Building Tech & Products
3D Home Printing For Skeptics: Harbinger Or Fringe Phenom?
ICON and Mighty Buildings are rising stars in 3D-printed home tech. Here's what they may mean for the future of climate- and labor-challenged home construction.
Two 3D-printed new home communities broke ground in March.
That's news. Especially for a business, manufacturing, distribution sector known fondly, within the industry family, as progress-averse.
Tidings of the robotically-framed whole enclosures now being squirted through precisely-guided nozzles caused a stir, as they should. However, the buzz was not so much in homebuilding's strategic community as in the sizzling-hot outer environs of contech, proptech, REtech, where starved capital and liquidity crave channels for new return opportunities and gravitate to nearly everything "tech."
Another eye-opener in this story for homebuilding skeptics, who may greet word of another game-changing process with a practiced numb shrug, is a strange-bedfellows pairing in one of the two 3D upstarts announcing plans for 2021 communities. A seed $9 million fundraise by ICON, led by Oakhouse Partners in Fall 2018, includes D.R. Horton.
A second raise of $35 million, led by Constance Freedman's Chicago-based Moderne Ventures, includes participation once again by that Oakhouse Partners group and, get this, international architecture firm BIG-Bjarke Ingels Group.
Any deal that includes, even in trace-level amounts, a stakeholder presence of D.R. Horton and BIG in the same capital structure family tree, let alone the same residential construction initiative, is worth peeling back a layer or two. Homebuilding's No. 1 player by volume, D.R. Horton's stock-in-trade conveys new homes, priced for attainability for as many working Main Street-households as can be humanly imagined.
BIG, on the other hand, stands as one of global architecture's quintessential advocates for carbon positive, circular-economic built space, notwithstanding whatever it takes to do that.
A simple show of hands among most residential building insiders would affirm widespread belief that architecture, engineering, and construction can choose one or the other, but not both affordability and climate-forward sustainability.
So, rarely, if ever, have two such apparently radically opposite strategic focuses converged to take a stake in a homebuilding business proof case.
The issue now with 3D's vaunted belle-of-the-ball moment is – as things go in housing innovation writ large – are capability, practicability, and the little matter of sustainably making money all aligned here or not?
The other issue is this. If additive manufacturing technology is already capable of first-impression impact today, and can likely be counted on to be a significant factor in how shelter gets designed, engineered, built, and clustered into communities by year 2030 or so, what's a regional development and homebuilding firm to do about it today?
Don't think so.
3 Take-Aways on 3D
- Disruption ... a leadership issue.
- Process improvement and scale ... a cost- and value management issue.
- Building science, sustainability and resiliency ... a sourcing and consumer impact issue.
These are the three bucket-list areas that will figure into established large, medium, and small residential construction players' calculus as they keep a weather eye on ICON and its 3Strands project, the East 17th St Residents in East Austin, TX, and Mighty Buildings venture with Palari Group in Rancho Mirage, an upscale community in the Coachella Valley, near Palm Springs.
That calculus weighs current priorities against future bets. It's at that crossroads building industry strategists tend to get stuck. This time waiting for dust to settle, for costs to revert to norms, and for Uncle Sam's constant helping hand to nudge things in a favorable direction won't, we believe, go well.
Additive manufacturing's futuristic promise – long a flirtation between what's been imaginable and that which can be done practically in the physical real-world – has, it's safe to say, gotten a firm toe-hold at building technology's fringes. Two players, ICON and Mighty Buildings, worked proof-of-concept wonders among tech developers and funders, into meaningfully scoped projects, one in Austin and the other in Southern California.
The timing of their big coming-out in the Spring of 2021 is hard to beat for narrative pop: Booming demand, soaring materials costs, supply disruptions everywhere you look, highly constrained labor, wholly-new building technologies that promise both cost-savings opportunity, climate-positive environmental impact, and natural hazard toughness.
Just as Environment, Social, and Governance gets traction, tempting silver bullet "mission-vision-and-purpose" Silicon Valley-style ventures crop up. Innovation's veritable triple-threat – affordability, sustainability, and resiliency – comes wrapped in a bow of a mission to "advancing humanity" by democratizing access to dignified housing.
Yes, "the next big thing" fell into disuse deservedly as terminally quaint about two decades ago. 3D printing of homes, instead, enjoys a solid proving-ground honeymoon period similar to that enormously-funded upstarts like Katerra once lavished in. Fact is, it will be 2025 before realities of both the business models and the consumer value proposition begin to come clear with 3D-printed homes and communities. Likely, it will be most of the decade before consumers, local regulators and their county, state, and federal counterparts, and institutional investment stakeholders can fully vet the pros and cons of this or any other new method of home construction.
Any call before that beta period and some pretty normalized competitive and economic-cycle based measures of competence, will solely consist of pure guesswork.
CNBC real estate correspondent Diana Olick summed up the mid-March news like this:
ICON, a pioneer in 3D-printed homes in the U.S., just completed four homes in East Austin, Texas.
The two- to four-bedroom homes are now on the market, starting in the $400,000 range.
A much larger community of 3D-printed homes is being planned in Rancho Mirage, California, by competitor Mighty Buildings.
Among homebuilding enterprise leaders, we personally know skeptics abound, at least as regards near-to-mid-term expectations of significant impact in higher volume residential construction. We also know we'll be circling back regularly to this topic, simply because brilliance, data and technology exponentially narrow the delta between the imagined and the doable constantly now.
Robotics, automation, materials science, modernization, process improvement, waste reduction, precision manufacturing, and perhaps most important, the rotation toward industrialization away from reliance on access to as-needed cheap skilled labor are all a matter of when, not if.
So too is the capability of applying these multiple levers of progress to a housing-as-a-solution purpose – addressing social equity, health, educational mobility, and, an ever-more-pressing balanced exchange with planet Earth's now-vulnerable bounty.
Here's where we see entry points to add value to the amping up of 3D printing projects in the early 2020s, first from a 40,000-feet perspective, then from a curb-appeal view of making the buildings at scale, and finally from the standpoint of essential subcomponent materials sourcing.
Disruption and Leadership
This is about bets, and it's about what it takes to lead a homebuilding, development, investment, and distribution enterprise when present-day challenges obscure what must be done now to prepare for tomorrow.
At the high level, the ICON and Mighty Buildings story touches a sensitive nerve among those who came up in building and construction and learning their rules of engagement during the 20th Century and first decade of the new millennium.
It's about disruption, or more precisely that the hodgepodge of skills, processes, raw materials, resources and time that add up to the business of home development and construction is a business ripe for disruption. By the same token, what few can and will agree on is by whom, how, and when that disruption will happen. Consensus in most of the research we've looked at shows that people in building see profound change coming.
But not now. They mostly see the shifts happening in the six to 10-years-ahead horizon, not in time-periods counted in months, like 24- or 36- or even 48-months.
So, ripe for disruption's power as a motivator among established business operators may not be fully unleashed.
The moat that smart, cunning, and experienced strategists in homebuilding believe is least susceptible to disruption comes down to a four-letter word: Dirt. For those who've excelled at homebuilding business models, dirt and the product that goes on it are of a piece. An internal rate of return [IRR] on capital put in place on a piece of dirt is a builder's secret sauce – the science, art, alchemy, and operational genius of homebuilding.
Dirt – a.k.a. "location, location, location" – speaks to relationships, leverage, scalability, and, simply, the chops it takes to execute on investment's most fundamental rule, to buy low and sell high.
Massively improved sourcing, assembly, and delivery of a vertically complete structure – with the help of data and technology – may in fact bend cost curves so that direct input expense outlays are reduced. However, what that doesn't accomplish by any means is that either the builder's margin improves or the buyer's price-tag gets lowered.
That may not be an intuitive thought to outsiders, but to time-tested builders, it's practically a law of homebuilding nature.
Higher margins and lower buyer costs, they'll tell you, are each prone to choke-points – namely, the impact of regulatory fees and taxes, and the impact of costs of financial capital. These choke points can siphon away gains achieved from greater efficiency, less waste, and higher precision and quality levels in the start-to-completion building cycle. This can and does subdue receptivity to innovation in the construction cycle alone, because investment in that innovation won't inevitably improve either profitability nor a bigger market opportunity.
Ultimately, the building life- and value-cycle includes dirt and the relative delta of margin value builders can derive from that piece of dirt from the duration of time they make it part of their inventory of lots and the time they turn it.
How much an accelerated, more efficient, more precise, higher quality enclosure – the promise of 3D printing – delivers on IRR hurdles becomes the focus of the business evaluation. In the building lifecycle workstream, that enclosure's opportunity for savings and better margins hinges on a number of other factors, including tasks and hand-offs that go before the vertical assembly stage and come after the enclosure reaches plate level and heads into an array of other processes other crews do and hand-off to the next crews.
A leader's dilemma then:
- Either to harvest as much cash as possible via inventory turns to have leverage against lower land, labor, and financing costs at the next dip or downturn trough,
- Or to invest now in capability that will dismantle non-value-producing parts of building's value chain, and reimagine, reset, and reactivate a value-cycle in a way that apportions total lifetime cost and value into an assessment.
D.R. Horton and BIG-Bjarke Ingels Group may not today share much in terms of business model vision, but the future binds them in an imperative to solve for both affordability and climate-impact.
It's customers, and in this case consumer households who do and will need shelter, who become the ultimate factor in disruption. Consumers choosing 3D printed homes over other equally-priced homes in the same types of submarkets will be quite a phenomenon when it happens. Sometime between now and the mid-term future of say 2025, early adoption consumers will have begun to do the work any true disruption requires to move a transformative paradigm into a tipping point.
Think about this, from three Accenture thought-leaders:
When faced with disruption, many leaders cling to their legacy business. But leaders who understand the various disruptive states and their company’s place therein will be more likely to see disruption as a positive force — not as a cue to protect the old but as a compelling prompt to lead in the new. They will see disruption as a means to improve their organization and become more financially viable, possibly by venturing into new markets.
The leadership issue is to whether and how to set decisions and initiatives in motion to discover and succeed in the future, well before those dynamics are active in the current demand pool.
Process Improvement and Scale ... A Management Issue
Managers of construction company performance outcomes solve countless problems daily, and are in constant blind pursuit of improvement. The complex math of procurement, process integration, trade relationships, customer care, and financial management is getting a thorough-going over as regards to when and what and how to bring automation, robotics, and precision-manufacturing methods into play in homebuilding operations.
The cut-over from comfort-zone workflows that involve 25 trade crews tag-teaming their way through each vertical construction task set to any new process has been a big challenge.
Fixes to part of the process look good on paper but in the real world they can trigger costly new sources of friction flanking either side or above or below the fix. It turns out, when it comes to migration from Dark Ages tried-and-true methods to the present and future of building, partial measures cause more money trouble than they prove to be worth.
That's why the ICON and Mighty Buildings micro-projects might best be looked at as proof-case discovery labs rather than paradigm shifts per se. For builders, more needs to be learned than is known, and much of that will have to do with market embrace and how well the real world execution and absorptions match up to the pro formas.
Here's a description of the ICON building site-build process, which company executives assert can capture 10% to 30% in construction cost savings, and "several months" in start-to-completion cycle time savings.
The Vulcan printer, an 11.5-feet high by 33-feet wide digital robot capable of printing 8.5-foot walls, on foundations up to 28-feet wide, with spacial coverage of up to 2,000 square feet. The Vulcan prints 1-inch tall by 2-inch wide beads of "secret sauce" Portland Cement-based Lavacrete, mixed and pumped through the Vulcan using tablet-controlled software for material to flow at rates of 5 inches to 7 inches per second as the printer runs along ICON's gantry system.
According to ICON strategic executives:Ultimate goal is to have hundreds, thousands of ICON Vulcan construction systems in the hands of developers and organizations around the world delivering dignified, resilient and affordable housing that you simply cannot achieve with conventional construction.
ICON aims to have a pipeline of 100+ home communities throughout 2022 and beyond, in addition to continuing social/affordable housing projects with organizations, continued development of space-based construction systems for further exploration of the Moon with NASA, disaster-relief housing projects with government entities, and continuing our work with the Department of Defense and armed forces who see incredible value in advanced technology and materials to deliver resilient shelters at a speed not possible without ICON’s proprietary technology.
Here's how CNBC's Olick describes the Mighty Buildings' factory-based process.
Mighty Buildings claims the 3D printing production process eliminates 99% of construction waste and is 30-40% cheaper than traditional construction. It will also use solar energy.
Mighty Buildings started in 2017, inventing a polymer composite that could be compared with synthetic stone. It makes the homes in panels in a factory and then will assemble them at the Rancho Mirage community site.
These advanced technology projects make for scintillating, future-forward storytelling. The important operational KPIs will be the actual versus theoretical or possible cost savings in the construction, and how much of those savings redound to the builder-developer and how much gets dropped to a consumer buyer's pocketbook.
Bending the cost curve, after all, doesn't equate to better builder profits nor lower buyer expense. So, for 3D to gain traction and self-sustain as a holistic building solution, there's important strategic, investment and operational work that needs to occur to fully realize the "savings" potential and what that translates into for builders and buyers.
Building science, sustainability and resiliency ... impacts
Importantly for the moment, both ICON and Mighty Buildings draw on a supply chain that involves engineering-processed stone or cement products bonded with polymers – synthetic plastics and resins – gaining notoriety as deeply disrupted raw material subcomponents.
Supply constraints, even at this subcomponent level, could impact roll-out of new, higher-volume projects for both of these fledgling businesses, and delay each of their roadmaps for growth.
Too, ongoing narrative conflict that pits cementitious building squarely against mass timber for both sustainability and resiliency, a full-throated combat amplified by trade associations competing with one another for construction market primacy.
Downstream of the lobbyists and their minions, consumers reign as market makers or breakers. When the homebuying customer can get asthetic value, energy performance, room comfort, low cost of operation, durability, ability to withstand natural hazards and disasters just as good for less, then disruptive innovation will have occurred.
When, by whom, and how that moment comes about is secretive information the future has not yet given up for industry consumption.
Until it does, the dilemma is this: Are you going to bet on 3D-printed homes as a scalable model of shelter production, or bet against it?