Backyard shed startup sales boom amid pandemic

Jeremy Nova, Studio Shed Co-Founder and Creative Director joins the Yahoo Finance Live panel to discuss how Studio Shed seeing a 150% increase in sales since the start of the pandemic and is expanding into Canada.

Video transcript

- Welcome back to Yahoo! Finance Live. In today's startup spotlight, a check back in with the company we profiled that was seeing a lot of business earlier in the pandemic, and that business has continued. That business would be Studio Shed, a company that's been helping people build out units in their backyard or spare space here to build out guestrooms.

Of course, everyone needed a little bit more space in the pandemic, but that growth is continuing. And for more on that, I want to bring on Jeremy Nova. The co-founder and creative director of Studio Shed joins us now. And Jeremy, I mean, when we first talked about this kind of idea, it made a lot of sense early in the pandemic. But talk to me about what you're seeing now, as maybe people even return to the office, how your business has held up.

JEREMY NOVA: Yeah, thanks for having me. We have seen continued growth through the end of last year and then into this year on both the single room studio side, which is, you know, the people using a home office or just a small creative space, and then also on our larger units-- so accessory dwelling units, things that have like a bathroom and a kitchen. They have a longer purchase consideration. And so a lot of the interest that was generated, I think, in the raised awareness of this category last year is really coming to fruition for us. That product line is growing at about 200% a year right now.

- How much of those homes that you're building out-- or the ADUs, we you should say, are for self use by the homeowner, and how much of it is actually being rented out? We've heard so much about prefab homes really taking off in some cities where there is a housing crunch.

JEREMY NOVA: Yeah, it's both. You know, we're seeing the majority are homeowners that are doing it at their own primary residence, but there's a variety of use cases that make a lot of sense. People need space both for themselves, for guests.

You know, they're perfect for multigenerational living, a safe place for parents to live. But the rental aspect is also large and growing. The ROI on building a unit like that is quite compelling. I spoke to a few customers ahead of this interview, and you're generally able to cover the finance cost of the unit from day one and then turn that into sustainable source of rental income over time.

Further, we're seeing people that have sold their homes with one of our units in the back. The appraised value of that space is typically about 1 and 1/2 times the retail price of the unit. So it's one of the best home improvement projects from an ROI perspective that a homeowner can undertake on their property.

- Yeah, that's an interesting, I guess, way to go about it if people are looking to get additional income and staying in their home if they got a big back yard to put to work here. But when you talk about maybe the cost of all of these things too-- we've talked about home costs rising, input costs rising. What have you seen on the front that may have changed, I guess, some of the math behind people looking to add these?

JEREMY NOVA: Yeah, you know, we've been able to do a pretty good job of not having to raise prices in the face of, you know, a lot of the commodity increases that we've seen. You know, we've been able to stay ahead of that, work creatively with our own supply chain. But I think you get a good point about the these units as a solution to housing pressure.

We're seeing that in a lot of our, you know, most popular communities. We see this as a real solution to a lot of the housing crisis issues where, you know, communities are embracing this type of structure as a lower pressure way to alleviate, you know, some of those housing issues compared to multifamily infill. It's a gentler way to increase housing density, to get more people into communities. And so it's a-- you know, it's a really exciting thing to be a part of on that level.

- And Jeremy, what does the growth trajectory look like for the company right now? We talked so much over the last 18 months or so about so many homeowners spending money on home improvement. It feels like that's kind of slowing down because people are getting outside of their homes. What have you seen over the last several months in terms of the ability for that kind of growth that we saw last year to be able to continue?

JEREMY NOVA: Yeah, it's a great question. You know, we are seeing continued growth, and we're obviously mindful of some of the things that you just mentioned. I think that one of the things from last year is, you know, we've been involved in this business for about 13 years now. And last year really was just an acceleration of a lot of trends that were already in place.

And you're seeing a lot of companies embrace work from home on a more permanent basis. There are a lot of companies that are going to allow, you know, at least full to part time remote work going forward indefinitely. And so we don't see that trend necessarily slowing down.

I think a lot of people, you know, spending all that time in their homes over the course of the last year have really re-evaluated the needs, you know, how to make their home work better for them. And that's what we're hearing from our customers. And you know, we're seeing really a continued strong growth on the heels of last year.

- Yeah, and around $20,000 for some of those studios I'm looking at here-- not terribly high for maybe someone looking to venture into it. Very interesting option out there. But Jeremy Nova, appreciate you coming back on. Studio Shed co-founder, creative director, thanks for the update there. Be well.