When it comes to engaging with new technology, the property industry has hardly been leading the way.
But as tech firms become an ever more important part of the office occupier market, the industrial sector becomes ever more geared towards online retail and build-to-rent schemes are aimed increasingly at tech-savvy millennials, the industry is recognising the need to bring itself – and the buildings it deals with – up to speed.
“Looking at technology purely in terms of its immediate return on investment probably held the industry back historically, but now it is embracing it – partly because it understands the benefits technology can bring, but also because companies understand the challenges they will face if they don’t embrace it,” says Peter Day, co-head of the real estate team at law firm Osborne Clarke, which this week published a report titled ‘Future proof real estate – is the property sector ready for the 2020s?’
Superb contributions by our contributors and panel members here at the launch of our new report by @OC_RE with @jamesdearsley speaking about 2020 vision and how IoT, Big Data and Wearable devices will become commonplace. Read more at https://t.co/6u9zljCynW— OC Smart Cities (@OC_SmartCities) February 28, 2018
So where should the industry be focusing its efforts? How can buildings be ‘future-proofed’ to adapt to tech that may not have been invented yet? Osborne Clarke asked 555 tech experts from across Europe what the property industry needs to do to raise its game.
Encouragingly, 42% of respondents believe London is leading the way in the use of tech in the built environment, compared with 28% for second-place Amsterdam and 26% for Berlin in third.
However, property developers overall are identified as one of the three main groups holding back the creation of ‘smart cities’: 33% of respondents cite them as an obstacle, the same percentage that see the government as a problem, while 37% point the finger at occupiers.
The three technologies identified as most likely to enter the mainstream by 2020 are big data (73% of respondents), 3D printing (70%) and wearable devices (69%). Others include the ‘Internet of Things’, virtual reality(VR) and augmented reality (AR) – although only 26% of respondents strongly agree that AR and VR will become more popular than traditional property viewings.
The report suggests that big data’s applications in property could include the use of sensors to track a tenant’s movements in an office building and collect data on unused areas that could be freed up for other occupiers; or to predict maintenance issues that crop up in individual flats in a build-to-rent or student accommodation block.
Changes like these are relatively easy to implement in an existing building, but other technological advances may require more forward thinking from developers. For example, a developer delivering an office or residential building could make promises for a basement car park to be converted into a last-mile delivery hub in future; or an industrial developer may need to make the design of a scheme flexible enough to accommodate space for the use of 3D printers. “Clever developers are making sure buildings are adaptable,” says Day.
This will come at a cost – although 83% of those surveyed say they think occupiers would be willing to pay a premium for tech-enabled workspace. If use of an office building can be measured down to the letter, however, occupiers may start to demand more flexible terms.
“Maybe we need to think of a way of developing buildings that is not focused on getting a 10-year covenant,” says Conrad Davies, also co-head of Osborne Clarke’s real estate and infrastructure team, suggesting that rent could be charged based on how many employees use the building and for how long.
Marrying the fast-moving technology sector with the long view that real estate takes is a challenge. The key is for developers to forge formal or informal partnerships with tech firms, argues Davies, citing the relationship between SEGRO and Amazon, which have worked together to build up a tech-enabled delivery estate for the online giant in the UK. He adds that property companies need to boost their in-house tech expertise.
“Companies that invest in a particular technology because it looks like the next whizzy big thing will be the losers, while those that take a series of smaller steps focused on what they think their tenants need will be the winners,” he says. “The sector has [previously] expected that tech companies will come and tell us what the problems are, and provide a boxed-up product to fix it – that is not what this is about.”
Given that it was somewhat late to the technology party, the property sector has a lot of catching up to do if it is going to be ready for the 2020s; but in the race to get up to speed, it seems there is plenty to play for.