Sekisui House, a leading Japanese homebuilder, is steadily expanding its presence in the U.S. home construction market, injecting significant investment and innovative approaches to a sector grappling with surging demand.
Last January, Sekisui House acquired Colorado-based MDC Holdings, a major U.S. homebuilder known for its Richmond American Homes brand, in a $5 billion cash transaction.
Sekisui House's U.S. portfolio also includes subsidiaries such as Woodside Homes, Holt Homes, Chesmar Homes and Hubble Homes. Collectively, these subsidiaries project an annual construction output of 15,000 new homes across 16 states, according to Realtor.com.
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The MDC acquisition elevates Sekisui House to the fifth-largest homebuilder in the United States by units, according to 2023 completion data from ProBuilder, a leading industry publication.
While still trailing major players like Lennar and D.R. Horton, Sekisui House's strategic expansion has solidified its position as a significant force in the U.S. market.
In Japan, Sekisui House is renowned for its high-end customer homes and is the second-largest builder by revenue.
However, with Japan's housing market experiencing a slowdown because of an aging and declining population, the company has shifted its focus to the American market to pursue growth opportunities.
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Yoshihiro Nakai, the company’s CEO, said the MDC acquisition is a significant advancement of Sekisui House's strategy to expand in the U.S. and bring the unique value of its philosophies and technology to the American homebuilding market.
"We believe that we can become a one-of-a-kind entity in the U.S. by combining Japanese and U.S. technologies and, above all, sharing our passion for providing quality housing," Nakai said.
Sekisui House will launch its largest overseas training program as soon as this month. It will send a team of 20 experts to the U.S. to train local contractors, including carpenters. The initiative aims to address the acute labor shortage plaguing the U.S. homebuilding industry, where the National Association of Home Builders estimates a shortfall of 1.5 million housing units.
In Japan, construction projects often require significantly fewer workers than in the U.S. This efficiency stems partly from the multidisciplinary nature of Japanese construction workers, who are trained in a wide range of skills.
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A 2017 Financial Times analysis revealed that the average Japanese construction worker's productivity surpasses that of their U.S. counterparts by about 37% in terms of new homes built annually.
Sekisui House is exploring ways to integrate elements of the multidisciplinary approach into its U.S. operations through the training program, with the goal of enhancing efficiency and productivity within the American construction workforce.
It remains to be seen whether the Japanese approach to homebuilding can be effectively adapted to the U.S. Factors such as stringent regulation and established work union rules may present obstacles.
"Sekisui will face the same fundamental challenges that other U.S. builders are facing, namely high input costs (like land, labor and lumber), regulatory hurdles and weakened buyer demand in the current environment of high mortgage rates," Realtor.com Senior Economist Joel Berner said.
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Berner said Sekisui House may also have several key advantages in the U.S. market, including lower borrowing costs compared to American builders, enabling the company to offer more competitive pricing and a distinct product offering that may appeal to a unique segment of homebuyers.
For now, Sekisui House maintains the existing brands and construction methods of its U.S. subsidiaries. However, the company plans to gradually introduce new offerings, exploring the U.S. market's receptiveness to homes incorporating Japanese design and technology.
According to Nikkei Asia, Sekisui House aims to construct 20,000 homes in the U.S. by January 2032. A significant portion of this goal — 3,000 units — is projected to be comprised of Shawood houses, which embody the company's signature Japanese-style wood home designs that prioritize environmental adaptability.
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The MDC acquisition underscores Sekisui House's commitment to expanding its U.S. operations and investment. The strategic focus is evident in the company's financial performance, with overseas sales experiencing significant growth.
For the first nine months of 2024, Sekisui House reported about $5 million in overseas revenue, a 156% increase compared to the previous year. The overseas revenue stream now accounts for about 30% of the company's total revenue, a significant rise from the 15% share last year.
"It's always great to see increased investment in homebuilding in the United States," Berner said. "The housing supply gap is one of the most important domestic issues of our time and if we're serious about providing safe, affordable, sustainable places for American families to live, then we invite Sekisui House to show us what it can do."
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