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Updated over 9 years ago on . Most recent reply
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3d Home Printing ...a threat to real estate investors?
This morning I came upon an article about a company that is using a giant 3d printer to print small homes for only $5000 cost. Should I be concerned about this technology eventually driving down the value of my investment properties? Is most of the property value for a typical 3/2 home in the land or the building?
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Anyone who thinks this is a niche market or something that will have little impact on "traditional" real estate should read Clayton Christensen's book "The Innovator's Dilemma". That book is all about exactly this kind of situation. Some technology appears on the scene. Existing vendors poo-poo the new technology. "Its too small", "It's a niche". "It will never effect our business". You might think he's talking about high tech products, and he does use a number of those examples. But there are many examples in non-high tech businesses. One he discusses at length is the steam shovel business. At one point not so long ago, any significant excavation was done with a steam shovel. Then the hydraulic excavator appeared on the scene. "Too small, too weak", the critics said. And at first, it was indeed a niche market. They were small. So they were perfect for digging that was done by hand because the smallest steam shovel was too big. Such as water and sewer lines for houses. But, guess what? The builders of these excavators refined them. Made them bigger and stronger. These days almost everything is done with hydraulic excavators. The modern, electrically powered versions of steam shovels are used only in very specific situations, such as mining.
There are many examples of this phenomena where a new, niche product arrives in a targeted market, but then expands until it reaches up and rips out the guts of the companies making the previous products. How many folks don't even have a land line? Or still use a flip phone? Laptops were, at one time, a niche. Now desktops are. The list goes on and on.
The challenge for the incumbent player is that these technologies do often start out small. The potential revenue is so small that it can't really affect the incumbent player's bottom line. So, the incumbent player has little incentive to invest in the new technology. Instead, new companies tend to produce these new technologies. And they tend to, at some point, wreak havoc on the big guys selling the old stuff. In many cases, killing the old guys. Christensen's book is really addressing how existing companies deal with these sort of innovations and come out alive after the change. It takes a willingness to develop a new product that will destroy an existing product. That's a tough thing to stomach. But the saying in the business is "Our old product is going to be killed by someone. Better if it was us than someone else."
Realize, too, that while we in the US tend to build houses out of 2x4s and sheetrock, that's not the case elsewhere. Houses built of concrete, stone or other materials are common in other areas. The 3D printed housing I've seen is much more like construction I've seen in India and Mexico. So, this technology may take off much more quickly in other areas than in the US. Or in different applications than houses. Such as high-rise buildings that are currently built by pouring a new floor right on top of the previous floor, letting it set, then raising it on jacks and adding the columns between it and the previous one. I can easily imaging a 3D printer doing that sort of construction.
Now will 3D printed houses develop to the point where they displace stick-built houses? Hard to say. Maybe, maybe not. But beware of dismissing something that's disruptive to your business too quickly.