Have you ever wondered why houses and buildings aren't constructed in a more efficient manner, more like a car assembly line maybe? If so, you're not alone. Many companies have tried to automate the building process, or at least some of it, but so far none have gotten it right. Another company, this one bought by Berkshire Hathaway in 2001, called MiTek, might be the one to get it done. Being associated with Warren Buffett doesn't hurt.
A new modular building venture between MiTek and famous New York City architectural consortium Danny Forster & Architecture aims to somewhat automate the building process. MiTek will provide manufactured building parts that will then be used by an end receiver to put together those parts -- kind of what we do when shopping at IKEA -- but to build hotels and apartment buildings.
If you barely trust yourself to put together an IKEA sofa, you might be skeptical about this idea. But MiTek has that covered. Not just anyone will be putting together these MiTek specially manufactured parts. Only general contractors (GCs) will be able to do this job for the hotels and apartment buildings these parts will become.
The plan is for MiTek to ship parts to a construction site. A GC will put the parts together, creating a module, and then the modules will be stacked atop each other.
An ambitious example of this is the 26-story AC NoMad Hotel by Marriott project. This hotel is to be constructed using modules prefabricated in Poland. Also a Danny Forster & Architecture venture, this AC NoMad project started in 2018, and this type of build, in theory, is supposed to take as little as 90 days. The AC NoMad was slated to be completed by 2020, so about a two-year timeline. However, it's still not complete at the time of this writing, mid-2021.
About modular construction
Modular construction has been used for a while now. It's the process of building off-site in a factory and then shipping what's been built to the site. Modular buildings can be temporary and relocatable like for schools, construction site sales offices, and medical clinics. Or they can be permanent, like homes, hotels, and apartment and office buildings.
Trouble getting this industry off the ground (so to speak)
Modular construction for large buildings struggles to be profitable. It's not exactly easy or cheap to transport entire rooms anywhere, not to mention across the country and especially across different countries. And just like a replaced window can leak, the same can happen with modular pod placement. In other words, not all the kinks have been ironed out.
Another failed attempt involves a startup called Katerra, in which many investors had high hopes. Katerra tried to break into this market, but its business model just didn't work. SoftBank Group (the same operation that invested in WeWork) tried to rescue Katerra, but Katerra ended up biting the dust, shutting down operations on June 1.
The company that captured the interest of Warren Buffett 20 years ago, MiTek, headquartered in Chesterfield Missouri, was, according to a press release issued at the time of acquisition, "The world's leading provider of steel connector products, design engineering software, and ancillary services for the global building components market." Warren Buffet, as usual, had great foresight on what sorts of products would be desirable in the future.
Today MiTek employs over 6,000 people. The company sells building components, construction software, and engineering services. This new module venture MiTek's entering into will cost the company tens of millions of dollars. Work is expected to begin early 2022.
The Millionacres bottom line
Modular construction is intriguing to many people. Although there are troubles in regard to making the industry faster and more efficient than the current way of doing business, modular construction makes sense. The key is finding the right set of ingredients to make it work well. Let's watch this new idea from MiTek. It's a Warren Buffett Berkshire Hathaway company, after all.