Building in the Digital Age
How Digital Enhancements can Transform Real Estate Projects
As originally appearing in Espace Montreal, volume 33, #1, 2024.
By now we’ve all heard about the potential impact digital can have on any given industry; commercial real estate is no exception. While questions remain about the capabilities and possible ramifications of emerging technologies, such as artificial intelligence, blockchain, virtual and augmented reality, etc., there are ample opportunities to embrace existing technologies that are already established and available in order to enhance real estate development projects, maintenance and operations, and timely access to information to drive informed decisions. It may be overwhelming to keep up with, but it’s estimated that in the next 10 years, 40% of the S&P 500 will no longer exist if they fail to keep up with technology trends. Further, companies that have embraced technology and execute on a digital strategy typically see an increase in profitability by 26% and a 12% higher market valuation.1
Here, we’ve outlined just a few of the ways commercial real estate developers, builders, investors, and buyers can leverage established digital processes and tools to increase efficiency, operational effectiveness, and improve the overall user experience.
Building
The use of drones is taking information gathering to new heights (pun intended). By using drones at the building stage for land surveying and project monitoring, data collection becomes timelier and more accurate with geo-tagged data using such technologies as Global Positioning System (GPS). Gathering geographic data is easily attained while photogrammetry software processes the data to facilitate design and construction work. Drones can also be effective at site monitoring for inspections, reduce health and safety incidents and claims, and provide security monitoring integrated with dispatch solutions.
In terms of asset tracking, technology such as the Internet of Things (IoT) helps better track field assets, which are expensive and require major efforts to move and monitor; and technology solutions can be quicker and more accurate at preventative maintenance requirements, automatically creating work orders and dispatching service calls accordingly, thus minimizing unscheduled downtown visits. Drones can also be used for land surveying to identify potential environmental impacts, take pictures of construction sites and send them in real-time for better remote monitoring and progress reporting in construction projects, enabling relevant parties to view the project status 24/7, at their convenience. For interior projects, tablets/cell phones can be used to take notes, photos, schedule tasks in real time, while capturing change requests (and additional revenue), and triggering progress payments through smart contracts (i.e. blockchain), etc. Certain software can also transform and analyze the data for insights on project status and quality, which can greatly enhance collaboration efforts among designers, developers, project managers and owners. Big data analytics designed to quantify and visualize the impacts of a project may also provide options to work around issues, where needed. Further time and effort can be saved on reporting if appropriate visualization tools are adopted and integrated.
Additionally, from energy-efficient systems to green infrastructure or smart grid technologies, there are several solutions that can be adopted to implement better energy efficiency, air quality, comfort, health and wellness, waste management, and site engagement. Integrating smart building capabilities and the IoT devices, such as sensors in buildings, enables real-time data collection on energy usage, occupancy patterns, and building conditions for optimal maintenance (i.e. HVAC, elevators). Smart building systems can include automating features, such as programmed access control, energy monitoring, or even water quality management. Each presents an opportunity for cost savings and increased efficiency in their own respect. The infrastructure established and the data collected can support the application of such advanced analytics as predictive maintenance for further energy efficiency, as well.
Selling
Data-enabled customer segmentation for marketing can be a seller’s best friend. Adopting such advanced analytic techniques as clustering on customer attribute data to identify the ideal customer segmentation can make marketing and selling more efficient. Among the benefits: more effective audience targeting for campaigns and more personalized marketing for potential buyers or renters. Leveraging data analytics also helps sellers gain insights into specific market trends, pricing dynamics, and customer preferences for more informed pricing decisions. This also helps address market volatility and economic uncertainty. Additionally, using big data analytics to identify the best prices for affordable housing solutions helps address the interests of various stakeholders using facts and real-time figures, tailored to each audience.
Sellers can also offer property viewing with virtual and augmented reality. There are differences between virtual reality (VR) and augmented reality (AR). To put it simply: VR is completely virtual (picture wearing a headset and viewing a space as if you are physically in the property); while AR leverages the real-world setting, but can enhance the ‘picture’ by highlighting or adding such things as new furniture placement in the room, without having to physically move any furniture. Both VR and AR make property viewing and marketing easier as they provide a better customer experience – buyers can really envision themselves in the space and make it their own. VR and AR also make the immersive experience accessible to almost everyone, without needing to be in a specific location or having to book an in-person viewing.
Investing
Big data analytics offering market trends, economic indicators, demographic data, and property performance metrics can help Real Estate Investment Trusts (REITs) identify lucrative investment opportunities and optimize the investment portfolio. In terms of capital raising and investor relations using a data-driven approach: online platforms with accessible performance data greatly reduces information barriers, and, potentially, showcasing a positive track record could further encourage investor confidence.
For real estate transactions, streamlining processes via Global Smart Contracts (GSC) provides secure transactions while minimizing payment risks and better identifies potential fraud. The GSC market size is estimated to reach $770.52 million USD by 2028.2 Further benefits include enhanced liquidity (as it takes less time to complete), a more simplified capital call process, increased efficiency and transparency, and being environmental-friendly due to the paperless nature of the smart contracts process. This is all enabled by digital technologies, such as digital identity management, electronic signatures, and blockchain.
Operating
The established infrastructure and data collected via property technology (i.e., proptech), paired with certain IoT technologies, can support the application of advanced analytics, such as predictive maintenance, energy efficiency, and so on. Data from IoT sensors can be analyzed for diagnostic analysis to proactively identify defects within the building (i.e. HVAC, elevators, lights). Predictive analytics with data captured from an IoT power grid in a building can identify potential defects or areas that may need emergency repairs and automatically create a work order, potentially before anyone even knows there was a problem. For operational purposes, drones also help examine exterior building defects as a safer alternative to situations, which in the past usually required workers to present themselves at a dangerous site or climb up ladders, thus providing a safer work environment, decreasing health and safety incidents and claims.
From an administrative perspective, there are several ways in which technologies can be leveraged to increase efficiency and ease of work. When it comes to the automation of repetitive operational tasks, such as background checks, rent roll, digital key distribution, scheduling, maintenance requests, etc., digitized paperwork and transaction processing through digital technologies and platforms greatly enhance the productivity of team members and reduce errors – not to mention reducing overall operational costs. Technologies that can assist in this area include Optical Character Recognition (OCR), Robotic Process Automation (RPA) and Blockchain. Chatbots can also interact with customers and tenants leveraging AI to offer 24/7 customer service, providing instant answers and gratification, while reducing operational costs, providing instant response times, and grants support beyond typical business hours.
Certain platforms that leverage digital tools and mobile applications can also enhance the workplace experience. This could include such functions as meeting room bookings, reserving building amenities, maintenance requests, or updates on community events and activities. In addition to being more efficient, predictive analytics can be used to plan/budget. The benefits are numerous, enhancing the tenant experience in a more engaging, community-oriented environment in which to work.
This also lends itself to helping rebuild in-person office culture in a post-pandemic world. Current hybrid work models offer flexible working arrangements for teams, but may present unique challenges when it comes to a team’s working dynamic and communication capabilities. This model calls for cloud-based collaboration tools and platforms and virtual meeting devices. Smart building enhancements (such as scheduling tools for availability and automation to enhance meetings by frosting the glass, or inputting audio/visual and smart boards, for example) and eco-friendly designs for further comfort regarding temperature, noise, and air quality also help support return-to-office mandates and make the transition easier for team members.
Retail Real Estate
Retailers are increasingly integrating e-commerce capabilities into brick-and-mortar stores for omnichannel shopping experiences. When combined, customers can seamlessly transition between online and offline shopping channels. The research agrees: “Companies with the strongest omnichannel customer engagement strategies retain an average of 89% of their customers, compared with 33% for companies with weak omnichannel strategies.”3
Putting buyers directly into the product or experience can also help increase sales, but doing so may not be an easy task, unless the experience is easy to use and meets the buyer at their level. Leveraging AR or VR for product demonstrations, creating immersive shopping environments, and enhancing customer engagement can lead to better sales conversion rates. With smart stores and self-service stores, IoT sensors and Beacon technologies provide personalized marketing campaigns to passersby, as they can send promotional messages to customers as they approach the store, further enticing them to visit. Target marketing can also share ads or promotions with people via cell phones and social media feeds, to attract them to a certain location. Advanced retailers are leveraging technology to scan products when put in a cart with payment being automated as they exit the store, reducing checkout labour costs and associated lines.
Social channels and partnering strategically with the right influencers can also be leveraged to encourage consumers to visit stores in person. They are called influencers for a reason. Partnering with an influencer who aligns with your brand and has an actively engaged audience can drive sales directly from social media platforms or encourage visits to brick-and-mortar. Live streaming interviews or product demonstrations with influencers can further help spread your message or product.
The selection for future brick-and-mortar locations can also leverage technology as decisions such as these require the consideration of multiple factors, including customer demographic data, transportation, warehousing/storage, and big data analytics.
Real Estate Digital Challenges
While digital enhancements and transformations may be enticing to some who are ready to seize opportunities, there is also a large audience that is hesitant to implement such changes. Such challenges can include the lack of strategic know-how and the digital skills gap, as well as reluctance around data privacy and security.
Real estate markets and customers are dynamic. Organizations may find it difficult to identify opportunities (as in, what should we do?) and priorities (e.g., what should we do first?). Or they can adopt outdated solutions or technologies (potentially implementing the wrong ones) and miss opportunities to be on the leading edge – especially if they fail to address market volatility. For many real estate companies, the existing technology stack is outdated, lacks flexibility, and is difficult to integrate.
Developing your digital strategy is found in several steps: first, define your vision and guiding principles, goals and objectives. This is critical to defining where you want to go. Second, conduct a current state needs assessment to understand what you have and what you want to do, understanding the benefits of modern day solutions. Third, define the future state, which includes defining how you will bridge the gap, identifying what needs to happen. Think big and practical and don’t let legacy people, processes, or technology interrupt your ability to innovate. Shoot for the moon to understand where you can go, and then apply a layer of pragmatism. Forth, once you identify and rationalize your options, develop a roadmap in how you will get there, ensuring you build in quick wins to gain momentum. Modern day solutions tend to be cloud-based with many configurable options which will accelerate time to value. Digitization and keeping up with beneficial technological advancements means constantly striving to meet new demands, identify and iterate on issues, embrace a fail-fast attitude and adapt accordingly as consumer demands continue to evolve.
At the same time, traditional real estate professionals may not have the vision to adapt to changing times, or they lack the technical expertise to leverage what digital and data technologies can offer. Shifting the mindset is critical as cultural barriers is one of the biggest challenges to overcome when trying to change. External sourcing and training programs can help in developing the digital vision of an organization. Workshops can further help encourage discussion, participation, and inspire innovation.
Collection and storage of personal and confidential data does present privacy and security risks, thus making people hesitant about data collection. A robust data governance framework and concrete data controls are required, especially when there is a need to comply with data collection and privacy legislation – several of which exist in Canada, the U.S., and abroad. The right technical expert can assist in ensuring data is stored securely and policies comply with various regulations and requirements (i.e. Quebec’s Bill 25 dealing with protection of personal information or the General Data Protection Regulation known as “GDPR”).
Digital enhancements may be daunting to some, but it’s reported that although “87% of companies believe digital will disrupt their industry, only 44% are adequately prepared for projected disruption due to digital trends.”4 Yet, with the right professionals helping map out current-state needs and future-state optimization, the right tools, platforms, and technologies can be implemented to increase efficiency, safety, and improve overall working conditions while also enabling better information and timely decision making for management, as well as minimizing environmental impacts, costs, and time spent on doing business ‘the old fashioned’ way.
2 https://www.linkedin.com/pulse/global-smart-contracts-market-size-evaluating-trends/
3 https://www.digitalcommerce360.com/2013/12/31/why-omnichannel-strategy-matters/
4 https://digitalmarketinginstitute.com/blog/the-what-why-and-how-of-digital-transformation