James Robert Scott
When Steve Weikal and I ask our students at MIT to name the most innovative period in real estate history, we end up looking 85 years in the rearview mirror to the construction of the Empire State Building. Workers put shovels into the ground on St. Patrick’s Day in 1930, and 14 months later, they opened the iconic 102-story skyscraper to the public.
It was a monumental achievement and many of the same practices that helped accomplish it continue to serve developers and construction firms today. But on the whole, the real estate industry has not kept pace with the advances made in other industries that have embraced digitization and innovation.
In fact, if you stop to calculate the pace of construction back in the first half of the 20th Century (around two floors per week on the Empire State Building), you’ll see that real estate has significantly decreased in efficiency over time.
To be sure, real estate is a complex industry, and there are good reasons that it hasn’t been totally upended by one silver-bullet app in the way that Uber and Airbnb disrupted transportation and hospitality. However, the number of proptech tools on the market has grown from only a few dozen several years ago to somewhere over 18,000 today, and the time has come for real estate professionals to take digital transformation seriously – or risk falling behind those who do.
Data Analytics and AI
It is often suggested that Big Data is not as readily available across the built environment, but this is changing significantly as new technologies and IoT devices engrain themselves into our lives to create the Smart Buildings of the future. As more and more data becomes available, it allows those with the skills and capabilities to use this data to create valuable insight, which allows for significantly better decision-making across a number of day-to-day processes.
Numerous new software tools have emerged that give professionals access to new data points – providing a greater understanding of who their tenants are, what they now demand as a standard, where they spend their money and even the likelihood that they will renew their lease. By embracing data analytics, real estate firms can quickly turn this data into dollars.
Artificial intelligence is, of course, an area that stakeholders in nearly all industries are watching very closely, and we’re already seeing practical applications in real estate.
For example, property management companies are using AI-powered virtual assistants to engage with tenants and prospective renters. These virtual assistants are now advanced enough to give people the sense that they’re communicating with a real person, helping to schedule apartment tours and dispatch maintenance orders required to fix tenant issues.
The chatbot can still escalate the interaction to a call with human representatives, but it will only do so when needed, considerably reducing call volumes for property management staff. The renters get their problems resolved more quickly, and the property management company can more effectively leverage its scarce human resources. It’s a win-win.
Web 3.0 and Blockchain
This is the next frontier of technology, and in many ways, it is still evolving. But real estate professionals need to work with these potentially game-changing technologies in mind, to ensure that today’s deals continue to serve their firms well in the future.
Blockchain, for instance, has the potential to transform the industry through smart contracts that improve trust and increase security. One day, developers may be selling advertising space not on the sides of their buildings but rather on the virtual space in front of them for personalized digital ads consumed via people’s augmented reality glasses.
And already, digital twins are providing operations teams with real-time data that provides actionable insights about everything from utilities to how people move through the buildings they occupy – helping to optimize HVAC systems, workplace seating arrangements and security protocols.
Importantly, stakeholders need to approach these changes with a sense of humility. The life cycle of the building and different asset classes, combined with intricate stakeholder complexity across the industry, means that real estate is a highly nuanced and complex sector. But the human element remains crucial to success in real estate.
Professionals who can complement their years of experience with the features of emerging technologies are the ones who will have the competitive edge in the future and lead the industry transformation.
James Robert Scott is a research scientist, lecturer and director of the Real Estate Transformation Lab at in the Massachusetts Institute of Technology’s Center for Real Estate.
