In recent years the real estate industry has seen the beginnings of fundamental change. Emerging technologies and a growing understanding of the tangible benefits they can deliver have found a foothold in almost every aspect of the industry, from tools to help planners and developers build more efficiently to apps and platforms that help agents sell more easily.
But what are the technologies affecting this change and how are they being harnessed to create real benefits for different sectors of the real estate industry? And more importantly, what will be the outcome of this progress not only for the real estate industry but also for the world around us and the lives we live? Here we get under the skin of what digital transformation really means.
What does the future of real estate look like?
There can be no arguing that 2020 and the covid-19 pandemic put the brakes on almost every facet of the real estate industry around the world, from investment and development to sales and leasing. This has left many pondering the future and what will have to change to facilitate its recovery to pre-pandemic levels.
Despite this, Savills’ latest global outlook for investors in the real estate industry paints a positive picture, if one mainly focused on growth as a recovery to pre-pandemic levels. With global GDP growth in 2021 predicted to be the fastest in 40 years according to Oxford Economics and an investor-friendly low-interest approach from many economies, support for real estate investment in the nearer term is high.
Looking beyond covid and its impact, there are other key growth drivers bringing about change for the longer term. Shifting demographics and a growing trend towards urbanization and cross-border investment is fueling growth in residential, commercial and industrial sectors. Around the world tech startups and enterprises like Nomoko are leveraging technological advancements and access to unprecedented levels of data to create innovative tools and apps targeting different industry sectors and professionals.
“The future of real estate is to be augmented by technology and digital products. From automating property management tasks, to data driven decisions and from furnishing your house virtually to AI based real estate funds – the real estate industry will go through the same transformational change as many industries before it.”
Nilson Kufus, cofounder and CEO of Nomoko
By streamlining processes, removing red-tape bottlenecks and offering invaluable insight and access to information and processes that were previously the domain of only the most powerful and wealthy organizations, technology is creating new opportunities for everyone and levelling the playing field of an industry typically resilient to change.
This democratization through digital transformation represents the single biggest step towards opening up the real estate industry to a new generation of investors and developers that will power its growth over the years to come.
What will be the key trends in the digital age of real estate?
It’s all very well talking about digital transformation but what does that actually mean in terms of application as well as impact? We’ve already said that it will open up the real estate industry to new levels of transparency and democracy and so foster growth like never before, but for that to happen we need to look towards digitalization through digitization.
“Digital transformation is creating fundamental change across every facet of the real estate industry.”
Gartner defines digitalization as “the use of digital technologies to change a business model and provide new revenue and value-producing opportunities”. Despite – or perhaps because of – the size of the real estate industry globally, its transition from analog to digital has lagged behind other industries like finance, widely referred to as FinTech. But PropTech, as the digitalization of real estate is now known, is starting to garner headlines, especially with the growing realization that without it, the industry is missing out on big profits
Upcoming PropTech trends
The uptake of technology in real estate is growing apace and there are some key turning points that will vastly improve its impact on the industry.
First and foremost is an improved customer experience. Making technology accessible and easy to use is fundamental to its success, paving the way for digitally native PropTech companies and startups to lead this integration into everyday use, both independently and as change agents for bigger, established real estate companies.
Easy-to-use interfaces are vital because of the sheer volume and range of data that’s now available, but putting that data to good use is just as important if it’s to have value. Big Data is what drives innovation, and connecting multiple real time data sets into a coherent and usable context that delivers value for all types of customer is a significant challenge, but one that’s already being met.
“The volume of data now available, often in real time, is truly mind boggling.”
The volume of data now available, often in real time, is truly mind boggling: environmental, transport, points of interest, amenities, property, cadastral, legal, planning, demographics, satellite, mapping… the list is almost endless. Giving it a powerful visual and spatial context that turns it from information into the kind of insight that can deliver tangible, real world value is the next step. And compelling use cases for developers, investors, realtors, property managers and more are already starting to gain traction.
The final major trend that’s coming to fruition is the appetite for digitization itself. A great deal of the data we need access to drive transformation is held in localized networks and computer systems or, even worse, on paper files in dusty basements of far-flung buildings. The continued desire to not only digitize this data but then embrace open standards and APIs that means it can be digitalized, shared and cross referenced across products, platforms, organizations and countries is the final bottle neck before unleashing the next wave of innovation.
What technologies are enabling the PropTech revolution?
For an industry on the scale of real estate to go digital, there are some significant technologies that need to come together and become widely accessible – these same technologies are driving the Fourth Industrial Revolution.
AR & VR
Artificial Reality and Virtual Reality are reshaping how, where and when people can experience real estate at all stages of the journey. From architects and planners designing and envisioning potential property developments to find the optimum solutions for whatever mandate they follow – profit, sustainability, efficiency, functionality, livability – to developers offering virtual tours inside and out of properties that aren’t yet built to secure investment and attract buyers. 3D modeling and mapping puts properties in context to bring developments to life.
“What we’re seeing in the industry in the last 18 months is raising awareness of the value of large data sets and putting data and analytics to work alongside people” says John D’Angelo who leads New York-based Deloitte’s real estate sector in the US. Big Data is changing every facet of the real estate industry. From global trends to hyperlocal patterns to granular insights, stitching together all these data points to create a complete picture helps paint a clearer picture of a development’s future opportunities and risks. Using machine learning algorithms to expedite a process that’s slow and expensive to collect and process, companies can derive more reliable, trustworthy insight far more quickly, which means earlier access to more opportunities, which means more projects and bigger profits.
Internet of Things
The IoT empowers Big Data by connecting millions of devices and locations to the internet to deliver information about what’s happening to them and around them, ready for analysis and insight. Sensors on devices can be tailored to measure almost anything – location, position, motion, pressure, light, temperature, flow – and deliver that data in real time helping to create a clear picture of whatever you may want to know.
Beyond that, long term data analysis helps with establishing patterns and trend forecasting. Through this analysis real estate businesses can automate procedures, reduce operational costs, improve productivity, capture value and create a more informed and cohesive user experience. This value is applicable to every sector of the industry, from risk management for property investors to energy management for building managers to workspace optimization for business.
Digital Twins are the realization of Big Data and IoT. They connect and translate near limitless data points on real world objects like buildings into a common language that’s accessible virtually and in real time. The more data is added to a building’s Digital Twin, the more complete the view of the building across its entire lifecycle becomes and so the more value it offers.
This has the power to affect every stage of the real estate cycle – across planning, investment, construction and management. Planners can use contextual data to understand the impact developments can have on local environments. Designers and architects have entirely new ways to simulate and test complex developments to optimize designs and maximize cost efficiencies. Landlords track real-time data to understand how tenants use their buildings and so identify problems, deliver value added services, minimize maintenance downtime and reduce costs.
Nomoko has already built a Digital Twin solution for real estate, called Praedia. A search engine for real estate that helps investors and developers find and filter properties based on their criteria – take a look
Blockchain is seeing fast adoption as a new way for buyers, sellers and investors to interact with each other the properties they’re interested in thanks to its inherent system of trust. By using Distributed Ledger Technology (DLT), it fosters trust through transparency that in term saves time, increases liquidity and reduces mediation and so, costs – for example with a blockchain-powered common database of property leases and purchases would give everyone the entire, accurate transaction lifecycle of every property, available all the time.
Through tokenization, blockchain creates an unprecedented level of security, keeping valuable data, insight, sensitive data and the transactions themselves safe.
“The future of real estate lies at the intersection of managed logistics and platform technologies that leverage artificial intelligence, data science, and mobile technology… The second phase of real estate tech are companies offering utilities or tools on top of the existing real estate process and industry – think eSignature, CRMs or transaction management platforms. Today, we are getting the first glimpses into Real Estate’s future.”
Chuck Hattemer, cofounder and CMO at OneRent
A paradigm shift for the real estate industry
It’s clear then that digital transformation is already creating fundamental change across every facet of the real estate industry. But this change goes beyond democratization, efficiencies and profitability – it is also creating a new era in sustainability, human-centered design and with these the prospect of a better future.
Confronted with the reality of growing environmental risks, more and more real estate investors are addressing issues raised by environmental, social and governance (ESG) factors. The New Climate Institute states that 73% of greenhouse gases globally are released by cities, and many are now turning their attention to sustainability and reducing the impact the built world is having on the planet while simultaneously putting smart resilience measures in place to mitigate future risks. For the real estate industry to keep pace, maintain their bottom lines and keep the future sustainable, they must align with these leading environmental practices at every stage, from architecture to construction.
This shift towards sustainability is being complimented by a shift in focus away from the buildings themselves and towards the people who live and work in them. Historically, real estate companies have seldom prioritized the human outcome in a meaningful way with their developments but many now recognize that promoting long term welfare and a sense of community yields benefits not just for tenants but also for investors and society as a while. To achieve this end goal, companies are naturally turning to smart technologies and advanced analytics aligned to direct interaction with customers and tenants to pull together data-based validations of their concepts.
Through the power of technology and digitalization, companies are putting sustainability and livability at the heart of their projects, and in doing so are creating a safer, healthier and more fulfilling future for us all. Discover Praedia now to get a taste of the future of real estate industry!