Big data, PropTech, Blockchain & Co: Innovation drivers for the real estate industry

These days, nobody doubts that digitalisation is forcing the real estate industry to undergo major changes. They will extend far beyond simple technological support for administrative procedures, documentation, and communications with clients and tenants. This trend will affect every corner of the industry – for example, by calling whole business models into question and developing entirely new ones. But what challenges and opportunities lurk behind buzzwords like big data, PropTech, Internet of Things, blockchain and smart contracts?

A centralised advance into the digital future: Big data

The underlying development is known as big data. “Data are the new oil,” as the new catchword has it. The more data are available, the more options there are for customised products, services and entire business models. This includes data of any kind: assessments of clients, tenants, buildings, markets, long- and short-term developments and much more.

The real estate industry already has a wealth of data at its disposal. Pooled centrally, they could be mined more deeply and with better focus in order to advance strategic decisions and product development. The data situation makes it easy, for example, for providers to address things like the megatrend toward customisation in the residential and office segment by means of flexible offers, asset concepts and management approaches. Alexander Betz, Head of the Digitalisation Programme at PATRIZIA Immobilien AG, thinks so too: “The data that the real estate sector generates from its assets, tenants and clients offer the industry tremendously valuable potential for further development.”

“The data that the real estate sector generates from its assets, tenants and clients offer the industry tremendously valuable potential for further development.”

Alexander Betz, Head of Digitalisation Programme, PATRIZIA Immobilien AG

Google, Uber, Airbnb: Entire business models are already based on data-supported services, and their main feature is no longer the product that the client is looking for, but the data about the product. This is an opportunity for real estate companies to reposition themselves. Potential fields to explore include advising customers even more fully, brokering between the producer and the client, and offering platforms for building and fund management.

PropTech adds value

Digitalisation can be useful in asset development as well. PropTech (property technology) is creating new opportunities for enriching assets with services that make them more attractive. Here big data and technological innovations work hand in hand. Customisation, already mentioned above, and driven by technology-friendly ‘millennials’, is going to be a core factor.

Take the example of smart buildings. Intelligent measuring systems known as ‘smart meters’ (including sensors) can provide support in optimising management, or help better meet users’ individual needs. Automatically transmitted data about the efficient use of different sizes of conference rooms might support the managers of a conference centre and help them develop the building concept. The media have already provided lots of coverage of the example of a refrigerator that orders groceries all by itself. This Internet of Things concept also works in buildings – only, the buildings will measure their own energy consumption and find the right electricity supplier through networking. Facility management is also seeing associated revolutions in its tasks and needs.

Developments outside the sector may also trigger changes in real estate. Looking further into the future, self-driving cars are much discussed but still present their share of challenges at present. Ultimately, however, they might subvert the old motto of location, location, location. Networked, self-driving vehicles support the driver with navigation, refuelling and choosing the best route to their destination. So the key factor of accessibility could soon be taking a back seat – and office or residential buildings located at the periphery of asset-poor metropolitan locations may grow in importance. So the upheaval that lies ahead for the automotive industry will also affect demand and product developments in other sectors.

Paperless transactions?

Digitalisation will also fundamentally alter basic business processes. Information and consulting are already migrating to the internet – digital contracts could soon follow. That would significantly speed up sale and purchase processes. Potentially, this could mean that some parties traditionally involved in the transaction (such as real estate agents, banks, etc.) may no longer be needed.

Blockchain, the technology behind cryptocurrencies like Bitcoin, has vast potential to turn purchasing processes in the financial and real estate sector completely inside out. The basic principle here is that transactions are verified by authenticated people on the internet and then registered in a database as an inalterable ‘block’ of data. The entire process takes place on a distributed basis via the parties’ computers. The history of a property – the blockchain, a sequence of transaction entries – is intended to ensure that information remains transparent and data remain permanently available.

The advantages are obvious. A purchase is made at the press of a key, and transaction costs are kept down. Essential data are stored in the block and can trigger things like entries in the Land Register. Potential buyers can bring up the blockchain to get seamless ownership records, and the brokers’ role will become superfluous.

In a further development, potential buyers could even define ‘smart contracts’ by defining in advance what kind of property they want to buy, on what terms, and within a defined price range. As soon as the right property becomes available, the purchase would take place automatically, guided by the system. At least, that’s the theory.

But precisely because blockchain has such a disruptive effect on the transaction processes that are familiar to us, there are a lot of unanswered questions. The technology is complex and requires a lot of computing power. Data has to be protected from outages and intruders. The legal situation is murky, especially about data and information privacy and the legal status of Bitcoin as a means of payment. There are also no standards for reliable data sources or for authenticating the approval networks. The question of a regulatory authority is unresolved, and so is compatibility with competing systems.

Though real estate sales have already gone through via blockchain in places like the US and Ukraine, the overall ambiguous picture still offers an opportunity for the real estate sector. It gives the industry time to explore the new environment, redefine its own role, and play a part in shaping the digitally networked transaction process.

New beginnings thanks to digital upheaval

It’s not enough to digitalise your company for digitalisation’s sake – but big data and new technologies are opening up vast potential for the real estate sector. The challenge for real estate companies is to derive the greatest possible benefit from the new technical options, in terms of strategies, assets and new lines of business. Cooperative arrangements with start-ups are also conceivable.

“In the future, real estate will be selling not just space but services that are based on big data.”

Alexander Betz, Head of Digitalisation Programme, PATRIZIA Immobilien AG

“In the future, real estate will be selling not just space but services that are based on big data,” is how Betz sees things evolving. “Real estate companies will become solution providers. Services within and around a building and the people who work or live there will become more important.”


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