The Reason Skyscrapers Might Soon Be Built Like iPhones

Modular construction and prefabrication have never really caught on in the US, but with rising housing and office costs pricing many people out of the places they want to live - and where employers would prefer to have them - less expensive and more productive technology-driven building manufacturing is gaining adherents. JL

Christopher Mims reports in the Wall Street Journal:

The world’s housing crisis has many causes, but there is a persistent one: productivity. Over 60 years, productivity in manufacturing has increased eightfold while remaining flat in construction. In consumer electronics, “design for manufacturability”—the reconfiguring of a device’s shape and function to make it cheaper to build—is standard. Technologists are reviving prefabrication and modular building, applying logistics and IT knowledge gained from building global supply chains. Cost savings from this type of construction are manifold.
The world’s housing crisis has many causes, but there is a stubbornly persistent one that we should have been able to solve by now: Productivity.
As prices of components and materials for pretty much every other physical object—cars, cellphones, clothing, etc.—have dropped precipitously, it still costs too much to build a building. Over the past 60 years, productivity in manufacturing has increased eightfold while remaining basically flat in construction, says Jan Mischke, a senior fellow at McKinsey Global Institute who specializes in infrastructure and housing.
Gadgets like iPhones, every one the same, benefit from economies of scale, but that’s harder to achieve with buildings, which must fit the sites they are constructed on.
As usual, technologists think they have a solution. They are reviving surprisingly old ideas in construction, including prefabrication and modular building. But don’t think “trailer park.” This time, they’re applying all the logistics and IT knowledge gained from building the global supply chains that deliver mobile devices, and all the automation pioneered by the automobile and other manufacturing industries. Yes, robots may be replacing more workers, but at least this should create more affordable housing.
Katerra, a construction startup, has raised $221 million at a valuation north of $1 billion, and it projects up to $500 million in revenue this year. It is, in some ways, the standard-bearer of this new, tech-focused wave of interest in building. The company currently has a single, 200,000-square-foot factory in Phoenix where it manufactures whole walls, including all the windows, insulation, electrical wiring and plumbing. Katerra uses an integrated, computer-aided design-and-manufacturing system that tells all the factory’s automated saws and routers how to produce all the buildings’ components. The same system connects to job-site cranes that lift and place the finished panels.
Katerra ships the walls to construction sites, where they’re snapped together like Lego bricks. The company’s goal is to build seven more factories within two years, each intended to serve a different geographic area. “That will cover the whole U.S.,” says Katerra’s chairman and founder, Michael Marks, who was previously chief executive of consumer electronics manufacturing giant Flextronics.
Construction is an industry worth more than $1 trillion a year, and Katerra has plenty of competition. A nearly identical process has been adopted by Baltimore startup Blueprint Robotics, Mr. Marks says. Both companies buy their robots and systems from manufacturers of construction robots based in Austria, Germany and Japan, where this kind of prefabricated construction is widespread, he says. Blueprint declined to comment for this piece.
Katerra is responsible for its buildings from design to final construction, which it says allows it to further cut costs. In consumer electronics, “design for manufacturability”—the reconfiguring of a device’s shape and function to make it cheaper to build—is standard. Another thing Katerra borrows from that industry: buying goods in bulk, direct from suppliers.
Some startups are also constructing whole rooms, which can then be stacked atop one another. Google recently announced it placed an order with Factory OS, the startup’s first order, for 300 units of housing for employees. Factory OS Chief Executive Rick Holliday says a previous project built with modular construction saved $105,000 per unit in construction costs, which translated to $700 a month less in rent per unit. Google has said modular construction is also more environmentally friendly, leading to less waste.
The tallest modular high-rise ever built was completed in the Prospect Heights section of Brooklyn in November 2016 by Forest City Ratner Cos. A conventional builder that has explored prefab methods, the company created a factory in the Brooklyn Navy Yard. At the project’s busiest, upward of 200 people were constructing and finishing individual “mods”—three for every one-bedroom apartment, says Bob Sanna, executive vice president of construction at Forest City.
Though successful, the project illustrates some growing pains of the new methods. Forest City had joined with construction giant Skanska on the modular factory, but that relationship ended, after delays in completing the high-rise, in a dispute.
It shouldn’t surprise anyone that traditional companies are testing prefabricated and modular construction, especially with complicated parts of buildings like bathrooms and staircases. The cost savings from this type of construction are manifold, including less site supervision, easier inspections and lower labor costs, since it’s easier to build things in a factory than on a job site, says Mr. Sanna. To save on labor costs, some companies have even gone so far as to outsource construction of modules to other countries, like Poland.
History is littered with architects’ experimental modular building projects, from Frank Lloyd Wright’s Usonian homes to the Palacio Del Rio hotel in San Antonio, erected in record time to be ready for the 1968 World’s Fair. So why isn’t it mainstream by now?
The consensus of those I spoke with, both providers and customers, is that the biggest barrier to modular construction is mindset. Construction is a conservative industry where old habits die hard. In Europe and Asia, modular construction is far more popular than in the U.S., where it represents less than 3% of new building, says Tom Hardiman, executive director of the Modular Building Institute.
Modular construction is also far more sensitive to demand. For a building factory to be profitable, says McKinsey’s Mr. Mischke, there must be a need for 3,000 to 5,000 new units of prefabricated housing a year within two hours’ shipping distance from the factory. In the U.S., aging millennials mean there is plenty of demand for housing. But much of it is in cities, where factors such as scarcity of land trump all else and have limited the market for modular construction. Homes, after all, aren’t like cellphones. We can’t just stick the old ones in a drawer when the latest model comes out.