Japanese company Sekisui House quietly becomes America’s fifth largest homebuilder

Leading Japanese homebuilder Sekisui House is quietly expanding operations in the US, bringing new investment and innovation to a homebuilding sector that is racing to keep pace with demand.

Last January, Sekisui House bought major US homebuilder MDC Holdings, which builds single-family homes under the name Richmond American Homes, in a $5 billion cash deal.

Sekisui House also owns US subsidiaries Woodside Homes, Holt Homes, Chesmar Homes and Hubble Homes. Together, the company estimates those branches will deliver 15,000 new homes each year in 16 states.

That would make Sekisui House the fifth-largest builder in the United States by units, based on 2023 completion statistics compiled by trade publication ProBuilder. While Sekisui House’s construction statistics lag far behind larger US builders such as Lennar and DR Horton, the company’s steady expansion has made it a significant player in the US market.

In Japan, Sekisui House is a high-end builder focused on custom homes and No. 2 builders according to income. But with Japan’s housing market slowing due to a rapidly aging and shrinking population, the company has turned to America to expand its growth opportunities.

CEO of Sekisui House Yoshihiro Nakai said last year that the acquisition of MDC “marks a significant advancement of our strategy to expand in the US and bring the value of our homebuilding philosophies and technology to the US.”

He added, “We believe we can become a distinct entity in the US by combining Japanese and American technologies and, above all, sharing our passion for providing quality housing.”

Sekisui House plans to train US construction workers in new skills

Just this month, Sekisui House plans to send a team of 20 experts to the US to begin training local contractors such as carpenters, marking the company’s largest overseas training program to date.

The company hopes the new training program will help it deal with the labor shortage that has plagued the U.S. homebuilding industry. The National Association of Home Builders says the country needs thousands of young, skilled construction workers to address a housing shortage of about 1.5 million units.

In Japan, houses are typically built with far fewer workers than in the US, in part because Japanese construction workers are multidisciplinary and trained in a variety of key tasks. A Financial Times analysis from 2017 found that the average Japanese construction worker produces about 37% more new homes each year than the average US construction worker.

Now, Sekisui House is exploring how it can bring elements of the multidisciplinary approach of construction workers to the US through its new training program.

“Homebuilders can compete for labor, so having multi-skilled workers is one of the initiatives we want to consider the most,” Nakai said, according to Japanese news outlet Nikkei Asia.

However, it remains to be seen whether the Japanese approach to home building will translate to the US, where builders are constrained by a host of regulations and union rules often strictly outline which tasks should be performed only by members.

“Sekisui will face the same fundamental challenges that other U.S. builders are facing, namely high input costs (such as land, labor and lumber), regulatory hurdles and weakened buyer demand in the current interest rate environment. high mortgage rates,” says the Realtor. .com Senior Economist Joel Berner.

“Sekisui may also have several advantages, from a lower cost of capital than US builders that allows them to keep prices competitive, to a differentiated product from US builders that can attract buyers,” he adds. “Another opportunity for Sekisui to flex its financial muscle as a large international company could be to offer preferred financing directly to home buyers in the form of subprime or below-market mortgage rate purchases. €

Will Americans Embrace Japanese Home Design?

For now, Sekisui House continues to operate its US subsidiaries under their original brands, offering homes built in the same style and with the same methods as in the past.

But over time, the company plans to add new offerings and test the U.S. appetite for homes built with Japanese technology and design influences.

According to Nikkei Asia, Sekisui House expects to build 20,000 units in the U.S. in the year ending January 2032, and hopes its Shawood line of Japanese-style log homes will account for 3,000 of them.

The Shawood home line adjusts the home’s structure to its local environment and climate, controlling sunlight and air flow to reduce heating and cooling costs. The homes also focus on using advanced insulation material and “hermetic” construction methods to increase energy efficiency.

However, Shawood houses use framing techniques that require joinery precision down to the millimeter. This level of precision will require special training, and it remains to be seen whether construction workers in the US will embrace the new training and techniques required for the Shawood line.

Regardless, the MDC acquisition signals that Sekisui House is serious about expanding and investing in the US market, which the company’s financial results show is a fast-growing part of its total business.

For the first nine months of 2024, Sekisui House reported about $5 million in overseas sales revenue. That was up 156% from a year ago and accounted for about 30% of the company’s total revenue, up from just 15% of the stock last year.

“It’s always good to see increased investment in homebuilding in the United States,” says Berner. The housing supply gap is one of the most pressing domestic issues of our time, and if we’re serious about providing safe, affordable, and sustainable places for American families to live, then we invite Sekisui House to show us that what can so.â€