[Source: www.builderonline.com, July 15, 2010]
Step back to the fall of 2008. Desperate builders across the country were scrambling to strip down their house plans to lower their prices in buyer-starved markets. Bert Selva, CEO of Shea Homes, says he didn’t want to do that, even though a number of Shea’s more affordable communities, such as Reunion in Denver, weren’t generating their desired absorption rates.
A “big fan of differentiation,” Selva thought Shea needed to come up with something special that could attract the 25- to 34-year-old demographic. He wasn’t sure what younger buyers wanted, but he knew that “they don’t want something their parents or grandparents had.” For example, buyers that Shea Homes interviewed said they normally eat in front of their TVs, which told Selva a new concept could dispense with large dining rooms. Selva also recalls a conversation with Scott Olivet, CEO of sunglasses maker Oakley, which led him to the conclusion that “customers don’t always know what they want, but they know it when they see it.”
As he was pondering all of this, Selva picked up the scent of nostalgia in the air. Muscle cars of the ’60s, such as the Mustang, Camaro, and Challenger, were making comebacks. Popular shelter magazines such as Dwell had become fascinated with mid-century design and simplicity.
Selva remembered growing up in the San Francisco area in the 1960s, when two developers were leaving their imprint on California’s burgeoning housing market: Henry Doelger, whose functional row houses with unique designs “sold like crazy,” recalls Selva; and Joseph Eichler, whose “California Modern” designs featured open floor plans and big windows that let in lots of natural light.
Selva’s meshing of past and present ideas served as the inspirational touchstone for a new concept: Spaces, Shea’s series of contemporary houses that the Walnut, Calif.–based builder is currently marketing to Generation Y buyers with great success.
Shea launched Spaces in April 2009, and the homes built to its specifications have made a splash wherever they’re been introduced in California, Arizona, and Colorado. The concept is one of the industry’s innovations that were triggered by a grinding housing recession from which builders and developers are only now escaping.
Spaces began addressing a specific problem and ended up positioning the builder for future growth. Along the way associates, consultants, trades, and customers played leading roles or cameos in molding the idea into shape. “Sometimes, events occur through a convergence of different contributions,” says Howard Englander, who oversees architecture for Shea’s divisions.
Having decided to make a bold design statement, Selva retained Denver-based architect Michael Woodley and gave him three mandates: Any new concept had to be affordable, energy efficient, and “cool.” Even before he was hired, Woodley could see that buyers craved “a new aesthetic.” By that November, he devised the scaffolding for what, at the time, was called the Shea Smart Series.
Construction costs would be lowered through standardization, with only two window types and two kitchen widths. All bathrooms would be the same, with shower stalls but no tubs. Countertops would be laminate, secondary bedrooms smaller.
Spaces’ “cool” factor would include pendant lighting, Euro-style kitchens with oversize stainless steel sinks, 42-inch flat-screen TVs that replace fireplaces, and floating cabinets in the master bathrooms. The new series would also feature tankless water heaters, solar tubes that let natural light into rooms, radiant barriers, blow-in insulation, and plug-in outlets in garages for recharging electric or hybrid cars.
The pivotal component of Woodley’s concept was what Englander calls its “gigantic activity spaces.” Focus groups told Woodley they wanted flexible indoor living areas. So he created active spaces dubbed “Work,” “Watch,” “Eat,” “Chill,” and “Play.” Englander says this labeling helped keep the company focused on the fact “that we were striving to create a different capacity.” The nomenclature also led to the concept being renamed “Spaces.”
Don Anderson, whose consulting firm Color Design Art helped design Spaces’ interiors, did research that confirmed Woodley’s. The targeted buyers want homes “they can personalize easily,” he says. A state-of-the-art kitchen is a must, as is a media-centered living area. But plans must be flexible enough for people to use as their changing lifestyles dictate, with ample storage space and mobile furniture. (IKEA’s basic, adaptable product line became a model that Anderson thought Spaces might emulate.)
Spaces’ details got hammered out at a two-day charrette in December 2008 that included Selva, Englander, Woodley, Anderson, Shea’s purchasing vice president Robb Pigg; Martin Riell, who oversaw product development in Shea’s Arizona division; and Anjelina Barraza, its regional purchasing agent. Three house widths—35-, 40-, and 50-feet—and eight house plans per width emerged from that meeting.
Once the elevations were set, Englander, Selva, and Woodley pitched Spaces to all of Shea’s divisions. “We convinced them that this could only work as a corporate effort, and to help us make it happen,” says Englander. Unlike Shea’s active adult brand Trilogy, which has its own management team, the divisions participate in Spaces based on their available lot sizes.
Spaces homes range from 1,087 to 2,616 square feet, and are priced from roughly $180,000 to $350,000. Shea built its first Spaces homes in Corona, Calif., without its jazzier elevations because the lots there were in an existing master plan. Grand openings in Phoenix and Denver that showcased Spaces’ bolder elevations drew big crowds and enthusiastic press.
Englander says Sacramento, Calif., will be Spaces’ next market. And Shea intends to try out an attached version in Denver. Spaces is a brand, but in some markets only its interior design will be used. As Shea found out in Phoenix, where prices had bottomed by the time it introduced Spaces, the concept “doesn’t compete as well when people are looking for shelter,” says Selva, But Spaces is also “a universal-type home” that’s adaptable to wherever Shea builds. “It’s almost turnkey,” says Selva.
Anderson concedes that Spaces probably isn’t for everyone. “Some people love it, others want a more traditional house of which there’s plenty out there. But there’s nothing like this on the market.”
Dixon-Kirby Homes faced thesame dilemma as many other builders during the recession. As its margins shrank, “efficiency and economies of scale became more important to us,” recalls co-owner Mark Kirby. The Raleigh, N.C.–based custom builder, which in good times generated between $8 million and $15 million in revenue annually, saw its business erode to the point where it couldn’t afford its three superintendents who were earning $100,000 a year each. But without them, how could it build at the same velocity?
This is where trumpets should blare to announce technology riding to the rescue. Dixon-Kirby—whose homes sell for between $600,000 and $900,000, with a couple of $2 million and $3 million houses thrown in—was participating in an online purchasing program through its buying group Custom Builders USA. Then, about a year ago, the builder took advantage of another opportunity CBUSA offers and started e-mailing construction plans to Texas-based Estimates Unlimited, which does the builder’s takeoffs and loads them onto Dixon-Kirby’s page on CBUSA’s site.
“Companies like Dixon-Kirby now have access to technology that, in the past, was available only to the big guys,” says Mickey Armijo, Estimates Unlimited’s president, whose client base includes some of those big guys, such as David Weekley Homes and Toll Brothers.
Armijo says that while today’s houses are more customized and complex, too many builders are locked into one or two vendors per product category, which can put them at supply and pricing disadvantages. His company’s proprietary software allows builders to control their order quantities and costs by remitting bids to multiple suppliers. He pointed to one builder that had received an $80,000 quote from its regular supplier. By resubmitting that bid through Estimates Unlimited, the builder received a $72,000 quote. “They paid us only $800 or $900.”
Armijo says his program also protects builders from suppliers that pad their estimates. He recounts the story of a North Carolina builder that got a quote from its supplier for 44 roofing squares. Estimates Unlimited said the project needed only 35 squares. The builder ordered 37 and had 1.5 squares left over. “At $80 a square,” Armijo says, “you’re talking about a big difference.”
Right now, Dixon-Kirby submits bids for both its framing packages and trim through Estimates Unlimited. Kirby says it took two or three houses to get used to the system, which reaffirmed in his mind how the learning curve for using technology these days is a lot shorter than it used to be. “And the access is instantaneous,” he adds. Estimates Unlimited’s program is in sync with the builder’s data processing system, so order-entry errors are rare. Armijo notes, too, that the takeoffs his company delivers come with color-coded diagrams “so the framer knows exactly what to use where.”
In May, Dixon-Kirby took another step toward streamlining its construction processes when it bought its first 3G iPads. The company loaded its competitive pricing application onto the iPads, and is now placing and confirming orders, and alerting suppliers where the drop will be via e-mail.
Kirby is also using an application called iTeleport, which allows him to connect to his office desktop to access all of his plans, CAD drawings, and so forth. “I can grab a file, and, using Adobe Ideas [a digital sketchbook] circle a detail and send it to my designer or engineer, and then send back their answer to our framer or inspector.”
He found another useful application called Evernote, which lets him take notes in the field or during a meeting, and marry those notes to pictures and document scans, which he can transmit electronically. “I’m always on Apple’s app store, looking for productivity applications,” Kirby says. “If I can learn it in 30 minutes, I’ll use it; but if I don’t use it in two weeks, I delete it.
“This used to be dream stuff,” Kirby continues. “Now it’s crazy efficient. I never have to go back to the office, and the [time] savings are through the roof.” A 17-year industry veteran, he’s back in the field again, “and with this technology, I’m more enthusiastic about building homes than I have been in years.” Dixon-Kirby is building about the same number of houses with three people as it did four years ago with nine.
Kirby says technology has changed the way his company thinks about everything: “Our blueprints, how we build.” He and his partner were recently looking for a portable scanner to use in the field, but instead started using smartphones to take pictures, turn them into PDFs, put notes on them, and send them to trade partners or home buyers, which works just as well. Dixon-Kirby requires all of its lead trades to have smartphones. “I don’t want paper quotes anymore,” Kirby says.
He laughs when he recalls how Nextel communication devices were once the industry’s cutting-edge technology. “I came to hate Nextel because I kept getting interrupted. These new systems allow you to respond when you can, and you have records of everything.”
Kirby admits his company still has some catching up to do—“my website is old,” he quips. But he’s also convinced that technology was the life raft that kept his company afloat and will keep it buoyant. “Technology made me a better builder and has made our houses better. And when I see other builders carrying around eight-year-old cellphones, I know they’re dinosaurs and won’t be my competition in five years.”
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