Using Tech, Design, and Supply Chain, Katerra Offers a New Building Model

Katerra is a Silicon Valley startup founded in 2015 that isn’t merely a disrupter to the traditional construction process of bidding, hiring trades, and project management. It’s a vertically integrated business model that both sources and makes its own construction materials and finished products. Katerra manufactures building components at an off-site factory in Phoenix, designs blueprints, and oversees logistics and on-site construction in real time with data warehouse technology.

Currently the company’s one-stop-shopping supply chain is focused on multifamily housing and it recently boasted about its ability to offer fixed prices up front per project without contingency fees, as tight supplies and trade tariffs raise the cost of lumber, steel, and other building materials. Katerra booked more than $1.3 billion in business last year and attracted more than $800 million in financing.

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Trevor Schick leads Katerra’s materials organization—supply chain, lighting renovation, and commercial rollouts. His background is heavy with procurement experience in the just-in-time delivery world of electronics, with stints at Hewlett-Packard, Motorola Mo­bility, Apple, and Sun Microsystems.

Q: What is it about Katerra’s system that offers more savings/efficiency compared with traditional modular or off-site construction?

A: Katerra is a construction technology and services company focused on optimizing the way buildings are designed and built. We apply holistic systems approaches to remove unnecessary time and costs from building design and construction. The services we offer include: architecture and engineering, interior design, materials supply, general contracting and construction management, labor management, renovation for affordable and market rate multi-unit housing, and commercial construction.

The changes we are making in our construction practices and processes are designed to address multiple financial, scheduling, and management concerns surrounding building construction. Our design approach combines product standardization with customization. This provides the efficiency of manufacturing without sacrificing design freedom. Through our global supply chain of curated, high-quality products, we eliminate middlemen, passing savings directly to our clients.

We also integrate BIM [building information modeling] tools and computational design with our global supply chain infrastructure, so plans go directly from design to the factory floor and construction site. Materials and products arrive at our construction sites just in time and ready to install. As a result, the activity at a Katerra construction site more closely resembles a process of precision-sequenced product assembly than traditional construction.

Q: Katerra has several projects under its belt. Is the company still fighting the perception that prefab builders make cheap buildings, or are you seeing more acceptance from general contractors/developers for off-site/prefab construction?

A: Since our founding in 2015, Katerra has grown rapidly. We currently have more than 250 projects—37 new-build and 215 renovations—under construction and more than $1.3 billion in bookings for new construction spanning the multifamily and student and senior housing and hospitality sectors.

Katerra’s method of construction avoids the problems and negative perceptions the industry once faced by strictly adhering to quality-control procedures. We construct building panels/components of the buildings inside the factory, but not entire rooms or modules. The cost savings in shipping the panels to the site are better than modules or units and allow for differentiation in the final products.

We are also rethinking the entire process from end to end, using technology to modernize it wherever possible. Additionally, we recently launched a design consortium made up of individuals from four award-winning design firms including Michael Green Architecture, Lake | Flato, Lord Aeck Sargent, and Leers Weinzapfel Associates. Katerra closely collaborates with this consortium to regularly receive feedback as we develop and expand our portfolio of products and design tools. As a result, Katerra’s ability to deliver high quality buildings in less time and at lower costs is unparalleled.

Developers and end consumers are quick to appreciate the benefits of our approach. By standardizing structural building components, we have more time to focus on what matters most to our customers – customizing a building’s design and interior finishes.

Q: Katerra is advertising a lot of job openings for the trades. How is the company’s recruiting faring in a market with a tight supply of skilled labor and what are some of the novel ways onsite managers are working with crews?

A: Since 2015, we have built a global team of more than 1,500 employees with supply chain, manufacturing, engineering, design, software, and construction expertise. One way we have expanded our team is through strategic acquisitions. For example, we recently announced that Fields Construction Company, one of the Northeast’s leading construction management firms, joined Katerra. Fields, which will become known as Katerra, will employ our vertically integrated model of design, material supply, manufacturing, logistics, and assembly to better serve its roster of real estate developer clients along the East Coast.

As we recruit for our skilled labor positions, we’re finding that Katerra’s mission to transform the construction industry really resonates with prospective employees. Candidates are drawn to Katerra because of the unique ways in which we are integrating technology. We offer competitive salaries with benefits and prioritize professional development for our employees. This includes encouraging borderless career opportunities where employees can pursue professional interests, even if they are outside of the scope of the role for which they were hired. We also offer specialized training and certification opportunities for our skilled labor employees to learn other roles.

Q: What has the company learned since it first launched in 2015?

A: When Katerra was founded we first focused on optimizing the supply chain. For example, we acquired an LED lighting manufacturer and proprietary cabinet component sets to significantly reduce our base cost of components. However, we quickly recognized that to achieve even greater cost reductions, further accelerate project delivery and reduce waste and risk, we needed to expand beyond the supply chain and become vertically integrated. To achieve this, we grounded our approach in an end-to-end software solution that encompasses site selection and configuration, building design, optimization for manufacturing, price quoting and project tracking from concept through to completion. Automating these functions as well as financial modeling and zoning and building code compliance – most of which are manual today – have unlocked new opportunities for speed, collaboration and assurance for all parties.

Q: What’s next for Katerra?

A: Our near-term priorities include delivering on our $1.3 billion project pipeline, bringing our Spokane cross-laminated timber factory online in early 2019, and continuing to build out additional domestic factories like the one in Phoenix where we fabricate building components. Additionally, we will continue to expand and improve Katerra’s technology platform and improve efficiencies throughout our vertically integrated model.