Why mass (forced) adoption of remote working will accelerate nascent trends in the construction industry
- Summary:
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Lockdowns and pervasive WFH has made people more reliant on home technology and will shift preferences as they consider new homes and apartments. The Coronavirus crisis spares no industry, but provides opportunities, not just pain.
The social and business ramifications of the coronavirus crisis have almost instantaneously changed business processes, consumer behavior and personal habits. As I wrote last week, a useful way of thinking about these changes is to categorize them into temporary events, cultural shifts and accelerated changes. The latter:
results when a crisis catalyzes the adoption of pre-existing technology or service by highlighting its value or, as in the case of restaurant deliveries, its indispensability. As Loup's [a VC firm] analyst writes, ‘The adoption curve is accelerated because users are forced to start something today that they likely would have adopted eventually.’ Again, there's some subjectivity involved since one analyst's inevitability is another's accidentally, but I agree with Loup's assessment that service related to remote work, health, entertainment and commerce are getting an enormous boost by the Coronavirus crisis.
The most profound and lasting effects will be those stemming from cultural shifts and accelerated change.
As regular diginomica readers know, the pandemic is touching every industry and company, but one market likely to see significant changes in how it designs and builds products is the home and multi-family construction industry. The catalyst is the stress being put on home technology infrastructure by forced isolation, turning one’s residence into one or more offices and classrooms by day and cineplex by night. Almost no residential structure has been designed to accommodate multiple remote workers and school kids, but in light of what I expect to be a permanent and significant increase in work from home (WFH) along with the proliferation of smart features into every type of home appliance, look for the residential construction industry to rapidly adapt to the new normal.
Network infrastructure - the problem isn’t with home connectivity
Several data points indicate that the problem doesn't lie with home broadband circuits, but inside the residence. Broadband services undertook significant upgrades to accommodate cord-cutting and increasing consumer preference for streaming over broadcast video, meaning that there is ample network capacity to handle the added daytime load. A December, 2017 study from the FCC found that about 70 percent of home connections in the U.S. provided at least 25 Mbps of bandwidth, however, accelerated cord cutting means that by now, the number is far higher. Furthermore, those with at least 100 Mbps service likely number at least 60-70 percent by now. More recent 2018 measurements by Ookla, operators of the popular Speedtest site, found that the average download speed for fixed (not wireless) connections in the U.S. was just shy of 100 Mbps.
According to data from Starry, a small fixed wireless ISP currently serving five large US metro areas, average daytime usage increased about 2.5-times from pre-lockdown levels across three metro areas. However, even these post-WFH daytime levels were about 25 percent below nighttime traffic during peak streaming and gaming hours. Overall, users only averaged about 2 Mbps, far below the capacity of home service. Thus, the vast majority of residences have more than enough bandwidth to accommodate multiple home workers and schoolers.
What most people weren’t prepared for was the technology demands of converting their humble abode into offices and classrooms.
Residences becoming a hodgepodge of connected devices
The technology infrastructure in most homes and apartments, especially those more than a few years old, is cobbled together with gear from their cable/broadband provider and miscellaneous gadgets from Amazon, Best Buy and other retailers. They generally work well enough for casual use, but can show their overall kludginess during times like these with heavy use by multiple users. For example, Wi-Fi coverage often has dead spots, routers aren’t configured with traffic prioritization so VPNs drop as the work laptop's Wi-Fi connection gets crowded out by online gaming streams, while the proliferation of home gadgets (Echos, Ring cameras, smart thermostat sensors, etc.) share the same SSID as work PCs, further adding to the network background noise. It's enough to make aspiring virtual meeting goers scream in frustration as they fruitlessly watch a spinning "loading" logo.
Even before the explosion in remote working, there was abundant evidence of the public’s growing acceptance (and later, dependence) on home technology via sales of connected, smart devices. For example, more than a third of US households have a smart speaker, with at least 70 million estimated sold last year, while 38% have some type of home security product, typically a connected camera or externally-monitored system. The broader market for connected smart home products is estimated to reach $141 billion by 2023, with 40 percent of that coming from the US. Another estimate expects slow, but steady 9 percent annual growth in the smart home market through 2024.
Aside from speakers and security systems, people continue to add smart thermostats, lighting/plugs, locks and smoke/CO2 detectors to the home technology milieu, turning the home into a hodgepodge of connected devices, many with limited built-in security. Although they communicate to cloud services and mobile apps, because of the slapdash way in which they are made, purchased (from multiple manufacturers) and installed, they might not work with each other or one's choice of home management software like Apple Home, Alexa app or Google Assistant.
Providing homes with office-grade technology infrastructure
The haphazard way most homes have built wireless networks and incorporated smart devices has become apparent as people start using their homes as a primary work location and include smart devices into their daily lives. While the situation isn't so dire that people will undertake a remodeling project solely to build technology into their homes, technology is showing up as a key factor when people consider a new home or apartment.
A recent survey of large home builders (firms like D.R Horton, Lennar, Pulte, et.) found that the majority already install wireless routers as a standard feature while a third install smart speakers supporting voice assistants like Alexa and Google Assistant. Furthermore, a majority of these builders of large, planned communities offer various smart-home products like thermostats, lights, door locks and garage openers as either standard equipment or available options, while smart appliances and water heaters are typically available as upgrades. Some 29% of new homes from large builders in the US now include a connected, interactive security system.
For example, The New Home Company offers a tech package with all new residences that bundles:
- Wi-Fi throughout
- Video doorbell
- Smart, Wi-Fi connected devices including:
- Thermostat
- Garage door opener
- Electronic entry door lock
- Lighting control
- Setup and orientation service including Wi-Fi and broadband connectivity, smart device activation and training.
The New Home system works with popular devices and services from Amazon/Ring, Google, Sonos, Honeywell, Philips Hue and others.
My take
All the data on smart device market penetration, home construction statistics and user preferences reflect a pre-lockdown world of pervasive home workers, non-stop video conferences and forced cocooning. After the crisis wanes, people will understandably want to escape the confines of their homes, however, after this baptism by fire, I expect a persistent increase in the number of home workers and greater reliance on home entertainment, security and convenience technology.
The Coronavirus crisis is rapidly evolving home technology from being an assortment of little-used tech trinkets into another set of critical home infrastructure, just like plumbing, electrical wiring and HVAC systems. Home and multi-family apartment builders that recognize this shift will have a strategic advantage as people gravitate to properties that elegantly integrate network, security and smart home technology and pay a premium for professionally designed, installed and configured systems. What some term proptech and PwC calls “the intersection of technology and real estate” is one of the accelerated changes I described last week that will be a lasting outcome of this year’s pandemic and quarantine.