A lot has been discussed about the impact of technology on real estate, but the most profound change brought about by technology is the slow, but definite change in mindset towards being a service industry. The most obvious driver has been the success of sharing economy models – be it the marketplace model offered by the likes of AirBnb or the co-working model that aims to redefine corporate workspace.
Like all sharing economy models, the focus is on providing under-utilised real estate resources on demand, usually at significantly lower costs than conventional real estate products. Proptech companies have been attracting significant capital and automation is the focus across the real estate value chain.
From the perspective of developers, innovation in construction materials and technologies has redefined the boundaries of building scale and efficiency. 3D printing-based construction is still in its early stages but demonstrates the potential to address the challenges of affordable housing. Wearables, robotics and advanced sensors will enhance construction safety and efficiency, translating into significant savings.
A Texas-based construction company recently reported annual savings of $1.8Mn, just by replicating paperwork with iPads. Augmented reality is providing new simulation tools for architects and planners, while Building Information Modelling (BIM) is widely being adopted across the lifecycle – from construction to facility management. Digital marketing tools such as virtual reality for an immersive property experience and chatbots for customer service are allowing developers to manage marketing resources efficiently and maximise the return on investment through more targeted campaigns.
The modern home buyer benchmarks his ‘real estate service’ experience with those provided by the likes of financial services and telecom players. The desire to own property is constrained not just by sentiment, but also the lack of a complete technology-oriented ownership, investment management and occupancy solution. Buyers and occupiers of real estate have access to unprecedented levels of information and social media platforms to make their voice heard. A growing group of millennial decision makers, driven by the need for flexibility and mobility in an uncertain business environment are challenging the rigidity that define traditional real estate products.
Corporate real estate planning will focus on enhancing collaboration through flexible spaces, eliminating inefficiencies, reducing cost, minimising downtime and leveraging technology to add value to business. Video and audio conferencing will make way for motion graphics communication through hologram meetings. As we move to Industry 4.0, there will be greater demand for multi-purpose ‘intelligent’ buildings to accommodate changing business processes and requirements.
The explosion of big data and machine learning will allow creation of new financial products for real estate, leading to a convergence with the fintech sector. Crowdfunding in real estate is expected to grow to $300 billion by 2025 and algorithms will enable financers to develop new financial products suited to different buyer segments – from catering to down payment for young buyers to more flexible senior living solutions, as life expectancy increases around the world.
Governments around the world are trying to leverage technology to regulate the sector. Blockchain is already being used to create digital ledgers of transactions, while law firms are using robots for routine legal documentation, such as lease deeds. Regulations and growing cost efficiencies are ensuring a gradual shift towards sustainable buildings. Governments are experimenting with artificial intelligence applications for energy forecasting, facial recognition enabled cameras for enhanced security and IoT devices for smart city infrastructure and governance.
These will need to be integrated with building management systems, energy grids, civic and transportation infrastructure as well as town planning agencies. As new transportation technologies like hyperloop and air taxis revolutionise mobility, traditional real estate concepts and products will continue to be challenged.
The convergence of technology will transform real estate as the various stakeholders mature in their journey of technology adoption. Market participants who have the resources and foresight to invest in technology, create value from data and adapt themselves to the constantly changing landscape could give themselves the winning edge in the next phase of real estate evolution, particularly as Generation Z steps into the ecosystem as consumers of real estate solutions.