Internet of Things Smart cities

How is the digitization of real estate shaping the future?

27 September 2016


How is the digitization of real estate shaping the future?

There is an amazing video dating back to the 1960s called “The Home of the Future: Year 1999 A.D.” (The Home Of The Future: Year 1999 A.D.). In this video, a passage predicts what is to come. It shows a “housewife” talking to her husband and son via a video connection using VoIP which looks like a basic version of the Internet of Things. This home of the future integrates the use of technology to make life easier; it is exciting and novel. Now, in the first half of the 21st century, we find ourselves transitioning into a 4th industrial revolution. This revolution is expressed in the form of digitizing our way of life. From transport to health, education to manufacturing, everything we do and use is in the process of being digitally transformed. The digitization that we are seeing today created the “home of the future”, but in a way that we could never have really envisaged. Digitization has become involved in real estate and is in the process of transforming it. This digital transformation is definitive and global. It concerns all aspects of the sector – from construction to asset management, marketing to sales, as well as our home and professional environment.

How does the digital revolution positively impact the real estate market?

The real estate sector is just like any other market. The various management and operating activities involve processes and the transfer of information, which can be optimised in order to improve effectiveness, productivity and profitability. The real estate industry itself very much welcomes this change: consultancy firm Drees & Sommers recently showed that 68% of participants see the digital revolution as an essential lever and a major source of transformation for the market.

Regarding the occupants themselves, we can see changes in both behaviour and use. They are driven by the change in consumer expectations regarding the way in which they interact with their living or work environment.

The real estate industry is undergoing a significant change with a new approach which is increasingly focussed on information. A deluge of data (“Big Data”) is gradually injected into the activities of construction and real estate management. This massive influx of data breeds knowledge which facilitates better management of real estate property. There is therefore everything to gain for those who manage or occupy a building. This is resulting in a better performance and optimisation of services and processes. They enable considerable savings to be made and a marked improvement in the quality of services. An example of the application of positive digitization involves Microsoft. The company has installed smart meters across its Washington campus, thereby saving $1.5 million on its annual energy bill whilst improving occupant comfort.

To take things even further, the real estate ecosystem must be decompartmentalised. Ensure that the data comes from the technical “silo” in which it is naturally found in order to be analysed with a global and cross-functional approach. The data generated by the digital technologies must be able to be accessed by everyone and therefore enable the information to be pooled and exploited to better meet all of its uses.

What are the factors of this change?

The levers that drive the transformation of the real estate sector are the same as those that will drive the 4th industrial revolution. They are the technologies that enable us to produce, analyse and communicate data en masse, across highly distributed and secure networks.

The Internet of Things (IoT) is used increasingly more often in real estate. IoT sensors can be used to implement what is known as “smart housing or buildings”, thereby helping to better understand behaviour, enable equipment to be ordered, and occupants to be informed, and even improve security.

The data generated by the connected equipment can, for example, be used to make predictions and model the uses in a building or those in an area of activity. Disney, for example, uses portable IoT-based devices to collect data on building use in one of its parks by visitors and to model this data. It is then possible to determine how to better manage infrastructures to achieve optimal use.

Well-analysed data helps to make informed decisions. With increasingly numerous and accurate forecasts, certain management processes are anticipated and become more efficient. Real estate specialists, JLL, have written their Top 10 Global CRE Trends for 2016. The exploitation and business analysis of data is the key element which helps managers to make the right decisions in corporate real estate.

Smart meters are another type of technology which drives the digital transformation. Smart meters form part of the connected world and mainly communicate data relating to energy and liquids. The analysis results of these data result in more effective use of the energy and reduced operating costs. The deployment of these meters is currently under way and certain players are well-positioned on the subject. In particular Nest, which offers a number of innovations, including motion detectors to adjust the heat settings when a person leaves the house for example.

It is the entire real estate ecosystem which can thus benefit from the use of smart meters and the data provided. Owners, service providers and occupants become stakeholders in smart buildings and play a role in optimising its management and performance.

Building Information Modelling, or BIM, uses digital technology to manage the entire lifecycle of a building. It covers entire projects from the design, construction, optimisation and continuous exploitation of the building and equipment. An illustration of BIM is the 3D representation of a building and its numerous applications (location of equipment, use of space, optimisation of technical interventions, etc.). Anglo-Saxon countries are well ahead in this field. The digitization of BIM processes has been described by the British government as “the collaboration between the construction sector and the software industries“.

What is the future for real estate? Are we heading towards 2 digital transformation levels?

The “home of the future” is here, perhaps 20 years later than expected, but the digitization of all that is related to the real estate sector is more impressive and more ambitious than could ever have been imagined in the middle of the 20th century. The data generated from a variety of sources have the potential to facilitate major progress across the entire real estate sector – optimisation, rationalisation, dissemination of information and collaboration, ensuring that management and exploitation are as effective as possible.

But where is the real estate sector positioned in the digital economy? A study by MIT focussing on the levels of maturity in terms of the digitization of a variety of sectors claims that digitization offers “very strong benefits” in all sectors, including real estate. However, the levels of maturity in this process vary, and a study by PWC entitled “Measuring Industry Digitization: Leaders and laggards in the Digital Economy” positions real estate and construction at the bottom of the digitization scale.

The real estate sector has a major challenge to overcome in order to accelerate its digital transformation and catch up with other sectors of activity. The rotation rate related to construction and major renovation enabling buildings to be made “smart” only represent a few percent per year and is not enough to overcome the gap.

The benefits of such a transformation are self-evident. All stakeholders (owners, managers, occupants, etc.) will profit financially, and in terms of performance and quality of services. A transformation is under way and although it is expected to take some time, it is inescapable.

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