housing”. Soviet’s were never known for their glamorous design, but the buildings they created were structurally sound concrete tilt-wall style. They used batch concrete plants pouring forms which were trucked to location and assembled. It is an incredibly efficient style of housing, but eventually people catch on that the entire country looks the same and is made of an ugly concrete shell. I’m not asserting that this is a better model of affordable housing, but there is something to learn from an efficient product method.