Real estate technology: Adoption and adaptation
INSIGHT ARTICLE |
The real estate industry is poised to undergo significant changes over the next five years, driven largely by disruptive shifts in technology as well as significant demographic factors. From the burgeoning middle class stemming from emerging markets such as Asia, the Middle East, Latin America and Africa to the continued emphasis on the sustainability of buildings to the short-term rental phenomenon sweeping the globe, real estate is set to undergo a major transformation.
However, many aspects of the real estate industry have stayed largely stagnant over the last several years, remaining bricks and mortar focused while new technologies consistently reimagine the way real estate is procured, developed, managed and utilized. Industry participants must understand the latest in technological innovation and implementation strategies in order to integrate technology and stay relevant in the coming years.
Key technologies that affect real estate
As many other industries can attest, technology is a major instigator of change. As people integrate technology into their living, shopping and working habits, real estate will see significant disruption in several key areas.
Smart building platforms and artificial intelligence
In the real estate industry, smart building platforms, Internet of Things (“IoT”) and artificial intelligence are driving significant change in the areas of eco-efficient building design and development. Globally, increasing migration to cities combined with high energy prices and climate change is predicted to have a major impact on sustainability criteria, including waste treatment, carbon emissions, renewable energy technology and green spaces. IoT technologies such as smart appliances, smart metres, and integrated management systems will also see greater application as they become more and more predictable and affordable.
The continued disruptive influence of the internet
As many retail chains operate more and more online, they lose the need for physical space, thus the retail real estate industry is experiencing and will continue to undergo a major shakeup. Similarly, the telecommuting trend that sees more and more workers working almost entirely or partially online from home will likely mean that the commercial office space sector will also see much of its demand evolve in the coming years.
Conversely, as online shopping becomes more and more popular, the demand for warehouse spaces located in or very close to large urban centres will continue to increase as retail companies seek to increase efficiencies in shipping and warehousing.
Demographic trends affecting real estate
With the advent of Uber, Netflix and other technologies wherein consumers access a platform directly – typically through their own mobile devices – and circumvent high-cost, low-value intermediaries such as parking, rental fees and arbitrary markups, the expectations of most consumers moved to an on-demand experience. Just as disruptive FinTech entities provide consumers with access to everything from loans to mortgages on their own phones, similar technologies have come to be expected in the realm of real estate. These include:
- Buyer search and discovery tools, including listing portals
- Agent search tools, including agent lead generation
- Virtual reality and simulation technology
- Online brokerage, sales and auctions
- Peer-to-peer brokerage
- Inspection management software
- Transaction management software
- CRM and lead management software
- Property marketing and sales solutions, including social marketing
- Acquisition finance and investment platforms including crowdfunding, peer-to-peer lending, and on-demand finance solutions
The influence of investment
Many venture capital companies have taken great interest in real estate technology, not to mention angel investors as well as strategic real estate corporate investors. Real estate remains the world’s biggest and most valuable asset class and as money continues to pour into the development of these new technologies, more traditional sectors will feel increased pressure to innovate.
Winners and losers
The impact of technology has already made definitive changes for some key sectors of the real estate industry. The increased demand for the data analytics necessary to power many of these technologies has, in turn, upped the demand for data centres and distribution centres while simultaneously lowering demand for retail space, particularly in suburban areas.
Similarly, the impact of short-term rental hubs such as Airbnb and VRBO have materialized a real threat not only to large hotel chains and the real estate they own but also urban renters, who often find themselves priced out of the market as landlords seek the highest returns possible for their properties.
What the future holds
The virtual worker requires an entirely different workspace and seeks different leisure and shopping experiences, mostly centered around high-end urban real estate and infrastructure. As automation increases and consumers become more mobile, the key relationship for real estate industry participants to watch is the one developing between the virtual and the physical. Driven by the rise of cities, more disruptions are anticipated, particularly in suburban locations. Savvy real estate operators who cater to convenience, flexibility and creating experiential urban spaces are expected to realize the greatest benefit.