MIPIM: Engaging The Future
The world’s leading property technology event brought together leading lights to discuss challenges and opportunities
It is now an urgent priority for the real estate industry to manage the risk brought about by new digital business models and the changing energy landscape. The conference was a perfect occasion for influential makers and doers to exchange insights, discuss new solution-driven tools, and to build the foundations for the transition into the digital era.
Is real estate ready for digital maturity?
The construction industry has, since time immemorial, dragged its feet, when it comes to digital transformation. In the past few years, almost every industry has evolved, digitally, but the industry of bricks and mortar wants to remain bricks and mortar. Even the banking sector was taken by storm, when digital fintechs dive bombed into the market and banks that remained invincible for centuries, were shell shocked into making radical changes, but for many it was too late. Will construction behemoths suffer the same fate?
It became clear during MIPIM that a lack of transparency has affected the real estate market in every city from Dublin to Dusseldorf: people have lost trust in both government and commercial real estate players. As a result, the real estate industry has failed to create a competitive, efficient, and flexible ecosystem for businesses to thrive.
To achieve the role of providing a springboard for entrepreneurship, the real estate industry needs to be transparent: rigorously enforced laws and regulations, easily accessible market information and performance benchmarks, with clear and fair practices. These pillars of an efficient real estate market allow businesses and investors to make decisions with confidence. Indeed, it is this above board market information that gives developers a clear signal about how and where to build, and energy efficiency benchmarks allow businesses to make more informed decisions about where to locate. According to JLL and LaSalle’s biennial Global Real Estate Transparency Index, it is Europe that leads the way when it comes to transparency, but how will the digital revolution change things?
Digital solutions in real estate
A lack of data and transparency makes it hard to have a clear view of the risks involved in a new construction project. New business intelligence solutions are giving tech-enabled real estate businesses an edge; an advanced ability to visualise, analyse, and manage data and key performance indicators. The use of digital software has touched all aspects of the real estate industry, from efficient management of human resources to moving the needle on emission-free construction sites. As governments strive to meet their carbon targets, it will be the construction industry — contributing 23% of the total global CO2 emissions — that they set their targets on. New digital clean tech vendors are set to solve the problem. By providing clean on-site energy: renewables, batteries, back-up generators, the new digital vendors can help wean, even the most traditional construction companies, off fossil.
Furthermore, on-site emissions can be measured through smart meters and IoT data trackers, which will decrease downtime, increase utilisation rates of equipment and provide better reporting. When risk-averse finance directors of leading construction companies think of digital, they think of risk — if it’s not broken don’t fix it, is the mindset. As executive boards build their strategic plan for the year, protecting the core business, takes priority. The thought of a major overhaul for a new digital business model/platform, is enough to scare even the most technologically open-minded board member. But, it is this hesitancy that has resulted in incumbent real estate companies losing market share to new digital players.
As internal innovation is often hampered by protecting core revenue streams, collaboration with or acquisition of a digital startup may facilitate the necessary disruption of one’s own business model, which is difficult to achieve from within. As a result, many corporations are looking to segue from their traditional business models by creating digital offshoots.
One-stop shop for real estate
Disruption is on the way for the laborious and time-consuming process of buying and selling a home. Companies like Opendoor are using algorithms to fine-tune the selling of property and major companies like Zillow are driving the shift to an end-to-end consumer ecosystem, where convenience is again a mainspring for change. We’ve all been there: you have agreed to buy a new home, and the sale is agreed on your current residence, but the dates don’t align. So-called iBuyers like Offerpad and Opendoor seek to solve this pain point by making cash offers for your home at ‘fair market prices’ providing you with instant money to buy your new home, and the flexibility to move out, when it’s most convenient. As a value-added service they will even clean and fix up your old house and sell it on the open market.
Smart buildings and IoT
IoT is revolutionising every aspect of a building from construction to management. This real time data enables more informed decision making, and with asset optimisation, better facilities management for more streamlined business processes. According to a report by IBM Institute for Business Value (IBV) 76% of COOs reported that increasing automation in facility and asset management will have a positive impact on operational efficiency. Leading real estate businesses are turning to smart buildings for three main reasons: development of new services tied to facility usage and performance, improved resource tracking i.e space management, and increased insight into facility performance. What many companies do is to start small; they install a monitoring system for an air-handling unit or the energy consumption of the lighting on one floor.
Inefficient processes
It’s not unusual for a multinational construction company to still use manual documentation. Picture a grey haired, moustached gentleman laboriously sorting through invoices and delivery notes, he may or may not have one of those oversized calculators, and a pair of thick-rimmed glasses. A paper based system, might seem like the best way to keep information secure, but with the risk of missing information for strategic decision making, it means that real estate companies that have not implemented an integrated digital system are sitting ducks.
And that’s only the start. Once artificial intelligence and machine learning come into play buyers and renters will have access to hyper-focused communications, to make accurate, data based decisions, which will advance the real estate industry even further and widen the gap between tech-enabled companies and incumbent players.
Whether you are an investor trying to optimise your decision making or a large construction company transitioning to a carbon-neutral, energy-efficient business model, the digital revolution, at some point, will become business as usual.
