How to win the race to evolve
Benjamin Franklin said there are only 2 things certain in life: death and taxes, but I believe there is a third – change, writes Simon Hughes of Liquid Real Estate Innovation.
Change is inevitable as we constantly evolve. Change in the real estate sector is happening constantly, and that is what makes it both interesting and challenging to predict what the future of real estate looks like. In the words of physicist Nils Bohr: “prediction is difficult, especially if it’s about the future.”
What is more predictable is that as the global population increases so will the demand for real estate. What is less so, is how the demand for particular types of real estate will change.
Conventional office space and co-working environments; home ownership and private rental; large scale hotels versus serviced apartments. Current trends show that the traditional real estate markets are shifting to meet new living and working styles that are being driven by changes in consumer-led technology.
Trying to predict the exact impact, and more importantly the return on investment, of business improvement technologies such as Blockchain and Artificial Intelligence, or the vast array of mobile solutions is nigh on impossible – especially to the levels of certainty required by our traditional businesses and their traditional business models. It’s even harder to predict the impact of such changes in an economic climate that is so prone to major shifts over the short term.
Therefore the current strategy appears to be: follow the longer-term trends, stay close to new emerging technologies that have worked in other sectors, create digital strategies, but hold back on the full implementation until the landscape becomes clearer and the risks of failed investments reduce.
Keeping on track
What is certain is that the real estate sector is changing, and will continue to evolve. It is only the most agile and innovative organisations that will be able to capitalise on the inevitable developments of the sector – ensuring their companies stay on track with the evolving trends, maximising the opportunities that will present themselves, and keeping up with the increasing pace of change.
The graphic below demonstrates some of the shifts that the current real estate operators will need to make in order to truly ‘own’ the future of property. Investing in technology without a clear understanding of how it will benefit the end user of the assets won’t shift traditional operators to the right.
The challenge for those organisations that are choosing to invest heavily in technology or digital transformation programmes, is to ensure investments are focused on addressing the needs of the end users of their assets. All too often investments in technology and digital transformation are focused on internal process improvement and can become expensive vanity projects that do not deliver the required returns on investment.
Making accurate predictions is difficult, and can be extremely risky and costly when it goes wrong. Investing in cutting edge technologies for the real estate sector now is high risk, and often a step too far for the current main players.
An approach to mitigating the risks of investing in expensive technologies that don’t deliver, is to take an innovative approach to understanding the needs of the end users of the assets we build, maintain or operate.
One of the biggest inhibitors is the relationship model. Many traditional organisations have long-term relationships with each other and fantastic histories of working collaboratively within supply chains. Those relationships are built on trust, and mutual cooperation. They are, for the most part, business-to-business relationships. The foundations of such relationships are built over years of delivering traditional outputs, and working together to manage the inevitable challenges the sector has faced down over the past hundreds of years.
It is no surprise that where proptech or wider innovation has progressed at a faster pace is in the residential and retail sectors; the relationships focus on the end user of the assets – the customer.
Shifting the power
It is the customer that drives the desire for technology, it is the customer that creates the need for innovation, and it is the customer that ultimately chooses which property, office, hotel or retail outlet they embrace. It is this end of the supply chain that is driving forward the innovation and technology demands. The challenge is how to benefit from these learnings, because meeting the needs of the end user is hard, and for the large organisations who are measured against a rational return on investments, often a stretch too far.
The future of real estate will be defined by the organisations that can make the links back to the end customer better, staying close to the needs and wants of the end users, those organisations that quickly understand both the importance of and how to maximise their B2B2C relationships.
The future of real estate will be dominated by those organisations who are agile in their thinking and their operations, innovative in the solutions and products they create, and are close, not just to their traditional customers in the supply chain, but to the end users of the assets in which they build, maintain or operate.