Introduction
With real estate being the largest commodity in the world, having a value of over $200 trillion, the sector remains considerably behind almost all others when it comes to digital transformation[1]. A report published earlier this year by PricewaterhouseCoopers (PwC) and the Urban Land Institute (ULI) highlighted the point, stressing the underutilization of technology across the sector. Slowly, however, what is now termed as ‘PropTech’ is beginning to emerge, offering to revolutionise the industry. From changing the way properties are developed through to the administration and management of investments, industry stakeholders have significant benefits to gain, including greater levels of efficiency, security and revenue. Big data, cybersecurity, automation and the sharing economy are just a few of the areas currently touted as set on having the greatest impact on the sector. Let’s take a look at some of these technological innovations.
Virtual Reality
Virtual reality, or VR as it is otherwise known, is becoming increasingly popular both among investors, developers, contractors and other stakeholders. Moving beyond still images, businesses are now offering 360° videos through to 3D virtual tours to help sell their properties.
In light of the growing use of the internet to search for homes, VR is increasingly critical for those businesses looking to stand out from the competition. Offering a three-dimensional walkthrough of a property, buyers can quickly get a feel for the location and in a matter of minutes determine whether an in-person visit is worthwhile all from the comfort of their own home, saving both time and money for the prospective tenant and the realtor. VR can also be utilised to showcase off-plan properties, giving potential buyers a feel for the end product, before construction is complete, as well as being used in place of staged apartments. VR offers the opportunity to deck out a property without the investment required to fully furnish a unit. In the future, VR will likely even offer tenants the opportunity to tailor the interior of their homes before completion.
Big data
The use of big data and analytics is finally catching up with the real estate industry, and the rewards it offers are truly game-changing. From streamlining data to creating transparency and providing increasingly more accurate predictions on future valuations, big data is reducing the risks involved in property investments for all stakeholders, from developers through to tenants.
For customers, data and analytics mean making smarter purchases and reducing risk. Insights, for example, on the local neighbourhood or local property values over time make for more informed decisions and can protect buyers from bad investments, unlike archaic forms of property valuation such as the old “Automated Valuation Model” used by banks in the US, which led to both the over and undervaluation of properties. Indeed, big data is already being utilised in search engines as buyers search for their ideal home. This will only mature to match better individuals and properties based on their unique needs, be that neighbourhood, affordability, schools, communities and more.
Innovative US realtors Zillow, for example, are utilising available data to provide prospective buyers with information on everything from local neighbourhood trends, through to estimated mortgage payments and the value of the property over time. The data is gathered from multiple sources including public data, surveys, and market conditions, to which a formula is then applied to provide a prediction. Granted, the projections are not full-proof, but they are transparent and a much more accurate picture of the future now more than ever before.
By collecting and processing data on neighbourhoods and communities, developers will similarly have ever better insights to create properties that match the needs of its residents. Moreover, such data will inform larger scale projects such as community planning, which has considerable positive implications for sustainable developments. By tracking information on the local environment and its usage, data on everything from traffic through to air quality and energy use will enable smarter buildings and neighborhood’s, tailored according to resident behavior.
Construction Automation
The automation of construction sites is a lot closer than many think, particularly with the onset of technologies such as BIM (Building information modelling), 3D printing and the advances that have been made in recent years regarding robotics. Today, BIM is being used by companies across the globe in the construction of buildings. The platform holds all relevant information on the development of a specific structure, including everything from design plans and specifications to simulations. Data can be accessed and updated in real-time, and the software has proven effective in minimising waste, managing workflows, and coordinating budgets. Today the solution is also used by government agencies in the design, construction and management of critical infrastructures such as water, gas and electricity, and roads and transport.
With 3D printing and robotics catching up behind BIM, the software will also facilitate the uptake in these technologies, supporting them in the automation of construction. 3D printing is being used today to print building components, moulds, interior design objects, and even entire buildings. Chinese company WinSun was the first to construct ten buildings from recycled materials in 2013 in just 24 hours with the use of the technology. With the ability to build a house in a matter of days over weeks, the technology offers enormous savings in both time and money in the construction process and is being touted as an affordable solution for many housing crises, including in the case of disaster areas and refugee camps for instance. The industry is estimated to reach $56.4m by 2021, with some of today’s bigger players including French company Constructions-3D and Dutch company MX3D.
Building Materials of the Future
Technological innovation is also paving the way for new building materials that promise to revolutionise construction. In some cases, such as with self-healing concrete, these offer solutions to long-held problems. One of the most widely used materials in the sector, cement can cause major issues when cracks appear. Self-healing cement offers to solve the issue thanks to the microcapsules contained within the material, so that when it combines with water, it produces limestone, thanks to the bacteria contained within it, sealing the crack.
Carbon fibre is another potential game changer. Five times stronger yet weighing only a third of that of steel, it is both durable and flexible, meaning it is easier to mould into any required shape. Resistant to harsh weather including high winds, it makes it suitable to environments where freak weather such as tornados and hurricanes can cause havoc.
Other materials to keep an eye open for include Aerogels, a gel-like substance that is being touted as an environmentally friendly alternative to insulation, four times more effective than fibreglass, shock-proof concrete, and graphene, an ultra-lightweight material said to be 200 times stronger than steel.
PropTech in the Middle East
In the case of the GCC, companies are slowly beginning to adopt the technologies revolutionising the industry. A survey conducted by HSBC into home purchasing trends in the UAE showed that 67% check the value of their home, 64% assess prices of prospective properties and 72% of buyers search for their properties, all online, prior to purchasing a house. Realtors will need to adjust to the new ways in which a digitally savvy population partake in property transactions today.
The UAE is leading the way in the adoption of PropTech, with Dubai said to be striving towards implementation of blockchain technology by 2021 in the administration of all government documents, including those relevant to the real estate sector. The technology offers a secure and transparent solution for the management of sensitive documentation, protecting all parties from risks such as fraud and identity theft, as well as reducing costs involved in the transaction. Paper-based title deeds and licences will be a thing of the past. Blockchain is also being touted as a tool for crowd-funding, giving blockchain start-ups the ability to offer its own currency for investments – these are purchased by the investor in exchange for some goods – be it money, cryptocurrency or other security. These investments, into what is termed as an Initial Coin Offering (ICO), can then be digitally tracked and traded. BitRent is one innovator in the field, which seeks to help companies source funding for their construction projects, though the uptake in the region is not yet apparent.
Saudi Arabia is similarly investing in the PropTech sector, as part of its broader diversification plans as laid out in the Vision 2030 plan. The country currently has plans underway to develop a smart city, drawing their inspiration from Google which plans to do the same in Toronto. The city is set to be a free-zone, operating with the use of robots for critical functions such as security, logistics and home delivery, while being run solely with wind and solar power. At the heart of the project is the drive to become a leader in the use, development and implementation of technologies from 3D printing, Internet of Things, robotics, renewables and nanotechnology.
With the value of the PropTech industry growing from $221 million (Dh811.73 million) in 2012 to over $2 billion in 2016[2] and predicted to continue to rise, Middle Eastern markets such as the UAE and Saudi Arabia will be critical players in the sector. Industry experts claim PropTech will have a similar impact on the real estate sector, as FinTech played in the banking sector. With what we are witnessing now in the industry just the tip of the iceberg, we can expect considerably more disruption across the industry as more tech-driven innovations continue to revolutionise the entire construction and real estate sectors.