Smart Technology is already shaping real estate and will continue to do so into the future, as major innovations like 3D printing, Blockchain, the Internet of Things (IoT), Augmented Reality (AR) and Virtual Reality (VR), Artificial Intelligence and even drones find useful applications in everything from building management to customer engagement. There are two main reasons for this, namely the human need to innovate and an increasingly enabling environment (catalysed by COVID-19).

Innovation – or the drive to do things better, if you will – is part of the human psyche. Socrates said that “The secret of change is to focus all of your energy, not on fighting the old, but building on the new.“ From the invention of the wheel to today’s advances in AI and Machine Learning, the human desire to strive for improvement is alive and well. 

From an economic perspective, innovation and economic growth go hand-in-hand. William Brody, ex-president of Johns Hopkins University and renowned scientist, radiologist and academic administrator discusses the calculus of innovation, describing it as follows: “… Knowledge drives innovation, innovation drives productivity, productivity drives economic growth.“ And Steve Jobs – widely acknowledged as one of the great innovators of our time – said that to be a leader, you also need to be an innovator.

The realm of smart technology is ideal for thinkers, innovators, leaders and businessmen to develop, fine tune and implement ways to improve their businesses and the lives of people affected by those businesses. In the real estate space, it’s about better experiences for tenants and employees, which lead to customer and employee loyalty, improved efficiencies, cost savings and, ultimately, profits. Whether you use AI to improve your customer service journey, or 3D printing technology to build more sustainably or save on costs in fit-out, smart technology is rapidly entering into the industry with their promise of improvements across the board.

Of course, the second factor – an enabling environment – is critical to successful innovation. In the case of smart technology and its application in various industries, internet connectivity is critical. IoT, AR, VR and AI are dependent on cost effective, reliable and far-reaching internet connectivity to function. In fact, all the smart technologies that are finding application in real estate are enabled by quality cloud services and high-speed, high-volume internet access.

Today, we’re seeing smart technology and digital transformation being discussed at C-Suite and Boardroom level. It’s no longer the purview of a few technically-minded specialists in the IT department. In fact, executive committees and Boards that are not actively looking at ways to transform digitally and leverage smart technology are positioning themselves to go the way of Kodak during the rise of digital photography and the birth of the camera phone. Though Kodak has managed to rebuild itself since it filed for bankruptcy in 2012, real estate players would do well to learn a lesson from this tale of caution and embrace innovation in their businesses.

New, more cost effective technologies have added to engineering efficiencies. Cloud computing and blockchain technology have made massive storage infrastructure and computing power available to any user at a fraction of the historic costs. Open APIs (Application Programming Interfaces) allow for different systems to connect and integrate, leading to greater collaboration, automation, and innovation across all industries and especially for real estate professionals. We’re seeing the Software as a Service (SaaS) model gaining traction, too, allowing real estate developers to reduce Capex requirements and time to market, and mitigate against a lot of the risk involved in digital transformation.

Value creation, cost savings and risk management are not the only drivers behind smart technology adoption in real estate. Tenants are becoming much more demanding, too, as customer service and engagement standards continue to rise and consumers’ tolerance for mediocre service continues to diminish.  Digital has become an expected part of the tenant experience.

With so much innovation available to transform businesses, we’re seeing real estate companies begin to appoint innovation managers to help them choose the right technologies and implementation strategies. And we believe the industry is only getting started.

In next month’s article, we will kick off with a look at the impact that 3D printing is having in the construction industry.

Co-authored by Wayne Berger & Peter Levett

Joint Chief Executives of iShack Ventures, a venture building technology business with specific focus and expertise in property, providing a number of technology digital capabilities to the property sector.  

3 Steps to Tackling Digital Transformation in Real Estate in 2022

As a real estate professional, you may wonder if you even need a digital transformation strategy. After all, real estate companies have operated very effectively for decades without significant digital transformation. Any strategic change fundamentally changes how the people inside and outside the business interact and operate, and digital transformation certainly does this.

Though the real estate sector has, historically, been synonymous with being slow to adopt technology, international PropTech saw a record $32 billion invested in real estate technology in 2021 – up 28% from 2020. Growth in revenues of the PropTech industry (as a measure of increased usage) worldwide has increased by over 10% per annum over the last few years and is expected to grow at a faster rate going forward. The PropTech industry is booming, with almost 10 000 PropTechs in operation globally.

In my years as a digital transformation consultant, I have seen many real estate companies burning through small fortunes, not to mention years of time, only to end up with failed technology engineering and adoption projects. It’s understandable, then, that real estate companies are thinking more carefully about their approach as landlords ponder the question: How do I maximise my digital transformation journey and improve my portfolio’s yield through digital?

These are the 3 steps to tackling digital transformation in Real Estate in 2022:

• Understand why a technology (or digital transformation) strategy is important

Any strategy, including a digital one, needs to be central to the business strategy and driven from the Board and executive management. Unfortunately, technology is too often seen as a matter to be driven by the IT department or similar in the business. But we are seeing a seachange in the industry as Boards and executive management are beginning to understand the importance and significance of technology.

While everyone was locked down at home during the COVID-19 pandemic, digital solutions to everything – from healthcare to shopping to customer service – gained momentum. And consumers are not keen to go back to the days of sitting in waiting rooms, standing in till queues or listening to panpipe hold music while waiting for a customer service agent to answer the phone. From managing car insurance claims paperfree through an app, to getting groceries delivered to your house in 60 minutes, the world has changed and there’s no going back. 

In real estate, the opportunities for more effective facilities and utilities management, tenant communication, and even residential or commercial property sales and rental management are endless.  One fast-growing sub-sector, for example, is smart building which allows real estate owners to digitally manage their buildings, as well as reporting, inspections, communications and more between all those that connect to the building – all using an app on your phone. This has increased relevance with the introduction of ESG reporting requirements. 

• Exploring potential benefits & current pain points

The key to benefitting from your investment in PropTech is taking a strategic approach. Digitally transforming for the sake of it is a fruitless endeavour. Instead, tackle your digital transformation with a clear understanding of the potential benefits and current pain points you want to alleviate and develop a strategy that addresses these. Critically, your strategy should include targets that you can measure against your business goals to ensure you can report on whether or not your PropTech solution is working for you. 

Whether you’re aiming to achieve cost reduction targets through better utilities management, seeking to attract new long-term commercial tenants through improved sustainability and energy efficiency reporting, or wanting to improve facilities management efficiency through quick and easy facility bookings, digital transformation must support your strategic goals if it is to give you a return on your investment.

• How do we choose the right digital solution mix?

Implementing your digital transformation strategy will boil down to choosing between three possible solutions: Build it yourself, outsource it, or buy into Software as a Service (SaaS).

Build it

Landlords are asset managers and, by nature, there is a tendency to want to own any assets they invest in. So building your own solution probably sounds very tempting. However, software engineering is a very different game to real estate investment and the skills required to maintain and innovate your bespoke technology solution are scarce, costly and – frankly – unlikely to respond well to the same management techniques that work for your employees in your core business. 

Outsource it

For most real estate companies, outsourcing is a more realistic option. It gives you access to the scarce and expensive technical skills you need, often at a more affordable rate, and without all the challenges that come with managing a software engineering team in your business. In this scenario maintenance and innovation is outsourced to a specialist company.

An important consideration for outsourcing is the ownership of the ‘Source code’. An unwitting customer may purchase the ‘executable program’ but be unaware that from the onset they must request that the software engineering supplier’s quotation includes the intellectual property of the programming, known as the source code. This gives the purchaser the flexibility to move the development project to a new service provider, should problems arise in the future with their current supplier.

SaaS it

The last possibility and the most cost effective upfront and monthly is SaaS. SaaS solutions save you time-to-market, while ensuring that your PropTech solution is regularly updated with improved functionality and cybersecurity measures, without the hassle and expense of maintaining or outsourcing the teams behind the software.  This makes SaaS solutions accessible and ideal for smart real estate businesses looking to accelerate their digital transformation. 

It’s important to select SaaS solutions that integrate easily with other software packages your business uses to ensure smooth data sharing and shared functionality. Licensing archaic or international PropTech systems that can’t easily be customised for the local market can get very expensive, very quickly.

If these three steps seem daunting, you may want to consider appointing an Innovation Manager or equivalent in your business whose sole responsibility is to navigate your company through the treacherous waters of digital transformation. The right digital transformation strategy, supported by the right skills to deliver against it, is the recipe to a nimble and ultimately effective technology adoption journey.