11 / 02 / 22 - 4 minute read
Cast your mind back to a time, not long ago, when watching a film at home first involved a trip to the local video store, listening to music meant inserting a CD into a player and banking – apart from grabbing cash from an ATM – required seeing a human
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Taronga is an investment house that brings together institutional real estate investment with technology and innovation to reate a qunique eco-system for global institutional, corporate and ultra-high net worth investors.
Based in Sydney, Australia, and with a team of nine staff, Taronga is supported by a network of strategic and institutional partners in Asia, Europe, the Middle East and the United States. PATRIZIA partners with Taronga Ventures.
For more information: tarongagroup.com
Digitalisation and technology have dramatically changed every sector of the economy over the last 20 years, so why would anyone think real estate was immune? Yes, the industry is slower to adapt to many trends owing to the long-term planning, construction and investment required to ensure a profit. Yet, real estate is the single largest asset class globally and has the most significant impact of all assets on our daily lives.
The simple answer is that the real estate industry is not immune. And, while it is true that we have seen the most significant and rapid change of the industry ever experienced over the last five years and those changes are continuing to accelerate – we’ve seen nothing yet!
As an illustration of the challenge ahead, we recently attended an event in Australia where the former local head of Facebook spoke with a property CEO about the customer data they were tracking. The former Facebook employee left the CEO in the shade regarding data-driven insights.
Facebook wants to and does know everything about its almost 1.7 billion users. This includes when they leave home, how they get to work and what they have for lunch. Workplace software makers, such as Microsoft, track workers and know which teams and people collaborate on projects, where they are working and their productivity.
This means big tech firms often have more insights into the users of a building than the commercial property operators responsible for enhancing the value of those assets. Such a situation opens the potential for big tech disruption. Microsoft, in particular, is potentially the most powerful commercial landlord that exists anywhere in the world today.
To counteract this, the real estate sector is embracing the data smarts deployed by global technology giants and preparing to fight them off as they advance into the sector. This is why the industry is undergoing so many rapid changes, but that transformation is only just beginning.
Seven years ago, we formed Taronga Ventures, a real estate technology and innovation investment firm, based on the belief that a fundamental transformation still confronted the real estate industry and we wanted to be at the forefront. Commonly, the term used to refer to the technology driving this transformation is ‘PropTech’ (property technology). We prefer the term RealTech (real asset technology) and believe this is a crucial distinction to describe the emerging opportunities.
Opportunities to innovate do not just lie in the property; it’s about the entire built environment because there is so much transportability beyond the physical asset. There is the infrastructure that surrounds the building, the access controls, building efficiencies, energy input and, beyond that, the entire value chain from design, construction, and operation to transaction. New models are also emerging, such as co-living and agile working, and new methods of raising capital.
In the course of our work, we have identified and invested in many companies creating cutting-edge solutions that fit into an ecosystem that, when combined, will enable real estate asset managers to reconnect with their customers.
As real estate owners, industry players will in the future have access to so much customer information through the various beacons, sensors, and systems that we should be able to build a much more refined understanding of our customer base.
But a comprehensive solution will require real estate companies first to capture historical data and reformat, simplify and centralise that data. Then there is dynamic data, such as data from the sensors used in building management. That dynamic data can then be added to build data lakes that will be critical to the future of real estate players.
This development of data and analytics will be one of the most significant developments within the industry over the next ten years. Those who harness this technology will become market leaders. Those that fail will underperform.
Another space within RealTech gaining significant traction in recent years are investments which consider environmental, social and governance (ESG) factors. The environmental factor is driven by the climate emergency, and real estate owners and operators are aligning their sustainability strategy with innovation as a solution and key priority. The real estate and construction industry is among the largest contributors to global warming, responsible for 38% of all global carbon emissions. With the growing awareness surrounding climate change, particularly after the Paris Agreement in 2015 and last year’s COP26 meeting in Edinburgh, the real estate industry is coming under increasing pressure to mitigate the sector’s impact on the climate.
The good news is that there is increasing evidence that investing in smart, connected and green buildings can deliver a capital premium. A Massachusetts Institute of Technology study shows such buildings provide a 23.7% premium on transaction prices. So, the message is clear, that considered buildings and rich data collected through innovative technologies will ultimately make assets more sustainable, attract a better capital premium and tenants willing to pay higher rents.
This article is based on a presentation by Taronga Ventures to PATRIZIA in late 2021. PATRIZIA is an investor in the RealTech Ventures Fund of Taronga, a dedicated property technology fund.
Image credits: istock (peterhowell)