Real estate has gone “virtual estate”
Real estate, valued around $15 Trillion (1) and described in a term used by economists to refer to primary and second land usage represent a huge asset pool. Ask any city planning manager or supply chain logistics operation, the assets of real estate represent large invested equity magnitudes larger that company revenues and typically the largest single personal wealth item for individuals.
The impact of digitization, a term used to mean various consumer technologies to the wider digital economy of connect markets, industries and society is disrupting in every level. This disruption is driven from the ability to take physical assets like cars, food, books, music , bank transactions, you name it and convert it into a digital commercial model that means it could be tradeable over the internet. We are reminded of this every day with the terms like uberization, google, facebook and amazon that are able to connect people, resources and markets in ways that spawn new ways to monetize assets and services in any location space. For the real estate industry this ability to digitize the assets and location changes the barriers to access and trading usage of real establish becomes a virtual estate of significant connected potential.
Beyond connected real estate
Connected cities and the use of ubiquitous mobile smart phones and the right of social media and online marketplaces means that the commercial model for digital business transactions can put real estate online. The whole activity of real estate sales deals, leasing and contract management can reduce the complexity of deals, leverage crowd sources open data efficiencies and better connections between real estate developers, owners, vetting architects, contractors and buyers offered by companies. Several specialist companies act as brokers of these services online created better outcomes and industry leverage.
The impact on commercial real estate (CRE) can be significant but it also includes residential real estate that has seen potential event more rapid high profile disruption with online estate agencies now the norm for homes and residential trading in price comparison and many legal conveyancing services as well as the house trading.
Needing a different mindset in digital
The notion of digital changing the way assets need to consider how it is traded, visualized and utilized. Advances in what has been dubbed the “internet of things” means that the buildings, utilities, rooms and service management can further digitize the real estate into virtual fine grained assets that turn estates into virtual services. In the very real sense data and usage on assets can be aggregated and used to define spaces and the asset value upon activities from owning the digital space.
Issues and considerations for real estate business success now include
· How data on land and usage are made open or closed to enable visibility of it to online real estate trading and valuation sites
· How usage patterns can be used to analyse and determine estate changing patterns of market value
· How compliance and regulation costs can be reduced through automation
· Where the omni-channels of real estate need to connect to offer access to partners and traders online will increasingly be critical to enabling a larger addressable market
· The impact of digital advertise investment, social media feedback to target optimal CRE and RRE promotion and returns
· The development of crowd souring and funding models as disruptive alternatives to trading and information models
· Integration to high quality infrastructure in telecoms, broadband, transport and location.
Innovation and the future of digital real estate
Companies in the RE market will need to address these new realities of digital online presence as the defacto façade of physical estate assets.
The valuation of real estate areas are changing rapidly in city areas such as London that is seeing large shifts such as Silicon Rounder-about Digital start-ups. The land uses are changing by digital both in terms of what it offers RE but also in being a technology driver for new business.
The future of Real estate needs to think in terms of a combined infrastructure of high quality telecoms at physical locations and the agency of the land in terms of transport, existing building suitability for startups and existing business and residential use that view these capabilities as increasingly connected.
Whether this is call gentrification of city areas to the ability to remotely work in rural areas, digital is rewriting the geographical matter and the potential of real estate as a new physical and virtual economy enabler. The old term location, location, location is perhaps now being modified into new considerations of location, connectivity, services that redefine the ability of Cities like London to scale and compete in the 21st Century Real Estate market
Professor Mark Skilton
28 January 2016