Real Estate's Embrace of Digital Transformation
“The technological disruption that is happening in the real estate sector will go far beyond taking away 'what you can sell'; it is set to radically transform the real estate profession... The real estate industry as we know it will disappear."Real estate has always been about location: Early tribes searched out the best hunting areas, settlers sought fertile land to raise cattle and crops, kings used land to collect rent from the peasantry, and residents of 432 Park Avenue sought status for living in the world's tallest residential building. Because the real estate industry is so organically tied to location, maps have been the leading infrastructure for real estate data since long before the internet was invented. But now the question is: How does the real estate industry use technology to go beyond the basic facts of location?Residential and commercial real estate leaders, such as Corcoran, currently utilize data visualization to create a new business model based on consumer reality. More and more of consumers' basic real estate decisions spring from digital touch points, and the technological raw material is already waiting to be used. Here are a few high points of how the real estate industry is transforming itself, and some notes about where its primary challenges are found.
The Impact of Location Is Undergoing Change
When viewing technology's disruption of the real estate industry, it's worth noting the way in which the fundamental concept of location is changing for many residential buyers. Today's hyperconnected marketplace means that people no longer feel the same need to live near shopping centers; with one click on their mobile device or computer, they can order products from anywhere on the globe. Furthermore, the number of people who work remotely from home has increased by 30 percent in just the last decade and is expected to continue growing. The outcome of these trends is that many people no longer have to factor a daily commute into their search for the perfect house. Similarly, the need for physical office space is decreasing as well, while platforms like LiquidSpace step in to maximize businesses' access to short- or medium-term workspaces.
The Thrill of Augmented Reality
Augmented reality ("AR") superimposes computer-generated input like sound, video or graphics onto a live view of the actual physical world. It's like a smart window onto reality: a way for users to not only see what's actually in front of them, but also to have extra information layered on top of that real-world view.Last summer, the biggest AR experience in history, Pokemon Go, added a whole new meaning to the importance of location. Restaurants, bars and other establishments benefited from the Pokemon Go craze by dropping lure modules onto their locations and providing charging ports for those playing the game. Some businesses even had a monthly budget for Pokemon Go, as these lure modules aren't free or abundant in the game.What does Pokemon Go have to do with real estate? The adoption of the app, which peaked at around 45 million daily active users during July 2016, shows the tremendous level of excitement that people feel for this new type of technology Users of the app traveled to places they never had previously thought of visiting, just to get the opportunity to catch Pokemon specific to that region. This was all due to the novel allure of augmented reality (AR).
AR's Role in Real Estate
The enhancement -- in real time -- of a consumer's current perception of reality can help home buyers tremendously. Eighty-seven percent of home buyers that visited real estate websites reported that photos were the most useful feature, followed by detailed property information, interactive maps and virtual tours. Zillow began capitalizing on this consumer interest with video and 3D tours last year and continues to do so. According to a recent report from the Urban Land Institute, experts expect $2.6 billion in real estate applications by the year 2025. Providers like Augmented Pixels lay out the exciting possibilities available to the real estate industry through AR, including on-screen home walkthroughs in which views can be shifted from 2D to 3D, and sections of the house cut away for better viewing. Other features include the ability to "repaint" the house in a different color, view it with the buyer's furniture already in place, or to view real-time stats superimposed on a property video.
The Greatest Opportunity Is in Commercial Real Estate
While there has been some digital innovation taking hold in residential real estate, the commercial side of the market has been slower to embrace digital. TechCrunch points out that the commercial real estate market is "antiquated and grossly underdeveloped." This sector is also more data-heavy than the residential market, providing intensive opportunities for agents to introduce software for visualizing and explaining details. Furthermore, the powerful proliferation of online funding sources, through real estate crowdfunding and fintech apps, enables new opportunities for agents to work with buyers on creative financing options.
Redefining the Role of the Real Estate Agent
One marketing challenge that has always existed for real estate agents, especially in the residential sector, has been to explain why their services are a good investment for sellers. Since it's possible for buyers and sellers to conduct transactions without involving an agent at all, the real estate industry has traditionally focused on the unique benefits they offer. One of these benefits has been Multiple Listing Services, which is a private network of listings that only real estate agents had access to. With the advent of disruptive services like Zillow and Trulia, every potential home buyer has access to all the listings in an area. This already removed a major selling point for the services of real estate agents, but the growing availability of other technologies threatens to eliminate agents from the scene altogether. Michael Buehler, Head of Infrastructure & Urban Development at the World Economic Forum, states the threat in plain language: "The technological disruption that is happening in the real estate sector will go far beyond taking away 'what you can sell'; it is set to radically transform the real estate profession... The real estate industry as we know it will disappear." Buehler warns that one inevitable outcome of the digital transformation is that many agents and brokers will lose their jobs and go out of business.
Preparing for the Coming Storm
The majority of respondents in a recent Pew Internet survey acknowledged the real-world fact that automation and technology will close down at least 47 percent of all jobs in the coming years. However, 80 percent of these same survey respondents are very confident that their own jobs will not be impacted by any automation within the next 50 years. One reason for this discrepancy may be that these respondents feel the way in which their own jobs require a crucial human touch. This human touch holds the key to the future of the real estate industry.
Agents Leverage Digital to Personalize Their Services
Mobile access opens door for agents and brokers as readily as it does for home buyers. Successful agents now don't have to spend a lot of time working in their offices. Instead, they've been freed to go out in the field meeting with various principals in person. If they need face-to-face meetings with the parties putting together a commercial transaction, they can accommodate their clients' schedules far more easily than they once could. They are now more available to conduct all aspects of their business that concerns clients' personal needs and wants. More hands-on client time is still needed, especially at both ends of the residential buyer spectrum: First-time buyers still need support as they navigate a stressful and complex transaction, while high-end luxury clients seek a personalized concierge experience.Wealthy clients often don't want to spend a lot of time alone clicking through different screens; they'd prefer to sit down with an agent who knows them personally and simply discuss their needs. In personal meetings, agents can offer the graphic benefits of new digital capabilities to clients, providing them with data visualization about local and national trends. Furthermore, an institutional landlord describes in Forbes the new options that technology opens to him. He stated that his asset managers use software products to leverage their portfolio data and close more deals.
Media Channels Extend Agents' Reach
Real estate is the domain of people-oriented professionals, and social media platforms are tailor-made for this industry. Where once the neighborhood agent was limited to sending out holiday cards or hanging brochures on doorknobs, now social media allows for ongoing connection with potential clients. Video content is being used by real estate agents for far more than house tours, and many are providing informational videos with high production values. Periscope allows live streaming to share an open house with more people than may be able to attend.Some of the flood of data that's now available to agents can be effectively packaged and shared with clients in the form of free educational content. Corcoran shows its mastery of this channel by offering its online magazine, Inhabit. Articles are delivered in a clean, open format on topics as broad as interactive art installations and artist-designed pianos. A new depth of connection can be established in this way, creating a sense of commonality and trust between the potential buyer and the real estate agency.Technology-enabled innovation in the real estate industry is still in its earliest phases. New mobile applications and software for research and development certainly pose challenges to the ranks of agents and brokers -- but for those who are eager to transform their way of doing business by embracing technological capabilities, the possibilities are almost unlimited.