Warren Buffett targets commercial modular construction

Warren Buffett is forging further into modular construction, leveraging the Berkshire Hathaway-owned MiTek engineered building products and construction software firm to launch a hybrid offsite-on site building model targeted at hospitality, health care, education and multifamily construction.

In a release, Chesterfield, Missouri-based MiTek announced a partnership with New York-based, modular-focused Danny Forster & Architecture to ship sub-assembly components to jobsites, where contractors would follow simplified instructions and use the firm's software to put them together.

"Modular has such clear advantages, but for your average commercial builder, the risks are too high and the learning curve is too steep," DF&A principal Danny Forster, who designed New York's planned 26-story AC by Marriott, which will be the tallest modular hotel in the world if built, said in the statement. "Our activation platform will change that."

The model, which is similar to the flat-packing and shipping of consumer products that are then assembled by the end user, would solve one of modular's biggest challenges — the transportation of factory-built units to jobsites where they are stacked together. Transportation is expensive, and hauling regulations around wide loads limit the design parameters of the buildings.

Other modular firms have tried the flat-pack method before, notably Katerra. While the firm had been ambitious in its own attempts to disrupt global construction by bringing more aspects of a commercial building project under its purview, it has since filed for Chapter 11, after a $200 million bailout earlier this year by its main backer, Japan's Softbank, couldn't keep the company solvent. The most recent investment followed $2 billion in earlier funding from the Japanese investment fund.

And there are other challenges to modular building in what is still largely an on site industry.

While in-factory modular building methods seemed a no-brainer solution to COVID-19's onsite construction challenges, the demand for permanent modular structures didn't materialize as expected during the pandemic. That caused some firms, such as Chicago-based Skender Manufacturing, to close their doors.

But this also isn't Buffett's first foray into modular construction.  

Clayton Homes, once viewed as a low-brow manufactured housing company, was acquired by Berkshire Hathaway in 2003, and under its stewardship evolved to be named Builder of the Year by Builder magazine in 2019, putting single-family home builders on notice that some mix of offsite and onsite construction was the future of that industry.

According to the Wall Street Journal, MiTek will invest tens of millions of dollars in the venture with DF&A, with its first projects coming online next year. General contractors would build rooms out of pre-packaged parts, which would include a steel cage to act as a structural frame, in a warehouse close to the jobsite to cut out long-haul transportation costs.

The firm plans to leverage its experience manufacturing trusses and construction fasteners to make its components more efficiently in its 225,000 square-foot factory, while using its in-house software to give contractors an edge onsite. 

Original Link: Construction Dive

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