Amazon makes itself at home
Retail giant might boost presence
in prefab market
On a mid-September morning, six trucks pulled into an alleyway of Oakland’s fast-gentrifying Golden Gate neighborhood, their oversize load wrapped in white plastic sheets — each truck carrying a piece of Jeff Stone’s prefabricated home.
As the blocks were lifted by a crane and anchored in place by a small crew of construction workers, Stone, an assistant editor at Pixar Animation Studios, his wife, the couple’s friends and neighbors stood watching. Module after module, the red barn house that the Stones first had sketched on a piece of paper a few years back — a nod to Oakland’s farming past — began to take shape.
By the end of the workday, the 1,741-square-foot duplex still needed work. Plumbing, wiring and gas had to be connected, and finish materials had to be applied where the blocks came together. But an entire house was standing in place of an empty backyard.
The residence had been constructed in just a fraction of the time it typically takes for a custom home to be designed and rise from its foundations. And while not quite a magic trick, the streamlined process developed by Plant Prefab has drawn the kind of notice most young companies can only dream of — from Amazon.
Last month, the giant online retailer’s Alexa Fund contributed to the Rialto-based start-up’s $6.7 million Series A funding round.
The fund promotes the development of applications for its Alexa voice-activated technology, including “smart homes” that would control all aspects of the residential environment: doorbells, lights and anything else you can imagine.
It is a huge business opportunity. With more than 600,000 new homes sold in the U.S. alone last year, there are billions of dollars to be made by anyone who can get a head start in dragging the industry into the tech age — something Amazon has accomplished in multiple businesses.
“The industry is ripe for disruption,” said John Burns, an Irvine-based real estate consultant. “There’s a huge competitive advantage for someone who has the capital.”
Ever since introducing its Echo device in 2015, Amazon has dominated the U.S. market for artificial intelligence-powered speakers — the nerve center of an interconnected home. The tech giant controls 70 percent of the smart-speaker market, according to one estimate, with its next-closest competitor, Google, at 24 percent and Apple at 6 percent. But pressure has been growing on the Seattle company.
Earlier this year, Google surpassed Amazon in global smart-speaker sales, according to research firm Canalys. Google and Apple also have announced collaborations with home builders to incorporate Google Assistant and Siri in select residential communities.
To stay competitive, Amazon announced new home appliances and gadgets, including smart clocks and microwaves. Now its investment in the prefab market is a chance to secure long-term relevance for its devices by influencing the way houses are built.
Prefabricated homes aren’t new. Traditionally, they have been associated with trailers and other low-cost accommodations built with cheap materials for people who can’t afford to live anywhere else. Plant Prefab has gone upscale with the concept, and while it isn’t the first to do so, its focus on streamlining production for custom homes that can fit on small lots in urban areas is a promising niche.
It took Plant Prefab less than two months to manufacture the Stones’ Oakland house. Crane operators and contractors worked less than nine hours at the site to install the six components making up the barn. By contrast, it took the average contractor nearly 12 months last year to build a custom home from the ground up, according to government statistics.
To bring down costs, Plant Prefab located its factory in suburban Rialto, 50 miles east of Los Angeles, where land and labor costs are lower. The start-up also relies on 35 full-time employees rather than a number of subcontractors so it can better control the process. The company says it is able to not only sharply reduce construction times but also shave costs by 10 percent to 25 percent.
“When you’re building in cities, you’re dealing with some of the biggest challenges: higher labor costs, higher land costs and a higher cost of materials,” Plant Prefab Chief Executive Steve Glenn said. “We can’t do much about land and materials, but we can focus on reducing construction times and labor costs.”
Glenn could not comment about the specifics of the Amazon investment but said he is looking forward to spending some time with the company “to see how to integrate smart technology in homes.”
Companies receiving Alexa funding gain access to several non-monetary services such as development support, marketing assistance and “other resources that help them build successful businesses with Alexa,” according to an Amazon representative, who declined to provide more details.
The Stones’ barn was assembled in the back of a home that the couple had purchased in 2012, as house prices were beginning to soar in the Bay Area. To be able to afford the investment, Stone and his wife had decided to rent the main property and live with their two kids in a trailer parked in the back, while saving enough money to build a second home.
The new house cost about $280,000, and the couple estimate additional expenses such as permits, foundation work, landscaping, plumbing and electricity will add up to $300,000.
The total cost of nearly $600,000 would be high in some markets but was a bargain for Stone.
He had sought quotes from traditional custom home builders and other prefab companies, but all were out of the couple’s price range and some were “astronomical.”
“Plant Prefab saved us at least $80,000. We would not have been able to afford this otherwise,” Stone said.