Offsite Building Faces Scalability Hurdles As Builders First Source Expands

Offsite construction is often hailed as the panacea for housing shortages and labor constraints. In practice, it faces the realities of a cyclical, regional business. Builders who buy these companies outright often end up tying capital to rigid factories that can’t flex with demand.

Recent experiences at PulteGroup and Veev make this clear. Why is Builders FirstSource increasing its offsite exposure?

Scalability challenge

Offsite manufacturing depends on utilization. Factories carry heavy fixed costs. They have equipment, land, automation, and specialized labor, whether orders come in or not. Most factories struggle to stay above 70–80%, and anything below that quickly turns red.

In the meantime, homebuilding is seasonal, sensitive to interest rates, and neighborhood-specific. It is the farthest thing from stable.

When demand softens, idle capacity piles up fast. Unlike site labor, which can scale up or down job by job, a factory bleeds cash when it’s not running at full capacity. Supply chain disruptions and raw material price swings ratchet up the risk, because factory schedules don’t bend easily when deliveries slip or specs change. Then there’s logistics. Moving oversized modules requires special trucks, permits, and routes. In urban or highly regulated markets, those costs climb quickly. Weather exposure, damage in transit, and staging delays add another layer of risk that doesn’t exist with stick-built work staged on site.

Codes are another drag.

Building regulations vary from city to city and county to county. Every tweak undermines standardization, the whole point of off-site in the first place. Factories end up over-customizing to satisfy builders, killing throughput and margins. Even heavy automation often devolves into manual work under a roof, without the flexibility crews have in the field.

PulteGroup’s exit

PulteGroup acquired Innovative Construction Group in 2020 to learn about and integrate offsite framing panels and shells, with the aim of mitigating labor shortages in markets such as Jacksonville. The operation worked mechanically.

Unfortunately, it was not financially viable. By Q4 2025, Pulte announced it was divesting certain manufacturing assets, taking an $81 million pre-tax charge as it refocused on its core homebuilding business, which generated $16.7 billion in revenue that year. CEO Ryan Marshall was blunt, saying fixed factory costs don’t play well with volatile housing cycles.

Integration proved harder than expected. Factory components didn’t always align cleanly with field conditions, creating coordination issues, callbacks, and delays. The paper savings were eaten up by managing the handoff between the factory and the job site.

Pulte’s takeaway was simple: benefit from supplier innovation without owning the factory. That keeps the balance sheet free for land, where Pulte invested $5.2 billion in 2025 alone.

Veev’s collapse

In 2024, after burning through $600 million in venture capital, Veev collapsed, and its assets were acquired by Lennar. That wasn’t bad luck. It was a business model colliding with how housing actually works.

Veev sold its backers on a “plug-and-play” modular vision, first in California multifamily and later in single-family homes. The pivot didn’t hold. Custom requests, regional code friction, and uneven demand crushed utilization. Layoffs began in 2022. Land purchases and factory overhead piled debt on debt. By 2024, funding dried up, and the company entered an assignment for creditors, with Lennar acquiring pieces of the IP.

Veev stands as a textbook example of a first-generation failure. Venture capital chased scale before demand was proven. Construction isn’t software. It’s project-driven, regional, and unforgiving of idle capacity. Without a guaranteed pipeline, factory economics break down quickly.

Why homebuilder acquisitions backfire

Buying an offsite manufacturer locks a builder into a capital-intensive model that clashes with how production builders typically make money. Homebuilding is about land velocity and optionality. Factories are about fixed overhead and depreciation.

During downturns, those fixed costs hurt. Unsold modules are stored, suffer damage, or tend to require rework. Insurance, warranty exposure, and legal questions around title transfer and code compliance add friction.

Texas homebuilders, especially mid-sized regional operators in markets such as Dallas, see this clearly. They prefer proven trade networks and on-site control. Even national builders are learning that they derive most of the benefit from outsourcing components rather than owning the factory.

Misaligned models

Off-site manufacturing can thrive only with repetition, standardization, and long lead times. U.S. single-family housing is the opposite, characterized by fragmented codes, buyer-driven customization, and fast cycle times. That mismatch does not seem likely to change any time soon.

Despite the hype, offsite construction still accounts for less than 5% of the market. Climate regulations, tariffs, and transportation costs continue to compress margins. Without coordinated code reform and procurement standards, factories remain niche tools rather than systemwide solutions.

What works in the factory

I’m a fan of offsite, just not as the backbone of production homebuilding. I believe that for homebuilders, panels, trusses, and select components sourced from specialized suppliers can improve precision and reduce waste. Factories have their value.

That said, I believe that for Texas developers, the smarter bet is still land that is zoned, entitled, and positioned for growth. The ROI on developing land is higher, and the risk is lower than owning factories that require optimal conditions to survive.

Hybrid approaches make sense. Panels offsite. Finishes onsite. Keep flexibility where it matters. At the end of the day, offsite construction cannot support the scale of production builders need.

Consider DFW: a best-case factory might produce 1,500 units per year. Lennar and D.R. Horton each build 8,000 homes annually in a single market. A partial solution cannot solve a full-scale problem.

Builders FirstSource jumps in deeper

Builders FirstSource isn’t buying offsite construction because it’s fashionable. They’re buying it because it works. Over the past few years, the company has acquired truss, wall panel, and millwork operations to expand its value-added manufacturing base.

The 2026 purchase of Premium Building Components in New York and the 2025 acquisitions of Builder’s Door & Trim and Rystin Construction in Las Vegas, with roughly $48 million in trailing revenue, are classic bolt-ons. They add controlled production of trusses, wall panels, and millwork, which can be manufactured and delivered more reliably than stick-built materials managed in the field.

The strategy is simple and disciplined. Commodity distribution is a low-margin, high-volatility business. Prefabricated components offer higher margins, bring builders into the construction cycle earlier, and reduce exposure to jobsite labor shortages. That’s the backbone of Builders FirstSource’s READY-FRAME® system. It shifts labor from the jobsite to the factory, bundling framing, supply, and coordination into a single offering builders can count on.

These deals also strengthen Builders FirstSource in fast-growing markets where execution matters more than marketing. Texas is chief among them. Builders want fewer delays, fewer idle crews, and fewer surprises.

By owning more of the manufacturing stack, Builders FirstSource can offer speed, predictability, and scale while capturing more value per home.

It’s not a reinvention of homebuilding. It’s a clear-eyed move to control the parts of the process that still make money, and that’s solid Texas business logic.