Real estate is the largest and most expensive asset class in the world. This area is one of the last to embark on the path of digital transformation. With the transformation, new business models, requirements for square meters and process optimization began to appear.
This market is one of the most competitive. Nowadays, “live” deals are already being replaced by electronic ones, and online services and digital tools are replacing realtors or consultants. All this substantially transforms the market, changes the behavior of its consumers and large players.
To date, only 9% of real estate and construction companies say they are ready for a complete digital transformation. A ridiculous figure, considering that digitalization is one of the main trends for the coming decades.
It is clear that direct development is limited by the number of innovations, since buildings are still being built using the same basic foundations as a century ago. However, before all those involved in the rental, letting and sale of real estate, a large world of new digital opportunities opens up.
New models for new times
The key trend in the real estate market is SPaaS (space as a service). World leaders – WeWork, Airbnb, Clutter – do not own the square meters they work for. They only form value added with a much higher margin.
Office real estate is no longer just a location for work. Workers do not want to feel like slaves and cogs of the system. People are increasingly moving to a remote location or starting their own business. But success requires conditions, and this is not only a table, chair and the Internet. It is a comfortable environment and a suitable environment. That is why creative professionals go to business spaces where you can find like-minded people.
They should help the community to form, supplementing it with services: accounting, sales, HR-services (not counting basic cleaning and catering). This is enough to make it easier for residents to work. Due to high-quality infrastructure and professional sales, business spaces become operational profitable by the second or third month of work, and invested funds are returned in about three and a half years. But we must carefully monitor the market.
Here are a few trends that are already changing the real estate industry:
- Proptech as a step towards digital transformation
New PropTech startups launch worldwide. They grope for promising niches and increase the level of interaction with customers, simplify the processes associated with document management or even technical support of premises.
There is no single definition of the term property technologies (proptech). James Dirsley, a specialist in this field, believes that proptech is a small part of the broad digital transformation in the real estate market; a radically new approach to the acquisition, operation and management of it. It includes all the promises that are in the industry: IoT-space, software, replacing staff, business planning with an investment component. One of the landmark deals of 2018 was Plant Prefab’s Round A of $ 6.7 million. The investor was Amazon, who was interested in the modular construction technology from the startup.
The blockchain in real estate also deserves attention: registries, property rights, simplicity and security of transactions. This technology is already used in Sweden, they created a digital cadastral register. It’s hard to name startups that have become successful. Most projects are not even five years old. But the market has a working platform for valuation and real estate trading (The Crypto Realty Group) and specialized financial instruments (The Lending Coin), which confirms the prospects of the blockchain in real estate.
- Green is the new black
Awareness and environmental friendliness of business spaces are important criteria when choosing offices. In many respects, the popularity of WeWork is based on it – from the start they created a green design (Zero Plastic and Meat-free initiatives) and an environmentally friendly community within the network (WeWork’s Global Summit conference, which brings together next-generation entrepreneurs, impact start-ups and socially responsible business).
Millennials disagree on less. Everything around should also be technologically advanced in order to minimize the waste of time and effort.
- Vertical development
This is one of the main trends in the global market. Vertical development is a solution in which everything necessary for life is in one building. Also, the player’s readiness for fundamental changes in the business model and processes under the increasing pressure of technology. Let’s say you can constantly install new applications on your smartphone, or you can change the OS. Population growth, the desire of millennials for minimalism and the abandonment of consumerism make vertical development an important trend of the future, which is everyone’s responsibility to monitor.
- More data
McKinsey & Company found that analyzing performance data exceeds not only intuition, but also experience. “New Oil” allows you to make decisions that allow a step or two to overtake competitors. As an example, WeWork trained a neural network that predicts the loading of meeting rooms. They claim that it copes 40% better than a person. The Zillow platform helps the buyer know the real and estimated value of the property.
Office real estate market participants need to think globally and not be afraid to transform the business. All the same, WeWork launched the new HQ by WeWork service, which prepares and turns out offices to corporate players in their spaces. The leaders of the company saw an opportunity for development and decided to change the business model.
To the real estate market also will come such digital upgrades as:
- Simplification of the deposit system
In the rental housing market, a system of insurance deposits is extremely widespread. This amount, often equal to the monthly payment for renting an apartment, is transferred to the landlord as a guarantee of keeping things transferred for temporary use in proper form.
However, what is good for the owner puts the tenant under financial pressure: sometimes when they leave they have to wait several weeks to return their deposit, or engage in battles to avoid unfair accusations of property damage.
For example, the creators of the British startup Reposit decided to rectify the situation and created a service that provides an online alternative to the deposit system in the UK. How it works: the tenant pays a non-refundable fee equal to the weekly rental cost, and the tenant in return receives insurance for eight weeks of rental.
- Availability of cashless payments
In the UAE, housing rents are still often paid in cash. This method has become especially dangerous in a pandemic, as it involves personal contact between the tenant and the landlord.
To solve the problem, the free Ajar platform was created. This is a service of online payments for rental housing. It reads the tenant’s notification of the need for payment (SMS, WhatsApp, email). The user enters the application, selects the payment method (credit or debit card) and deposits the required amount. For timely payments, he also receives bonuses from platform partner companies.
- Contactless rent
In a megalopolis, it’s not so easy to break at any moment in order to drive through the whole city and pass keys to access the premises.
The idea of such a service is that it greatly simplifies the process of conducting transactions and allows you to switch to contactless rental of premises, which is especially important during a pandemic. The virtual key allows you to open the door directly from your smartphone. You do not need to meet with anyone to move into apartments, rent a garage or office.
The digital future of real estate industry
Over the next 20 years, several fundamental points for market development will change immediately. First, data science and databases are already becoming ours tomorrow. Data will be even more reliable and transparent. Secondly, traditional shows are becoming obsolete.
Virtual reality will become so real that you can touch, see and even smell any real estate in the world without leaving your home. For those who want to see housing in person, home automation technology will allow you to see a house or apartment without the presence of a broker. The process of closing the transaction will take place practically and online at a price significantly lower than today.
The two biggest trends that will affect the real estate market are climate change and the stages of human aging. In light of global warming and increasingly aggressive weather, architects are brainstorming and coming up with new energy-efficient building models that reduce air emissions and bills. Over the next few decades, we will see more and more water collection systems, green roofs and other amenities that reduce energy and water costs.
Another key factor will be the aging of the world’s population. By 2030, more than half of the world’s population is expected to be over 60. According to experts in the field of real estate, wider ramps, doorways, adapted bathrooms, additional amenities for concierge services, care and interior design in the style of the hotel, motion detectors and other smart devices and technologies for monitoring the physical condition of residents will expand.
The only major technological advances that have truly changed real estate over the past 30 years are online access, digital photographs, email and electronic signatures. VR will be a good tool for investors, but people will still want to personally get to know their home.
Also, a real breakthrough in real estate technology is the use of online tools and data to fine-tune the marketing plan and improve the method that brings the seller and buyer closer to the deal. The current process of creating, receiving, distributing, reviewing and agreeing on proposals is incredibly archaic and error prone. This technology will provide a more transparent and effective way for buyers and sellers to come to an agreement in a much shorter time.
What is needed to transform the real estate market?
Transformation of the market requires a complete transition to digital technology. To address the issues of transparency and full access of the population to the services of realtors, it is necessary that the transition to digital technologies be comprehensive. So far, only the most advanced companies have switched to digital work. And the next step in introducing new technologies in the real estate market should be the development of an electronic register of contracts for the provision of real estate services.