11 Apr 2017
“Technology and the availability of data is changing property investment.” This was the unanimous view of a panel made up of thought leaders on our stand at MIPIM.
This is not new; technology has been around for many years, both within our sector and outside of it. However, it is also no secret that the built environment has been slower than other sectors in adopting technology. How then, is this beginning to change? What can we expect to see more of in the coming months and years?
Below is a snapshot of the discussion:
Current trends include:
Increased strategic investment in technology
It is no secret that the real estate sector is years’ behind the financial sector in utilising the benefits of technology. However, as the pace of change is getting quicker and quicker, we are seeing innovation from both existing companies and new entrepreneurs at an increasing rate and more strategic investment in start-ups.
Transparency of data is essential
Legacy systems and a view of “we’ve always done it that way” has previously resulted in poor data management in companies of all sizes. This is beginning to change however, with the introduction of a Chief Information Officer in many firms and ever increasing support for the need for global data standards. Transparency of data benefits everybody.
The global market is increasingly important
Of $1.3 trillion worth of commercial property transactions in 130 countries, tracked by Real Capital Analytics, approximately one third had a multi-transactional element to them. Real estate is no longer a bullet proof investment with new business models like that of Air BnB impacting traditional markets and return on investments (ROI). This means that companies need to think more opportunistically about how to create ROI, through research and development (spending around which is currently very low) to solve real, meaningful problems.
We invested in French hotels, a stable market about five years ago …and then along came Air BnB. In the space of three years, there are more Air BnB rooms in Paris than there are hotel rooms. As an investor, what had seemed to be one of the most bullet proof investments in the world changed pretty quickly. That was a big wake up call for me.
Demand for property is a data game
It used to be difficult to obtain data; now there is an extraordinary amount of data but there is a question around what to do with it and how to verify the use of it. Understanding where people want to work for example, through the capture and analysis of qualitative data, will aid decisions on where to invest. The value of data will change as it becomes more commoditised over time but knowledge and expert services will be required more and more.
With new technology and the availability of data you can create new products. A new investor class, liquidity and transparency – these are the kinds of things that are going to come from making data freely available and having underlying software to be able to operate that.
Long term impact:
Technology will continue to drive the opportunity for real estate
Crowdfunding and investment in real estate from wider funding sources will increase as technology continues to innovate the way we are able to invest in property.
Knowledge of technology by CEO’s will no longer be a ‘nice-to-have’ but a ‘must-have’
At the moment, it is possible to be a CEO and know very little about technology; this will not be the case in future when almost every company will be a ‘tech company.’ That is not to say that real estate expertise will not continue to be essential but an understanding of maths, technology, liquidity etc. will also be vital.
We’ve redefined ourselves as more of a technology company; we’ve quadrupled the size of our technology team over the past 4 years’.
We will see a more diverse workforce
In five years’ time, the average workforce will be much more diverse. This will, at least in part, be because technology is encouraging people to be more serious about bringing talent into organisations; it’s the product or service that drives business and the right people are required to be successful in the market.
There will be more opportunity for data partnerships
We are already seeing more partnerships (VTS & Hightower for example) which are creating opportunities to drive new performance metrics such as tracking revenue and expense management, which are increasingly important. How do we capture economic data, what is the quality of the data, what will the valuable assets be? As these questions become increasingly important to answer, more opportunities for data companies to partner will present themselves.
The 'co-mingling' of data and software will increase exponentially in every industry
This is the new frontier of innovation. If you can take someone’s data and give it back to them in a way that they can create value from it, you will successfully find a way to innovate. Alternatively, if you take someone’s data and then try to sell it back to them in a proprietary way, people will find ways to restrict that value. This is a battle currently taking place within our industry. However, technology today is such that we should be able to collect data anonymously and in a way that creates real advantage and value. If we manage to do this, the industry will prosper.
We are seeing meaningful improvements in the time it takes between someone wanting to sell or buy a property and when they can accomplish it; the process has shortened considerably through technology. There’s a lot more to come.
There is an overwhelming amount of technology out there and we are still at the early stages of understanding the full benefits that technology can bring to our sector. 80% of 300 Chief Executives surveyed by Altus Group agreed that they need data and technology to run their businesses effectively but only 20% said that they already have the technology they need.
Real estate is a market that is ripe for innovation. Technology can bring great opportunities to investors but can also be a huge threat for our industry if ignored. How do you avoid obsolescence? Get involved in the discussion and find out what will make the biggest impact for you.
- Bob Courteau, Altus Group
- Aaron Block, MetaProp NYC
- Philip Barrett, PGIM Real Estate
- Bob White, Real Capital Analytics
- Dan Hughes, RICS
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