How will new technologies change the German real estate landscape? What impact are new, primarily digital, technologies already having? If you’ve ever asked yourself these, or similar, questions, then a new study, “Smart, Smarter, Real Estate”, which has just been published by EY Real Estate and ZIA certainly makes for interesting reading. We’ve put together a summary of the study’s key findings, so read on to see how digitalisation within the German real estate industry is gaining pace, even if it is not yet as widespread as in other major countries around the world.
Smart, Smarter, Real Estate
One of the key findings of the new EY Real Estate/ZIA study is that 90% of German real estate experts view digitalisation as a very relevant topic within their own companies. And it’s not just words that count, money does too. Established German real estate companies invested an average of 5% of their annual revenues in new technological solutions and digitalisation last year. In the PropTech sector, the figure climbs to an astonishing 65%. Across the industry as a whole, the average now stands at roughly 11%.
Just the beginning
In the words of Christian Schulz-Wulkow, Sector Leader Real Estate and Head of Real Estate M&A in Germany, Austria and Switzerland at EY: “In the modern real estate industry, there is almost no way to avoid digitalisation”. And Martin Rodeck, ZIA’s spokesperson for innovation and CEO of OVG Real Estate in Germany, added: “As far as the implementation of digital processes is concerned, the first steps have already been taken, a fact clearly demonstrated by the findings of this year’s survey. Nevertheless, what we are seeing right now is only the beginning”.
Smarter real estate
So, in what fields do the study’s authors and respondents believe these new digital technologies will have the greatest impact?
IoT/Smart Metering/Smart Grids
A network of intelligent metres and sensors will create a virtual representation of physical objects and improve the operation of a building’s technical systems. Smart power grids will work seamlessly and efficiently to generate, source, supply and store electricity, thereby cutting costs and ensuring that energy resources are used more efficiently.
Sensors will allow property and facility managers to accurately determine the condition of their buildings and technical systems in real time and enable them to optimise their preventative maintenance schedules and strategies.
Organising and managing the shared use of properties, services and equipment (e.g. apartments, parking spaces, work stations) will allow existing resources to be used more efficiently.
Robotics (including robotic process automation, or RPA for short) will use software robots and artificial intelligence to automate processes by imitating human interactions.
Building Information Modelling (BIM)
The digital modelling of buildings will create digital avatars of buildings to aid the planning, construction and management of real estate across all asset classes.
Big Data/Data Mining/Data Analytics
Big Data can be used to identify, analyse and forecast developments across markets, sub-markets and at individual locations. This will enable investors to model their property portfolios and individual acquisitions, as well as their risk exposure, on the basis of a plethora of rich datasets and truly actionable data.
Blockchain technology creates decentralized and shared digital ledgers that can be used to record transactions across many computers, thereby making them immutable. This has the potential to transform core real estate processes such as property transactions (purchase, sale, financing, leasing, and management).
VR and AR will give building owners, managers and users a new way to experience the built environment. They will enable virtual building tours and inspections, thereby improving agents’ marketing strategies, create detailed models to assess the results of remodelling or redevelopment measures, and turn architectural drawings into immersive augmented reality models.
3D printing techniques look set enable on-demand printing of components or entire building structures in the medium-term future, making construction more flexible and improving structural stability, whilst also increasing the life cycle and decreasing maintenance in the built environment and reducing the consumption of resources.
Germany has some catching up to do
More than three-quarters of the study’s respondents stated that they are currently involved in developing or implementing digital processes. This means that they have at least moved beyond experimenting or testing isolated technologies. Nevertheless, what on the surface may appear to be an extremely positive figure is put into context when you realise that all of these respondents come from the PropTech sector. Ultimately, more than 90% of those surveyed rated Germany’s progress as ‘average’ or ‘below average’ in comparison with their European peers.
What might hold Germany back?
The study’s authors identified a series of hurdles that Germany’s real estate industry will need to overcome if it is to fully embrace the digital future. The most pressing challenge relates to the limited pool of qualified and skilled workers in Germany, and the war for talent between the real estate sector and other industries. According to Martin Rodeck: “Digitalisation is creating a host of new roles across the entire industry. […] We need to ensure that the real estate industry is as attractive as it can be for all young professionals and specialist workers”. The other major hurdles mentioned by the survey’s respondents included data protection, regulatory requirements and a lack of industry-wide standards, potentially low levels of acceptance among end-users, IT security issues and the fact that those who shoulder the substantial investment costs may not be the main beneficiaries of digital transformation.
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