Finding a Path to Real Estate
At Pathfinder, we recently held our second ‘Path to’ event dedicated to real estate, and part of a series of talks on how the future is being shaped in several industries, with handpicked players from the corporate and startup world. During this second talk which took place on Nov. 21, we decrypted the sector’s trends and invited our audience to then identify existing problems and pitch innovative business solutions. The next episode, dedicated to Beauty, will take place on Feb. 11. Stay tuned !
At the ‘Path to Real Estate’, we discussed how digital tools and new technologies are reshaping the Real Estate value chain as we’ve long known it. New market players, from GAFA’s to startups, are shaking up traditional actors’ leading position. But while Real Estate is facing a great transformation, the chain will always have its upstream of land for building and its downstream of a resident.
On stage, Pathfinder’s Raphaele Leyendecker talked with François Pitti from Bouygues Construction (a leading construction firm facing disruption with the advent of new technologies), Thomas Lefebvre from MeilleursAgents (an online service changing buyers’ access to data regarding property value), Kevin Cardona from BNP Real Estate (a commercial real estate actor leveraging IoT and data to re-think tomorrow’s space) and Jade Francine from WeMaintain (a startup that’s breaking up the highly concentrated and opaque elevator maintenance market).
Here is what we learned from our journey through the value chain, from construction to the end user.
The Future of Construction
Real estate’s value chain includes a great diversity of players from developers and architects to realtors, public institutions and investors. Each is currently being challenged by new entrants leveraging the power of technology. Upstream, construction (which today represents 15% of the world’s GDP) is a vertical facing the gruelling challenge of responding to an exploding world population which is set to double in some emerging countries in the next 25 years. Accelerating urbanization, energy transition and gentrification is therefore fuelling the need to do much more with much less.
As a highly regulated industry that represents between 12–15% of employment in some countries, François Pitti noted that change in construction will nevertheless not happen overnight. While disruption has mainly taken place on the upstream phase of a building site (ie. Space planning and modelling), we are already starting to see great transformations driven by new technologies helping resolve productivity problems. Labs, materials, drones, robotisation, blockchain, 3D…the way we build today is almost like science fiction, says Pitti.
Yet the diffusion of this technology is taking time and it’s only through a network effect that we will notice its overall impact. While we haven’t experienced yet an uberisation of construction says Pitti, there probably will be one in the next 5 or 10 years through disintermediation and automation.
Big Data to get ahead of the industry…
Big data is disrupting all sectors and real estate is no exception! A staggering amount of messy, closed data is now available to help various parties (sellers, realtors, buyers, financial institutions) make better decisions. Disruption is taking place at many levels, from property valuation to urban planning.
Have you ever wondered how potential buyers got their info 15 years ago? At the time, information was held by a handful of players (mostly notaries and realtors). Companies like Meilleursagents are democratizing the industry, providing buyers with real-time property value estimates, accurate all the way down to the street number.
Will this trend see the disappearance of real estate agents? It’s highly unlikely, says Thomas Lefebvre, as almost 70% of transactions in France are still done through realtors. The human aspect is still proving indispensable. The question is more about how to leverage technology to have better performing agents.
The next challenge, says Lefebvre, is going to reflect how the usage of this data reforms urban planning. What is the next model? How do we link the power of data with services as a starting point on the reflection of space planning?
IoT to create tomorrow’s Smart buildings
What about GAFA’s involvement in real estate? After all, Facebook and Google have our profiling data and Amazon and Apple know everything about our consumption habits. Their impact in the sector could be massive.
In a world that will be increasingly dominated by digital natives, the entry door for the GAFAs into real estate seems to currently be connected devices (Echo, HomeKit, Nest..) that get ever closer to consumers. But GAFAs do not have the core competencies of real estate actors, says Kevin Cardona. Instead of competing, the big four are actually partnering with property developers. As an example, BNP recently launched the first fully-integrated Google, Apple, & Alexa-connected building.
Commercial real estate is therefore betting on IoT as a competitive advantage. Today’s Smart building is equipped with tools allowing one to improve facility systems by cutting costs, being more sustainable, maximizing occupancy and ultimately increasing tenant satisfaction. But the real value will be in the analytics and intelligence we gain from these IoTs to understand in real time how buildings operate.
One typical pain point, says Cardona, is the management of meeting rooms. A smart building will soon be able to tell us in real time which is the closest available meeting room at this precise moment.
From a product economy to a usage economy
Property developers are facing the complex challenge of meeting the needs of today’s changing lifestyles and this is reflected in the way we think of space planning. Digital nomads are totally redefining the space we live in, including its legal status, says Kevin Cardona.
For instance, if a resident manufactures products at home and then sells them online, is this space considered residential, office or retail? What does it say about usage and how do you price it? We’re entering a new economic model that is shifting from product to usage.
Taking usage as the starting point means rethinking the product. As an example, Google and BNP have recently partnered to create a highly modular and flexible office space which can be instantly reorganised depending on project needs.
How will we value usage instead of product? We’ve long been focusing on the tangible aspect of the building itself,talking for centuries in terms of square meters, but now the focus is on the user experience. WeWork is not a co-working company, it’s a community-based co-working company whose main objective is to create a community, and the building is simply a means to do that. Today valued at $20B, what is it telling us about the new model for property valuation?
Understanding tomorrow’s models also means understanding societal trends and offering adapted services, says Cardona. What co-living solution can we offer that is tailored to the specific needs of so many different consumer groups, from divorcees with children, and reconstituted families to singles, couples, students…?
New incumbents
New incumbents are challenging industry leaders’ positions, offering efficient and price-transparent solutions. WeMaintain is an example of a startup leveraging this opportunity to create a new model by tackling elevator maintenance — a €30B market that has until now been slow to react, opaque and dominated by an ‘oligopoly’ of 4 actors.
A New Ecosystem with shifting lines..
Today’s notion of property is completely changing as we enter an era increasingly focused on the quality of service.
Airbnb is a perfect example: zero tangible assets yet the second most valuable startup in the USA based solely on its community and an exceptional customer experience. Airbnb is now wondering what’s next? After launching the home-sharing revolution, the company that provides the housing is actually now planning to create houses with it’s ‘Backyard’ initiative, moving into architecture and urban planning. The lines are blurring and market leaders should capitalize on their assets to continuously reinvent themselves.
The value chain is clearly being displaced and intertwined with adjacent chains to create more value. All players seem to agree that it’s by working hand-in-hand that the revolution will happen — it’s a networked ecosystem game, not just a bunch of trees and branches.
The second part of Path to Real Estate was dedicated to inviting our participants to reflect on how to best leverage assets. How can real estate players, mostly incumbents, use their assets to ignite new businesses and be an important part of this real estate revolution?
For example, one team imagined how promoters can be more informed about the life of a neighborhood to better predict which types of properties to develop and to eventually launch modular buildings adaptable to the needs of the neighbourhood.
And how do we help do all that at Pathfinder?
Throughout this masterclass and workshop, we brought forward one of our big convictions at Pathfinder, that all players, particularly incumbents, should broaden their views and embrace the digital transition by looking at other value chains and learning from the disruptive practices of other corporate players and startups.
Our motto at Pathfinder is to realign interests of entrepreneurs and big corps. Our clients? Big corps. Our mission? Create their new businesses to rule the digital transition of their value chain. In startup mode. With entrepreneurs.
Stay tuned for our third episode on February 11 at 6pm at The Family Paris, where we will focus on the future of beauty. With industry leaders and startups from the beauty world, we will break down the beauty value chain and understand the different trends affecting and shaping its future.
