Switching to digital: the paradigm shift in real estate

07 / 04 / 20 - 5 minute read

While the real estate industry is increasingly collecting, analysing and utilising data. However, it’s only in combination with artificial intelligence and optimised processes that the industry will benefit from that data.

Heading towards the digital world of tomorrow

A little later than other industries – such as automotive, finance or pharmaceuticals – the real estate sector has also begun the journey into the digital future. Almost all companies say digitalisation is one of their most urgent priorities. The practical implementation, however, is often impeded by a lack of relevant data, an inadequate strategy and shortages of qualified expertise. This applies to Germany in particular, while the pace of change is being set in the Anglo-American region and Scandinavia.

Companies are investing more

To catch up, the real estate sector in Germany has significantly boosted investment in digitalisation in the past year. One in four companies supported their digital strategy with a budget that’s equivalent to more than 5% of their annual revenue. In 2018, only 15% of businesses did so. This is one of the findings of a recent study (Gebaut auf Daten – digitale Immobilienwirtschaft) carried out by the German Property Federation (ZIA) and the consultancy Ernst & Young.

With this investment surge, the industry wants to establish a data set that maximises the possibilities in the medium term. According to the study, 70% of companies see the potential in the data to enable new business models and expand existing ones. More and more, this involves data analytics, a method that systematically extracts and analyses data from various sources. PATRIZIA’s Chief Digitalisation Officer (CDO), Alexander Betz, sums it up: “instead of ‘location, location, location’, today it’s all about  ‘data, data, data’.”

“At the start of every process in real estate there’s the challenge of collecting relevant data”, Betz explains. This is the basis for the use of blockchain technologies and AI-enhanced systems. Blockchain is  a database that is built on a number of different servers, accessible to all users and continually expanded. Artificial intelligence is a collective term that includes the automation of intelligent behaviour and machine learning. Both innovations are drivers of digitalisation.

A trio of data, processes and technology

Experts agree that what would be ideal for the sustained digitalisation within companies – and, in the long term, for the industry as a whole – is relevant data that only has to be collected and analysed once and is available for the entire real estate management process. Betz calls this the “single source of truth”. Even today, there is already extensive data available – at market, property or user level. To properly weight and correlate it all is something new for Germany’s real estate industry.

"Instead of ‘location, location, location’, today it’s all about  ‘data, data, data’."

Alexander Betz

Alexander Betz is convinced, however, that a digitalisation strategy can only be successful long-term as a trio of high-quality data, intelligent use of technology and optimised workflows. “The latter means lean, efficient, productive processes within the company, including a disruptive approach”, says Betz. “Processes that should and must differ from the traditional ways of managing real estate.” In addition, there must also be industrywide data standards and structures.

According to Betz, many industries have already experienced profound changes, but the real estate business is at the beginning of its digitalisation journey. “As a more traditionally managed industry, real estate must take on a more fundamental task”, says Betz. “Firstly, to manage its own data more professionally – we might call that ‘small data’.” Intelligent data management minimises errors and boosts performance.

Only a holistic approach will be successful

With its expanded management board and measures already undertaken, PATRIZIA is at the forefront of this development. The aim is to improve the operational excellence and service quality for clients. On digitalisation projects, PATRIZIA pursues a holistic approach along the entire value chain. “In practice, this means that we take all stakeholders into account – from external service providers to our own investors,” Betz explains.

For digitalisation to be comprehensive, sustainable – and thereby successful – the entire company must be involved, including all employees, processes and departments. “A digitalisation strategy should not be seen as just an IT strategy”, Betz warns. “It must be a core component of the strategic and operational business strategy, actively promoted by the management.” This ultimately leads to the question of how such a strategy can be successfully implemented in a company.

At this point, a common misconception must be addressed: digitalisation is not a project. It requires the continuous, holistic participation of the whole company. Digitalisation, in its proper sense, will never be completed. And given the potential to affect interdisciplinary processes, digitalisation also means increasing complexity. In this way, a step-by-step approach is advantageous in the long run.               

"A digitalisation strategy should not be seen as just an IT strategy."

Ultimately, it’s up to us

Long-term success requires a clear, well conceived business strategy. In the age of digitalisation, however, this strategy now has to be digitally re-thought and adapted with today’s technological standards in mind. The consensus seems to be: the growing challenges for real estate investment managers can be resolved better than ever with the help of digital tools – as long as digitalisation is not simply for its own sake.

For this reason, the real estate industry – both in Germany and internationally – is currently tackling some fundamental questions: What are the optimal structures in a company and in the industry as a whole? How can the industry establish common standards for data collection and evaluation? How can high quality and the meaningful integration of data be secured?

Answers to these questions may come from technical building management as well as the internet of things (IoT). This refers to a system of sensors, integrated computers and smart devices, which are connected with each other and with the cloud, and exchange data continually. As fascinating as these digital possibilities are, they can still only play a supporting role in planning and control, particularly in daily business.

Betz warns that analogue conversations between people are more important than simulated dialogue with chatbots: “Ultimately, our business is and remains a people business.”



Alexander Betz

Augsburg, Germany

Alexander Betz

Member of the Management Board, CDO