Bricks and bytes blend

The digitalisation drive will dramatically change the real estate sector in the coming years. 'Bricks' and 'bytes' will merge in smart buildings. This will offer real estate entrepreneurs numerous opportunities. But digitalisation will at the same time have negative effects on the market as well. New unexpected competition could arise, which could also bring uncertainty. What do we expect will change in the field of digitalisation and technology and what can real estate entrepreneurs do to anticipate these changes?

Wave of digitalisation

The real estate sector is standing on the threshold of far-reaching digitalisation. The amount and quality of available data is increasing rapidly and this is resulting in new and deeper insights into the use of real estate. This will impact the entire real estate cycle. New knowledge will make it possible to improve and renew the built-up areas to such an extent that they will meet the needs and wishes of users and investors better than ever before. This will make the advice to ‘put users first' much more concrete.

Wave after wave

The wave of digitalisation that will take place over the next three to five years will set the stage for a subsequent wave that will go much further. More and better data will make it possible within several years to apply innovations on a much broader scale in the real estate environment. Examples include 3D printing, blockchain, artificial intelligence, Virtual Design and Construction (VDC) and robotics. Users will as a result communicate directly with buildings and devices in the built-up area. There will also be much greater insight into the sustainability performance, which will help to improve energy performance and enable transformations at an earlier stage.

Real estate-as-a-service

The apps, software and data will provide much greater customisation and added value for users, owners and investors. Customisation means users will be able to customise all kinds of things, including both workstations and parts of buildings and energy and mobility. They will be able to pay directly via Pay-per-Use, for example via 'smart contracts'. Contact with users will take place primarily via digital platforms. They will as a result be able to take care of more things themselves on a self-service basis. This will make 'real estate as a service' common practice. Information about the design and use will in the meantime be registered and exchangeable; which will open up new opportunities for owners to, for example, grow towards circular economic models.

Economy of Things

The Internet of Things is evolving towards an Economy of Things. This is the term for the situation in which more and more physical objects communicate online with users, owners and markets. This second transformation will take place much faster than the first. The internet needed 25 years to get to the point it is now. Back then a totally new digital infrastructure had to be put in place and suitable devices (such as smartphones) had to be developed and used on a large scale. As a result the doors are now wide open for the next digital wave. And because digital solutions are 'borderless', new ideas and solutions can very rapidly gain a large market share worldwide. In contrast, existing solutions can also suddenly fall from grace.

User landscape

Many successful young companies work with new business models that are founded on the pillars of data and scalability. Thanks to exponential growth, they have taken their markets by surprise and squeezed out existing players. Existing large users of built-up areas are consequently making way for new ones. And they are, as a result of their explosive growth, often looking for suitable, scalable accommodation solutions. Real estate owners would be wise to take an in-depth look at the business models of these kind of organisations so that they can respond more effectively to their accommodation needs. 

Companies develop new business models. Worldwide known examples inspire and influence the world of real estate.

How can real estate entrepreneurs change in tandem?

Digitalisation gives rise to new opportunities for combining bricks and bytes. These opportunities must also be seized in order to be able to address the dramatically changing user landscape. Innovation is the key to capitalising on the new opportunities and real estate can provide support in this process. Read our five tips for real estate entrepreneurs below.

1. Examine your business model

Improving or even reinventing your own business model constitutes the most high-potential innovation. The basic premise for this is that the greatest value creation can occur by offering clients 'ideal' accommodation solutions. This goes beyond improving existing products or processes; it revolves around providing totally new solutions to client requirements, based on different business models. This is why it pays for real estate entrepreneurs to examine their own business model by asking critical questions. Is it clear which target group I am focussing on and what specific accommodation needs they have? How can I address those needs in a distinctive way? What should I keep or turn around in my existing model? Who can I work with to tackle this topic collectively? And how can I take a different approach to income and expenses?

2. Focus on scalable opportunities

Frontrunners in the construction and real estate sector are distinctive due to their ability to identify a new demand and offer solutions to meet it. This is because digitalisation gives rise to new companies, jobs and working concepts that require a real estate solution.

How does the real estate market seize these opportunities?

  • Innovative building concepts and construction methods. They include solutions such as standardised prefab home concepts (MorgenWonen), flexible and reusable building concepts (HeijmansOne), innovative building materials (solar panel roof tiles) or completely circular concepts (ReGenVillages in Almere). Many construction entrepreneurs and property developers study product and chain innovations that optimise 'bricks' by adding 'bytes' to them, which in turn enables them to strengthen their business model.
  • Sharing economy solutions. Platforms are emerging in different real estate segments that enable flexible or multiple use of space. Examples include flexible office concepts such as HNK, WeWork, SKEPP and Spaces. The pop-up store has now become a well-known phenomenon in the retail market. ParkBee makes company parking garages available to non-employees. WeWork in the United States has been adding living space to its flexible office concept in a growing number of locations. The United States is also home to other initiatives such as Breather, which enables short-term rental of workstations or meeting rooms. Flip.lease uses a blockchain solution to enable lessees to 'pass on' their lease contract to a new lessee as long as they meet the landlord’s criteria.
  • New forms of collaboration and value creation. Many startups are based on the new digital opportunities and are aimed at real estate entrepreneurs that want to change their business model. Organisations such as HollandProptech, HollandContech, Provada Future, Proptech NL and StartupBootcamp are, in turn, focusing on the resulting need for matchmaking between startups and existing real estate and other entrepreneurs. Collaboration with startups generates new ideas and opportunities for existing organisations.

3. Use technological solutions to your advantage

Knowledge of future users is essential for real estate providers. How are users changing, what are they looking for exactly in real estate and how do they organise their activities? In short: what constitutes 'suitable accommodation' for these users? It is already possible to link the BIM design data to presentation software (such as virtual reality) and to let potential users digitally customise the future real estate property. This gives suppliers greater insight into the accommodation needs for their target groups. This feedback will make it possible for the real estate supply to move more in step with the user market.

4. Focus on the vanguard and organise innovation

Not every entrepreneur can be a forerunner. Adapting to the digital real estate world does require good timing. Those who do not anticipate on time will see the competition increase quickly. But whoever invests too much prematurely could also be left out in the cold. It is crucial that entrepreneurs are aware of the latest developments, how the environment and the customer are changing and what other players are doing. Work together with innovation partners, take an in-depth look at startups and be inspired by new ideas from other sectors or countries for example. First make innovation bite-sized and work on developing concrete and applicable ideas. And above all: look for answers to clients' problems or needs.

5. Research the added value of data

The increasing availability, quality, linking and exchangeability of data will have a major impact on the information exchange that all real estate entrepreneurs will encounter. We see a broad and far-reaching efficiency drive on the horizon. A few examples:

Municipal Basic Administration Addresses and Buildings (BAG) 

The Netherlands’ Cadastre, Land Registry and Mapping Agency registers the registry and ownership information of our real estate. There is also the Municipal Basic Administration Addresses and Buildings (Basisadministratie Adressen en Gebouwen, BAG) that contains additional information on property, such as the date of construction, surface area, intended purpose and location on the map. The information from all the Dutch municipalities is in this way brought together in a uniform manner in one national register, which creates a wide range of smart possibilities for linking data.

Watch the video 'BAG in 5 minutes')

Blockchain
Blockchain makes it possible to register and share information digitally in a manner in which all involved parties can rely on it being current and correct, without needing a third party for this. While it has become well-known as the technology behind Bitcoin, it offers many more potential applications. As a result money or confidential transactions can take place entirely digitally. Blockchain makes these processes more efficient, transparent and safe.

The first experiments with applying blockchain in the real estate sector are already underway. Examples include crowdfunding, registration and automation of lease or purchase transactions, settlement of service charges, pay-per-use constructions and Homeowners Association management.

Blockchain explained on youtube.com

Rabobank

Numerous flows of information also converge at banks. Rabobank is participating with other banks and data organisations in Standard Business Reporting’s Real Estate Taxonomy initiative. The objective is to attain a better exchange of real estate data among the different parties in the real estate process. We are also setting up a valuation platform together with approximately 350 certified valuers in the Netherlands. This enables us to compile unique information that leads to insights we can use to help our customers. As part of another process, Rabobank is developing a real estate risk tool in association with other organisations including Calcasa and Locatus. We use it to bring the opportunities and risks for real estate investments into focus. We then combine this with our own insights so we can help customers improve their results.

Read more about Standard Business Reporting's Real Estate Taxonomy