Real-estate agent shows a build project on a tablet to a young couple © shutterstock.com/Leonardo da

The Digital Self-Dwarfing of the Property Industry

Ulrich Schüppler
Editor at Immobilien Zeitung

Compared to the news from other industries the digital efforts made in the property world sometimes appear to be rather hesitant. Ulrich Schüppler from Immobilien Zeitung discusses the reasons.

 

At the spa town of Bad Birnbach Deutsche Bahn is testing the first self-driving bus, the World Food Program uses iris scanners to monitor the distribution of food in Jordanian refugee camps and the German Federal Highway Research Institute is testing a road surface in Cologne, which automatically repairs minor damage itself and generates electricity at the same time. These are just three recent examples. And what about real estate? Well, after all tenants cannot only use an app, but also the Amazon voice assistant, to tell the building’s management whether a tap is dripping. In France anyway.

Tenant Satisfaction Apparently of Minor Importance in the Current Market Environment

If you want to know what’s the problem in the property industry when it comes to digitalization, you just have to ask the IT operators. It soon becomes obvious: Property users benefit from many improvements based on digital technology – but neither architects nor planners, neither developers nor building owners like spending money on it. And why should they? Interest rates seem to be consistently low, due to a solid economy demand for properties remains high and due to a shortage of new floor area the additional supply is limited in all asset classes. In view of this situation tenant satisfaction seems to be an objective of minor importance.

It’s just a shame that the permanent ups and downs of the market just won’t end, which are a characteristic of all capital-intensive industries and which the economic jargon often refers to as a pork cycle. This means that every boom generates over-investment, which inevitably results in excessive supply at some point. Maybe not everywhere at the same time, but certainly in individual regions. Those property suppliers who know more about their users and their needs than their competitors will then be ahead of the game.

In Boom Years Investments Would Make Particular Sense

Therefore, real estate companies should use at least a portion of the constant cash flow of the boom years to invest in new methods of data acquisition and evaluation. Not always will the next startup valued at more than a billion – also called a unicorn – be found. A stress test of traditional business processes would be very useful to start with. At the moment, however, the property industry is largely dominated by digital pseudo-giants rather than unicorns.

 

Digitalization is a big topic at EXPO REAL

Articles and videos on our blog as well as more information on our website and the website of the Real Estate Innovation Network (REIN).

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