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Warren Buffett is launching a new business venture that could shake things up in the building industry. A Berkshire Hathaway-owned construction company has teamed up with a New York City architect on a new way to make modular mainstream. The plan is based on a way to make the modules more transportable and keep local contractors and workers involved.

First reported by the Wall Street Journal, the initiative launched last week between tech-construction company MiTek and Architect Danny Forster. (1) They started working on this initiative about a year ago with backing from Berkshire Hathaway. The investment is reportedly worth millions of dollars.

Modular Units Would be Collapsible

The modular units would be made of steel boxes that can be attached to and stacked onto other units. But unlike the bulky building blocks of other modular construction projects, these will be made to \u201cfold\u201d so they can be transported more easily. As reported by Fast Company: \u201cInstead of large steel boxes that have to be carefully routed under bridges and overpasses on the back of a truck, MiTek\u2019s collapsible modules fold flat, easing transportation to job sites.\u201d (2)

The folded shells will then be shipped to warehouses close to the building sites. The rest of the \u201cpre-assembly\u201d can take place at those locations before they are moved to the jobsite. That one change is significant because it means these collapsible modules can be shipped more economically at a much greater distance from the factory. Transportation costs are something that have apparently held other modular companies from growing.

Pre-Assembly Finished at Local Level

Also, by doing much of the assembly at the local warehouse, with local employees, there\u2019s less chance of a push back from labor unions and local officials who can say yay or nay to a project. Forster told Fast Company he\u2019s run smack into a solid steel wall when it comes to getting approval for a project that sidesteps the labor unions. He says: \u201cThe unions have told us very clearly there\u2019s no way in hell you\u2019re shipping in a building from offshore or even from out of state. They\u2019ve said if it\u2019s not 40 miles from the job site and local labor\u2019s not participating, it\u2019s not happening in downtown San Francisco.\u201d

That project is still in the process of getting city approval, but it appears that it may be in line for MiTek\u2019s new collapsible modules. They will be initially built at a 250,000-square foot factory in Lebanon, Pennsylvania, and shipped from there to construction sites. General contractors will be hired to get them fully built at the local level. But the modules will be designed to make it faster and easier to do the finish work from pipes and electrical wiring to windows and doors.

Two Prototypes Already Built

The MiTek team has already built two prototype \u201crooms\u201d that could be used for a hotel project. MiTek\u2019s Todd Ullom says: \u201cWe took the plumbing process from 16 labor hours down to 4 hours and 10 minutes. We\u2019re trying to create the NASCAR pit crew for construction.\u201d

Making the process more efficient is a challenge when it comes to negotiating with a contractor, because it means fewer hours for workers. Ullom feels it will take some time for this process to gain acceptance. He says the company will be spending the rest of the year fine-tuning the process, and hopes to begin module production in 2022.

But it isn\u2019t just the manufacturing process that needs tweaking. There\u2019s a lot of work to be done talking to contractors who need convincing, and local officials who control the permitting and inspecting of projects. MiTek is reportedly in high-level talks with two national builders, but there\u2019s no word on which ones.

A Better, More Efficient Process

The goal is to bring down construction costs and speed up the building process. Forster told Architectural Digest that there needs to be a \u201cbetter, more efficient process\u201d but so far, modular construction has only realized limited adoption. (3) The challenge is to get a large number of stakeholders on board including insurance companies, designers, developers, investors, lenders, materials testing people and others. He says: \u201cI\u2019ve spent a lot of years on this bumpy ride and right now we\u2019re trying to fix potholes before we start chasing business.

He says MiTek will build modular rooms for hotels and apartment buildings, including senior living and affordable housing. He rejects the idea that their modular concept will lead to cookie-cutter buildings. He says they are creating a \u201csystem for architecture\u201d and not an \u201coff-the-shelf box\u201d that will appear all over America.

He says they are working on getting this right, and are not in a rush to get this to market. He says: \u201cThis probably comes from Mr. Buffett. Not a lot of companies can say I\u2019m taking a 10-year look at this.\u201d

If you\u2019d like to read more about the MiTek Modular Initiative, you\u2019ll find links in the show notes at NewsForInvestors.com

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Links:

https://www.wsj.com/articles/warren-buffett-to-offer-a-new-spin-on-modular-construction-11621339201

https://www.fastcompany.com/90637837/how-a-berkshire-hathaway-company-is-quietly-planning-to-disrupt-the-construction-industry

https://www.architecturaldigest.com/story/warren-buffett-offer-fresh-approach-modular-construction