DIRTT Wants Office Renovators to Outsource Floors and Walls

The call that would rattle any small manufacturer came at 7 in the morning on a Monday in 2008. The truck scheduled to deliver a $25,000 order for customized glass office walls to the Bill and Melinda Gates Foundation in Seattle had been stolen.

Minutes later, DIRTT Chief Executive Officer Mogens Smed ordered the modular office maker’s factory in Calgary to recreate the walls. The replacements shipped Thursday, and the foundation’s 250-square-foot renovation was ready on Saturday. “There was some disbelief,” says DIRTT salesman Michael Iannone, describing foundation officials when they saw the new rooms. Once convinced about the robbery of the originals, the foundation went on to place three more orders over the next two years, says Iannone.

Founded in 2004, DIRTT pioneered a software-driven operation. It starts with customers creating a 3D model online of their order with DIRTT’s walls of glass, wood, or high- gloss plastic. When the customer places an order for a design, the software sends the specifications to machines in one of DIRTT’s two factories. “If you can package technology with off-site modular construction, there’s an exponential increase in efficiency,” says Tom Hardiman, executive director of the Modular Building Institute, a Charlottesville, Va.-based trade group. “That seems to be where DIRTT is hitting it.”

Shrinking Office-Construction Market

The fast-growing 564-employee company is benefiting from a shrinking office- construction market in the U.S. Since the height of the U.S. real estate bubble in 2007, the amount of money spent on office construction has plummeted from $53.8 billion to a projected $22 billion this year, according to researcher IHS Global Insight. In 2010, DIRTT’s revenue topped $100 million for the first time and could reach $134 million this year and $175 million in 2012, according to Chief Financial Officer Scott Jenkins.

DIRTT’s walls and floors, designed by company co-founder Geoff Gosling, 50, snap into place much like Legos. Walls can be reconfigured as needed to create smaller or larger offices. If a company moves, it can reassemble the components in the new location. About 80 percent of DIRTT’s business is in existing office buildings. Customers range from Google (GOOG) to Levi Strauss to the Fort Sam Houston military base in Texas.

Before co-founding DIRTT, Gosling worked at Calgary-based Evans Consoles designing control rooms for 911 call centers and air traffic control operations, among other spaces where functionality is crucial. Gosling, who earned a master’s in environmental design from the University of Calgary in 1991, says offices appealed to him because he liked the idea of designing “environments that have not been given their due,” he says.

One fan of Gosling’s work is Jim Prendergast, partner at architectural firm Goettsch Partners in Chicago. In 2009, he designed a new 14-floor headquarters for Jenner & Block, a 470-attorney law firm there. The law firm chose DIRTT over rivals Teknion and Haworth for its detachable walls’ aesthetics. He says installations took three weeks or less per floor, about half the time of conventional construction.

Mixed Environmental Impact

Modular office construction’s environmental impact is mixed. While components can be reused, the products require more resources to make than conventional walls. For example, to produce the aluminum in DIRTT’s products, the energy use is eight times higher than for the steel in traditional construction, according to data compiled by environmental researchers at the University of Bath in the United Kingdom. Companies that do not change an office for years would be “greener” sticking with conventional construction, says Nadav Malin, president of Building Green in Brattleboro, Vt., which does consulting for the construction industry.

Gosling and co-founders Barrie Loberg and Smed met at Evans Consoles in 2003, the year Smed took over as chief executive officer after leaving Haworth in Grand Rapids, Mich. (In 2000, Haworth had bought Smed’s office furniture business in Calgary, SMED International, for $300 million Canadian, or about $201 million U.S. at the time.) Smed hankered to run his own company again and convinced the other two to join him in starting DIRTT, which stands for Doing It Right This Time. Loberg developed the DIRTT software, named Ice, with some help from Gosling’s brother James, creator of the Java code used extensively in building business software. Ice is licensed to more than a dozen manufacturers through DIRTT’s subsidiary, Ice Edge Business Solutions.

In March, DIRTT raised $22 million in funding from venture capital firms led by San Francisco-based Expansion Capital Partners. The funding will be used to open two new DIRTT factories in Phoenix and Houston, Jenkins says. New interior products are in development for the health-care industry, which is expected to grow with the aging baby boom generation. DIRTT is looking for distributors in the United Arab Emirates, Saudi Arabia, China, and India to launch its product overseas, which the company believes could account for 20 percent of its business in five years. “That would be 20 percent of a billion dollars in sales,” Jenkins says.

To contact the reporter on this story: Antone Gonsalves at antonegonsalves@gmail.com

To contact the editor responsible for this story: Nick Leiber at nleiber@bloomberg.net

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