The Future of the Home
As Managing Director of Lowe’s Ventures, the venture capital arm of Lowe’s Companies, Inc., I have had the privilege of meeting with and investing in some of the most dynamic founders who are either shaping the future of commerce or changing the relationship between humans and their home. This front row seat coupled with our 70 years of experience in the home improvement industry has enabled the Lowe’s Ventures team to better understand the future of the home. To be clear, this is not an exhaustive list of hypotheses but rather a curated list of outcomes for the home that we feel are inevitable.
· Housing will increasingly become a service: This future state is perhaps the most blasphemous (so let’s lead off with it) when put into the context of the perception of the American dream. While home ownership has been a pillar of American society since post-WWII, there are many factors that would indicate individual ownership will wane and people will increasingly seek to access home. Key factors contributing to this include the continued delay in key life milestone events that trigger home ownership (therefore creating greater desire for rental solutions later in life), increasing urbanization, desire for maintenance-free lifestyle, and wealth bifurcation. Signals that are showcasing this trend include the rise in single family rentals, long wait lists for co-living communities, and the shift in demographics among renters. If you doubt the feasibility of this future, keep the following in mind: as little as five years ago the idea that transportation would be a service seemed unlikely. Then came Uber and autonomous vehicles and suddenly the narrative changed. A similar shift can (and will) happen in housing.
· The home will (eventually) be intelligent: Smart home devices and services have been around for more than a decade and the vision of the fully automated home has lived in the collective minds of people since the Jetsons. While certain products have gained traction (Nest and Ring as examples), the smart home revolution hasn’t fully taken hold. There are a lot of factors that have contributed to this such as lack of standardization of communication, cost of retrofit, need for increasing bandwidth, and lack of a solution selling model that enables people to understand the utility of a smart home. However, we will eventually solve for these issues and as more homes become fully connected systems our ability to leverage artificial intelligence to create a home that senses, feels and reacts to its environment will take shape. Timing on this is unknown and there is still work to do, but this is the most inevitable of all predicted future states.
· Humans and machines will work together more to construct homes: New home construction is one of few industries that is actually less productive today than it was 50 years ago. Homes are generally built the same way today as they were during the suburban boom and technology has been slow (see almost nil) to be adopted by leading home builders. When labor was flush and cash was cheap, these factors were easily overlooked. Today’s environment poses many challenges that will require builders to think harder about new methodologies for building and delivering homes. Labor is tight and getting worse in the skilled trades. Building modular and pre-fabricated homes enable builders to gain economies of scale that are not able to be employed when utilizing subcontracted, on-site building techniques. Augmented new modular methodologies will be increased robotics in the home construction space. Today, a multitude of skilled tasks are being automated in early stage companies from self-driving excavators to robotic drywall and masonry machines to autonomous framing and joist construction. As the need for additional housing meets the continued lack of available trade labor, these technologies will provide builders with the productivity gains necessary to keep up.
· The use of service providers to maintain and repair homes will increase: The DIY boom of the 1950s through the 2000s was fueled by a macro environment that favored home ownership and a homeowner base that had the skills to take on those tasks. In addition, finding a reliable contractor or service provider was difficult and limited to the recommendations of your inner circle and neighbors. Today, many of these factors are in reverse. Not only is home ownership declining, but the ability to find trusted service providers is increasing exponentially. A further benefit of being able to find service providers is that the cost of service should decrease thereby making outsourcing more attractive. With more and more people identifying as time constrained and lacking DIY skills, the likelihood of choosing to outsource home improvement tasks to a professional should rise drastically.
While far from an exhaustive list of housing trends, these four future states represent highly likely scenarios of housing in the United States. These future states also present incredible opportunity for investors and entrepreneurs alike. Housing is an enormous industry (the value of all residential real estate is about 2x global GDP) and transforming this industry will create unique challenges and pockets for value creation. Our goal at Lowe’s Ventures is to ensure that Lowe’s is at the forefront of these changes and well positioned to serve the evolving home improvement market.