changemanagement
Canadian Property Management magazine
monthly national property magazine
Toronto, ON
June 2016
THE UPSIDE
OF DISRUPTIVE
Technological Change Opens Real Estate Opportunities
By Amy Erixon
TALENTED real estate professionals have
been defined by their ability to spot trends
and accurately assess the impact they will
have on the world around them. They have
historically considered properties that have
stable lease agreements, attractive
configurations and preferable growth
locations as desirable. Most underwritings
assume that things will unfold in the future
as they have in the recent past. But what if
they don’t?
Far from being immune to the rapid
acceleration of technological change, the
real estate industry – which is profoundly
“old school” – will be deeply affected by
innovation as adoption accelerates and
disruption unfolds. Understanding the
14 June 2016 | Canadian Property Management
most relevant forces and concepts involved
will help industry players avoid investing
in properties that will have lower future
va lue, r e qu i r e d isp r op or t ion at e
refurbishment capital or simply become
functionally obsolete.
Change is coming to the real estate
industry in the form of a vast array of
communications, construction, energy,
security, process and operational (commonly
called "smart") technologies that will affect
virtually every aspect of the industry. In fact,
that change is already here.
The way properties are conceived and
built; the way they are researched, marketed
and sold; and, most importantly, what they
offer to tenants in the way of energy-
efficient, flexible, adaptable smart
functionality are all becoming critical
factors when assessing the future viability of
investment properties and establishing
sustainable long-term investment criteria.
Investors need to be aware of, if not
deeply informed about, the latest disruptive
technology trends affecting the industry. At
last count, more than 2,500 companies are
poised to disrupt the real estate industry,
with innovative models set to alter
everything from real estate’s traditional
role in business operations to how it is
funded and where it is located. Just as
Amazon successfully mainstreamed
e-commerce and forced retailers to rethink
their supply chains and store offerings,
The art of
creating impressions
Tork Image Design
TM
Gently brushed stainless steel provides a first class impression. Touch-free towel, bath tissue
and soap dispensers deliver a complete look that complements any washroom design, and
keeps your washroom running smoothly. Your guests experience nothing but your best.
Discover how our range of new Tork Image Design dispensers can enhance your washroom.
www.torkimagedesign.com
© 2016 SCA North America LLC. All rights reserved. ®Tork is a registered trademark of SCA North America LLC, or its affiliates.
changemanagement
fin-tech will similarly transform retail
banking and insurance, while bio-tech
reconceives both medical practices and
service delivery.
APPS
The number of real estate apps for collecting,
managing, marketing and reporting
property data across all segments is set to
explode. The MIT Center for Real Estate is
currently tracking more than 2,500 apps in
development and has noted that students are
almost universally gravitating to app
development over investment banking,
investment management and property
development roles. It’s likely that these apps,
as happened in the travel industry, will be
supplanted by aggregator apps, as their data
manipulation capabilities and productivity
advantages become hugely valuable to real
estate professionals.
The business applications of social media
are also growing, with networks increasingly disintermediating buyer and seller
relationships and replacing corporate websites as the place to go, not only to develop
business relationships, but to research industry developments and, increasingly, to actually get business done. Cutting-edge
architects, for example, are beginning to
crowdsource solutions to design and engineering problems, as well as to collect stakeholder feedback. E-commerce is moving
into mobile and social networks as retailers
look to improve the effectiveness and reach
of their platform investments.
By leveraging these technologies, real
estate professionals could report on industry
data on a far greater scale than ever before.
They could then develop and manage a
portfolio of acquisition targets and portfolio
initiatives and optimize the entire process
based on the specific data inputs and metrics
they deem most important, such as
sustainability, tenant retention or customer
engagement.
PROCESS TECHNOLOGY
The process technology revolution – the
application of data analytics, hardware and
software innovation, and disruptive business
models – may have the greatest effect of all
on the real estate industry. In the last 35
years, the industry has undergone a
transition from cheques, letters and carbon
copies to fax machines, ATMs, electronic
money transfers and mobile phones – and
most recently, to e-mail, desktop publishing,
tracking of business analytics, computeraided design, social media, bitcoin and
crowdfunding.
16 June 2016 | Canadian Property Management
The automation of everything – from
manufacturing processes and robo-lawyers,
to driverless vehicles, block chains and the
Internet of Things – is accelerating. Eight
years ago, the U.S. presidential election was
the first to be heavily influenced by social
media and crowdfunding; now those are
standard tactics.
Change is the only constant. As the
automation of everything unfolds, new
jobs and technologies pop up to exploit
fresh opportunities, and real estate must
keep up – locationally, technologically
and functionally.
Process innovation has always changed
the math. Up until now, it has not altered the
role of real estate service providers much,
but that is starting to change. The very
nature of real estate’s role in the business
ecosystem is open to innovation. For
example, Amazon, well-known for
fulfilment warehouses, must see
operationalizing big data as the next big
thing, as the company has 6 million square
feet of office space under construction in
Seattle, while cloud computing is its fastestgrowing current business.
In addition to building state-of-the-art
warehouses, Amazon derives its success
from constr ucting new prototype
facilities – including data centres and, in
the future, office buildings that will be
filled with people exploiting that data.
Leveraging technology across its
spectrum of applications (for example,
the use of robots in its e-commerce
supply chain) has been the key to
Amazon’s success. Amazon is using
social media to socialize the idea of
drone delivery of same-day fulfillment
because, while early adoption provides
first-mover advantage, resistance to
adoption is the reason change sometimes
doesn’t happen as soon as it could.
Alibaba, notorious for exploiting both
social media and big data, has a real
estate sub-category where the firm is
m a r ke t i n g, o p e n s o u r c i n g a n d
customizing modular construction for a
variety of applications, including offices,
hotels and apartments worldwide. Credit
card chip technology, only a few years
old, may be upended by mobile pay,
providing enhanced cybersecurity as
fingerprint and retina scan technology
come online.
Last year, $35 billion of real estate
projects were crowdfunded, cutting out
traditional financial service providers.
The point is, process technologies are
disrupting how things get done, and that
means the building spaces that will
sustain their value going forward will be
those that reflect and enable that process
revolution, hosting lower-cost, highertech facilities in the right locations.
ADAPTABILITY IMPERATIVE
To d ay’s s u c c e s sf u l r e a l e s t a t e
professionals undoubtedly believe they
are highly sensitive to change, including
technological change. But the change
afoot is not simply a market shift due to
a n i ndust r y boom or reti rement
demographic – and the technological
change is not about retrofitting the
buildings of the past to support the
technologies of the future.
We’re talking about full-scale industry
disruption and transformation that will, or
certainly should, radically alter investment
portfolio criteria – and those criteria must be
clearly, deeply and strategically understood
by decision-makers. If service providers are
not thinking about things like the IoT, big
data, modular construction, renewable
materials, social media, automation and
smart systems, buildings and cities, they are
not thinking hard or broadly enough. zz
Amy Erixon is Principal and Managing
Director, Investments, with Avison Young. The
preceding article is excerpted from her white
paper, Technological Disruption and the
Real Estate Industry. The complete text can
be found at https://avisonyoung.uberflip.com/
i/684513-aytopicalreport-techdisruptionjune8-16final