Real Estate Predictions 2020 - Prepare to adapt to the changing market - Deloitte
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Real Estate Predictions 2020 Prepare to adapt to the changing market
Real Estate Predictions 2020 |
Section title goes here
02
Executive Summary
Welcome to the 2020 edition of the Real Campus: The working environment Where and how will we live in 2040?
Estate Predictions. Twelve different for companies willing to optimize real Brazil is facing a series of trends that are
countries have worked together to estate affecting the real estate sector across the
analyze the latest developments and At a time when the modern economy is globe. From rapid urbanization to changing
trends that will impact your business. knowledge-intensive and relies heavily demographics, the challenges in Brazil’s
Curious to see which changes lie ahead? on innovations, companies have become real estate market can be seen in major
Read about the impact of climate increasingly specialized and value markets everywhere.
change, Conversational AI, Proptech and chains became more complex. Campus
many more... development generates benefits for Smart development of smart places
companies that want to innovate, grow and With cutting-edge technologies combining
Climate change and the real estate create a future-proof working environment. to make them a reality, smart places
sector: From pleading guilty to are the next generation of real estate
delivering solutions Proptech on the move development. Smart places have evolved
Fully aware of the responsibility they have As Forbes defines it, proptech is from the sophisticated technologies that
on climate change and the impact this will “businesses using technology to disrupt power smart homes and are now finding
have on their activities, the Real Estate and and improve the way we buy, rent, sell, their way into offices.
Construction players are firmly moving design, construct, and manage residential
forward from a "plead guilty" position to a and commercial property.” Although a From workplaces to living
"solution maker" role. relatively young field, proptech startups environments
have already raised over $43 billion in It goes without saying that you would
Blending the digital with the physical funding worldwide since 2012. design a building to include lightbulbs and
to augment tenant experience doors, but how about voice-controlled
Considering real estate (CRE) as just a Diversity & Inclusion in the Real Estate lighting or desk sensors that track user
physical space is a thing of the past. The Industry behavior in the workplace? Smart building
industry is at an inflection point. Real estate Traditionally, real estate has been a male- technologies are here, and they will
tenants and end-user expectations are dominated industry, especially in key profoundly impact the future of work.
evolving continuously in terms of how they management positions. Although various
engage with their physical surroundings. efforts have been made to develop a more Data minimization: the importance of
inclusive environment, there is still a gap data
Conversational AI: A potential game that needs filling. The importance of data and the growing
changer impact of data mining and data analytics
The entire real estate industry is facing Real estate in 2020: The year climate is clear to almost every one. Over the last
significant disruption as new technology change bears down on investment two decades developments in these areas
and various digital offerings change the way pricing have resulted in the increasing availability
people live and work. Enhanced customer Nearly 35 years have passed since the of data for numerous purposes in society
expectations for more and more real-time publication of Our Common Future— as a whole.
and high quality services are a major otherwise known as the Brundtland
challenge. Report—and its definition for sustainability: The workplace “hierarchy of needs”
“Development that meets the needs of the In today’s fast changing digital world
present without compromising the ability of work and as companies rethink how
of future generations to meet their own they approach traditional real estate
needs. investments, workplace experience is
increasingly in the spotlight.
03
Real Estate Predictions 2020 |
Table of contents
In today's world; real estate,
society and technology are
inextricably linked. There’s
growing interest among
enterprises in looking beyond
what’s new to what’s next.
Deloitte can help. Our real
estate professionals have
deep industry experience
and knowledge to help you
achieve your business goals.
04
Real Estate Predictions 2020 |
Table of contents
Table of contents
Executive summary 03
Climate change and the real estate sector 06
Tenant Experience 09
Conversational AI 13
Campus development 17
Proptech on the move 21
Diversity & Inclusion 25
Real estate in 2020 28
Where and how will we live in 2040? 31
Smart development of smart places 34
From workplaces to living environments 37
Data minimization 40
The workplace “hierarchy of needs” 43
Contacts 48
Authors 49
05
Real Estate Predictions 2020 |
Climate change and the real estate sector
Climate change and the
real estate sector
From pleading guilty to
delivering solutions
For years those in real estate and construction have been
aware of the impact their sector has on climate change. But
while most acknowledged their responsibility, little was being
done by them to address the problem.
Until now. In the past year, real estate understanding the full extent of the risk The construction sector is also adopting
and construction have started to take climate change poses to real estate assets. new methods and materials to both limit
concerted action to not only mitigate the In 2019, FourTwentySeven a publisher their resources and energy consumption
impact of their sector on climate change and provider of market intelligence on the and resist climate-related extreme weather.
but proactively develop solutions. Whether economic risk of climate change, estimated
due to expected tighter regulations or that in Europe, 19% of retail spaces and These actions bring the sector more in step
public pressure or generational change, 16% of offices were exposed to floods and/ with much of the business world. More
the sector’s newfound ambition to reduce or sea level rise. than 500 of the largest companies are now
their impact is a decidedly positive and part of the Science Based Targets initiative
important step in the climate mitigation Clearly, the time has come for the real that champions competitive advantage in
effort. estate and construction sectors to start the transition to a low-carbon economy.
initiate real action on climate change.
Making the case for change Already investors are taking climate change Moving beyond regulation
From carbon production to consumption into account in their strategies by: Regardless of voluntary actions, the real
of resources and land development, the estate and construction sectors, like
• Mapping physical risks for current
lack of environmental movement from the every other sector, has to adhere to the
portfolios and potential acquisitions
real estate and construction sectors was rising tide of climate-related regulations.
contributing to an increasingly negative • Incorporating physical adaptation and All European countries are now following
image of the sector. For years the sector mitigation measures for assets at risk a path to tighter regulation and more
received repeated censure from NGOs demanding standards. In Germany, the
• Including climate risk in their due
and warnings from scientists. Regulations European Energy Performance of Buildings
diligence processes
imposed new reporting standards. Directive (GebäudeEnergieGesetz) will see
Millennials, buyers, and even investors • Investing directly in mitigation measures numerous building efficiency regulations
voiced their objections. for specific assets combined.
• Getting involved in local resilience
But only in the past year or so has the
strategies with policy makers
pressure started making a difference.
And it has only been reinforced by
06
Real Estate Predictions 2020 |
Climate change and the real estate sector
07
Real Estate Predictions 2020 |
Climate change and the real estate sector
And in France, by 2021, regulation will • Climate transition leadership: The
be tighter and impose several actions building sector has to take the lead in
for the real estate sector. This includes mitigating climate change by preparing its
low carbon strategies that either adopt employees, products, and clients as well
new construction methods or integrate as the population for deep changes.
circular economy as well as the respect
of biodiversity, which calls for reducing
Leading the revolution
or ending soil artificialization, renaturing
In order to achieve what represents no
soil, or developing natural spaces in urban
less than a revolution, the real estate and
areas.
construction sectors will have to move
quickly. They must review their operations
But even though regulation is mandatory,
and processes and supply chains. They
moving faster than regulation can be a key
need to adapt to new construction options,
competitive differentiator. A demonstration
such as modular construction, and increase
of climate concern ahead of and even
their R&D investments. And they need to
beyond regulation can prove invaluable
recruit, hire, and train new positions like
in today’s marketplace, where climate and
environmental or energy engineers and
other social issues are playing a much
carbon specialists.
larger role.
This will require new ways of working
Taking bold action
with an increasing number of external
The real estate and construction sectors
partners as well as successfully leveraging
are not only changing their attitude toward
technology to ensure fluidity, traceability,
climate change but are embarking on bold
and accountability. It’s a challenging
actions to take mitigation even further.
task—but one that is no longer optional.
Recognizing their role in climate change,
Because the time is now for the real estate
companies are thinking about even larger
and construction sectors to finally take a
solutions that can help society at large
leading role in saving the planet.
limit temperature rise to below 2°C or
3.6 degrees Fahrenheit in the next 10 years,
Authors
as stipulated in the Paris Agreement. These
Stéphane Martin
solutions are expected to revolutionize the
Director | FR
sector’s approach in four specific fields:
stephmartin@deloitte.fr
• Energy production: Every new building
needs to be at least energy self-sufficient Pierre Bernat
and ideally supply urban networks with Director | FR
additional production. pbernat@deloitte.fr
• Raw material re-usage: Each building
must serve as a material repository:
every refurbishment operation is an
opportunity to supply other construction
(infrastructure, housing, or other)
with second-hand material. BIM and
technology will facilitate inventorying and
monitoring stocks.
• Biodiversity enablement: Biodiversity
improvement should become a
central pillar of every construction and
rehabilitation operation, especially
in dense urban areas where it is
much needed for both health and
temperature reasons.
08
Real Estate Predictions 2020 |
Blending the digital with the physical to augment tenant experience
Blending the digital with
the physical to augment
tenant experience
The commercial real estate (CRE) industry, which largely
operates at the intersection of the physical real estate space
and its users, appears on the cusp of a digital transformation.
Tenants and end-users are largely looking forward to doing
more with the physical space. They are increasingly looking at
innovative and personalized technology-enabled experiences.
As an example, guests at Alibaba’s futuristic Figure 1: Ninety two percent of respondents plan to maintain or increase their tenant-
FlyZoo hotel in Hangzhou, China, can use a experience-related technology investments
digital assistant called Ask Genie to have a
more personalized and secure experience, Percentage of respondents
from reservations to in-room services1. 1%
PERE Investor or Manager 6% 21% 52% 21%
Yet, a majority of respondents of our
REITs 5% 34% 48% 14%
recent global survey of 750 CRE executives
don’t consider digital tenant experience a
Non-REIT Owner 10% 29% 48% 13%
core competency. Only 38 percent of the
CEO respondents consider digital tenant
Broker or Consultant 9% 38% 41% 13%
experience a core competency of their
company, which is the lowest amongst the Developer 7% 50% 34% 9%
various C-suite respondents. However, it
could be imperative for CRE companies to Property Manager 9% 51% 31% 9%
prioritize tenants’ and end-users’ needs
given the increasing influence of technology Overall 7% 36% 42% 14%
on customer preferences.
Significantly decrease Somewhat decrease No change Somewhat increase Significantly increase
How are companies digitizing tenant
experience? Let’s begin with tenant Source: Deloitte Center for Financial Services analysis.
experience-related technology investments
over the next 18 months. Thirty six percent
of respondents expect their organizations
to hold the line on tech spending, while 42
percent anticipate a moderate increase,
and 14 percent are likely to more than
double. (see Figure 1).
1. Anthony Pearce, “Alibaba’s Flyzoo Hotel In Hangzhou Is Staffed By Robots”,
Globetrender, August 5, 2019.
09
Real Estate Predictions 2020 |
Blending the digital with the physical to augment tenant experience
10Real Estate Predictions 2020 |
Blending the digital with the physical to augment tenant experience
Second, companies should put tenant Figure 2: Data governance investments in the next 18 months
and end-user preferences at the center of
every business decision. The on-demand Percentage of respondents
economy is reshaping tenant expectations
about how real estate is consumed, Chief Strategy Officer 4% 23% 65% 8%
and technology-enabled facilities and
personalized experiences are already Chief Digital Officer 2% 28% 51% 19%
transforming the CRE industry. Today,
creating superior experiences is not just Chief Investment Officer 4% 28% 58% 9%
about engaging the tenant, but also about
extending services to the CRE end user,
Chief Financial Officer 2% 34% 50% 14%
or the day-to-day consumer of that space:
a retail shopper; a resident living in a
Chief Acquisition Officer 1% 37% 47% 15%
multifamily property; an employee working
in an office space; or a manufacturer
using a warehouse. As attention spans Chief Executive Officer 5% 35% 50% 10%
wane, it will likely become more difficult
Somewhat decrease No change Somewhat increase Significantly increase
to attract and retain tenants and end-
users. Our surveyed executives believe
that IoT technology and mobile apps are Source: Deloitte Center for Financial Services analysis.
important technologies to help improve
front-end experiences for tenants and
end users. More than half of respondents Figure 3: Departments benefiting from using AI technologies
believe that environmental and security
technology investments will improve tenant Percentage of respondents
experience. Mobile apps are a powerful
Sales & CRM 54% 57% 61%
tool to create personalized tenant/end-user
experiences. Respondents cited features
such as app-based entry, notifications and/
Accounting and FP&A 56% 50% 63%
or virtual events to enable community-
building among occupants, tenant
handbooks and newsletters, and contact Property management 60% 43% 54%
information for property management
and maintenance services as some of the
most essential smart features’ properties Lease administration 42% 44% 46%
could offer.
Currently, 58 percent of surveyed CRE CRE development 38% 40% 51%
executives consider tenant preference
during the predevelopment stage. North America Europe Asia
Organizations can use digital reality (DR)
technologies to attract, retain, and engage Source: Deloitte Center for Financial Services analysis.
tenants during the development phase
of a CRE project. With DR, owners and
developers can use prototyping tools
and offer potential tenants a futuristic
experience at the predevelopment stage.
11Real Estate Predictions 2020 |
Blending the digital with the physical to augment tenant experience
Third, data control, access, and analysis To gain more in-depth insights from our
are expected to become more critical as global executive survey and strategies
data generation and usage continues to that can help companies amplify digital
rise. Most CRE companies have not yet tenant experience, read our report “2020
fully explored how to capture and use commercial real estate outlook: Using
information to enhance decision-making, digital and analytics to revolutionize
improve operating performance, and tenant experience.”
create a differentiated tenant experience.
To maximize the value of the data they Author
already have, whether collected internally Surabhi Kejriwal
or purchased from a vendor, CRE Real Estate Research Leader | US
companies should develop platforms, sukejriwal@deloitte.com
processes, and a governance structure
that enable data discovery, availability,
management, and usability.
Most organizations appear to understand
the importance of data governance, as 68
percent of the surveyed chief investment
officers (CIO) plan to somewhat or
significantly increase data governance
investments in people, processes, or
technology over the next 18 months
(see figure 2).
Last, with CRE industry’s growing access
to a wider variety of personal data such as
user location, communication, behavior,
and sentiments, cybersecurity and tenant
data privacy are becoming top priorities.
For some organizations, these concerns
tend to limit use of emerging technologies
such as IoT and AI. For instance, 44 percent
of respondents chose data and privacy
issues as one of the biggest challenges
in adopting AI technologies. Separately,
surveyed executives consider tenant
relationship damage, turnover or lower
rentals as the second most important
impact of a data breach. High attention
to cybersecurity and tenant data privacy
are important to comply with different
regulations, increase tenant loyalty, and
maintain brand and reputation.
As we look to 2020 and envision the next
decade, the traditional mantra of Location,
Location, Location is becoming increasingly
irrelevant. The most successful CRE
companies will likely be the ones that follow
the mantra: location, experience, analytics.
This requires companies to fundamentally
rethink location, space requirements,
users, and user preferences, and gradually
shift to a service mindset.
12Real Estate Predictions 2020 |
Conversational AI
Conversational AI
A potential game changer for
real estate customer service
The entire real estate industry is facing significant disruption
as new technology and various digital offerings change the
way people live and work. Enhanced customer expectations
for more and more real-time and high quality services are a
major challenge.
What is needed is more than a chatbot But to do this AI offerings need to
but rather a so-called “intelligent virtual move beyond static Q&A chatbots to a
assistant.” Enabled by conversational “personalized” agent with the ability to
AI, these assistants would be built for trigger or perform relevant tasks and
purpose, have a rich set of capabilities, events. For some selected use cases (e.g.,
and be integrated into the end-to-end targeting group-specific rental offerings
process landscape of the enterprise. or cross-selling services) additional
They can also simultaneously act as an capabilities will evolve, allowing the
important interface within the entire real assistant to act as an intelligent advisor
estate ecosystem. capable of making suggestions based on its
integrated AI driven recommender engine.
Real estate and the digital customer In the future add-on services like these
experience could make the difference in real estate just
Today, expectations regarding customer like they do in modern online retailing.
service experience are mainly driven by
the standards of the big technology firms. What is needed is more than a chatbot
Personal contact is no longer the major but rather a so-called “intelligent virtual
relevant success factor in many processes. assistant.” Enabled by conversational
Rather, it’s easy and simple contact AI, these assistants would be built for
channels, 24/7 availability, fast response purpose, have a rich set of capabilities,
times, and a low error rate. Service desk and be integrated into the end-to-end
automation and conversational AI can process landscape of the enterprise.
enable companies to design and deliver They can also simultaneously act as an
an experience that provides this value to important interface within the entire real
the customer. estate ecosystem.
13Real Estate Predictions 2020 |
Conversational AI
14Real Estate Predictions 2020 |
Conversational AI
Facts and figures on market insights for AI based smart assistants
21%
Global market 18–24
Where voice assistants are 51%
2 billion voice growth for smart
used:79% at home, 51%
requests per week speakers will be 25–34
19%
in car, 37%
worldwide 30% p.a. Ø2019
6% in transit, 1% at work
until 2022 30%
15%
35–44
33%
Deloitte, "Beyond Touch – Voice Commerce 2030" 18%
45–54
31%
Ø2018
16%
18%
55–64
21%
9%
31% will consider smart home as decision driver for next flat or house 65–74
13%
19% are willing to pay more rent for space equipped with smart
0% 20% 40% 60% 80%
home applications
2018 2019
Bitcom Digitalverband, Bitcom Research Deloitte, "Voice assistant usage per smartphone“ - Global Mobile
Consumer Surveys 2018-2019
91% of customers have called a customer service more than once to Up to 10x higher cost
solve the same issue savings (comparison of
75% of Netflix
90% complained that they had been put on hold for too long resolution efforts for a
viewership is driven
classic customer phone
by recommendations 80% had to repeat the same information to a different person during the same call call vs. virtual assistant
50% of all customer service calls remain unresolved due to poor customer service interactions)
Deloitte, "Beyond Touch – Voice Commerce 2030" Deloitte, Real Estate housing analysis
Real estate and the digital customer events. For some selected use cases (e.g., course becomes much easier if your virtual
experience targeting group-specific rental offerings assistant covers real estate processes
Today, expectations regarding customer or cross-selling services) additional from end-to-end (which needs a deep
service experience are mainly driven by capabilities will evolve, allowing the and comprehensive understanding of all
the standards of the big technology firms. assistant to act as an intelligent advisor underlying real estate specific workflows
Personal contact is no longer the major capable of making suggestions based on its and tasks) and provides open interfaces
relevant success factor in many processes. integrated AI driven recommender engine. for connectivity to such systems as ERP,
Rather, it’s easy and simple contact In the future add-on services like these individual databases, CRM/ticketing,
channels, 24/7 availability, fast response could make the difference in real estate just apps, smart devices, or external service
times, and a low error rate. Service desk like they do in modern online retailing. providers. It’s also important that the
automation and conversational AI can virtual assistant is flexible enough to
enable companies to design and deliver A virtual assistant in practice stretch its scope or to integrate services
an experience that provides this value to To be able to address all real estate related from an ever-growing universe of micro
the customer. requirements, it is essential that a virtual services, the relevance of which will
assistant and the underlying digital service increase even more in the digital future.
But to do this AI offerings need to platform are integrated with as much of
move beyond static Q&A chatbots to a the real estate ecosystem as possible. The
“personalized” agent with the ability to more relevant the stakeholders within
trigger or perform relevant tasks and the process cycle are, the better. This of
15Real Estate Predictions 2020 |
Conversational AI
With applied conversational AI and Within the real estate industry only a
intelligent automation a wide range few companies, especially in housing,
of suitable and easy-accessible have started to realize the benefits of
communication channels becomes conversational AI. As of now most of the
available (e.g., web, app, voice, smart existing conversational AI services lack
speaker, smart watches, etc.). They all maturity and/or scalability, a reason being
provide a much lower barrier to customer the functional depth of the real estate
connection. Thus, the amount of reported ecosystem, the diversity of requirements,
incidents to be processed and managed and a weak process alignment. This
will increase, particularly in a company that often leads to bad user experiences,
in the past avoided contact with customers forcing businesses to rebuild their
due to poor service. Also, as digitalization solution on a better suited technology
allows you to better utilize and leverage platform and with a heightened focus on
your customer service resources, business requirements.
subject matter experts can take care of
more extensive and value-added tasks The future of customer service is AI
while virtual assistants work on simpler Having a suitable conversational AI
client incidents. platform and intelligent service offerings in
place is the only way to foster sustainable
There are opportunities for quick wins in and successful digitized customer service.
this sphere, especially where there is little Of course, solution implementation is only
diversity, no sensitive client data to manage the first step. Providing conversational AI
(e.g., residential marketing or letting and virtual assistants to your customers is
research), and no demand for sophisticated not a one-off task but an ongoing activity.
interface models. But more attention and It requires robust monitoring and analysis
consideration is required. of all interactions in a professional digital
For example, in a CREM (corporate real operations setting that is optimized for
estate management) case, a virtual the world of AI. This way continuous
assistant has to tackle the individual improvement becomes possible, which will
responsibilities and requirements of all ensure continuous service excellence and
involved players (owner, tenant, and service the overall success of your initiative.
provider), needs to cope with the diverse
interface landscape, and requires a clear Authors
data governance definition (e.g., ownership/ Jörg von Ditfurth
usage of gathered data). Partner | DE
jvonditfurth@deloitte.de
Don’t get left behind
Remember, virtual assistants will impact Tobias Piegeler
your customer service no matter if you or Director | DE
your competition apply them. And even tpiegeler@deloitte.de
though conversational AI has already
entered the market, implementation has Nicola Machaczek
typically not been treated as a multi- Senior Consultant | DE
domain exercise across the entire real nmachaczek@deloitte.de
estate industry. Use cases differ across
domains (e.g. housing associations,
corporate real estate and facility service
departments, RE service providers,
nursing home operators, concierges,
hospitality, etc.) and, as such, need to be
adapted accordingly.
16Real Estate Predictions 2020 |
Campus
Campus
The working environment for
companies willing to optimize real
estate, collaborate, co-create, innovate,
attract talent and grow
At a time when the modern economy is knowledge-intensive and
relies heavily on innovations, companies have become increasingly
specialized and value chains became more complex. Innovation is no
longer a closed process that companies and knowledge institutions
go through independently.
They increasingly innovate and co-create Campus development
together. This is done through a dynamic A campus is a clearly spatially defined
network of partnerships. This new way area in which researchers and companies
of innovating changes the needs for the collaborate intensively. Campuses are
(physical) environment in which companies often part of a larger ecosystem. Users
operate. A network of interactions is have access to knowledge, facilities, and
created - a web of interconnected, talent. Real estate is no longer only used
interdependent, companies and by a single user, but (parts of) buildings are
organizations that together innovate and opened up to third parties and alternative
create value - "the business ecosystem". functions. By opening up real estate, one
can promote interactions between parties
The spatial translation of a business and individuals, stimulate engagements
ecosystem are commonly dubbed and cooperation, and learn from one
campuses, valleys, and districts. The another. The campus environment is,
campus, as the workplace of the future, therefore, a means for companies to
facilitates cooperation and joint innovation achieve their broader objectives. The idea
between and within parties. We see a that companies have to do everything
trend of companies that increasingly inhouse is outdated. Cooperation leads
and successfully work in campus-like to progress. On the one hand, we see
environments. Campus development companies that become part of an existing
generates benefits for companies that campus. On the other hand we see
want to innovate, grow and create a future- companies that use their real estate to
proof working environment. However, realize new campus environments.
there is no blueprint for successful
campus development.
17Real Estate Predictions 2020 |
Campus
18Real Estate Predictions 2020 |
Campus
Reasons for campus development Talent attraction: The campus model
We have identified several reasons is also used to attract the increasingly
for companies to start with scarce talent since it is a favorable
campus development: working environment especially for young
professionals. The campus can also
Aspiration for cooperation and facilitate education and programs to suit
innovation: New products and services are the demand and supply of talent better.
emerging, while at the same time existing
products and services are disappearing. Benefits on different scales
The search for cooperation can lead the While the strict definition of a campus is
way to new products, services and markets. often linked to educational institutions and
The market shows that most successful research, we see that the benefits offered
innovations are developed with partners. by the campus model can be applied at
This can be explained by the fact that in different scales for all types of parties. We
the early stages of an innovation process, identify six layers of proximity:
there is a need for direct interaction and
• Geographical proximity: Being able to
exchange of knowledge. That is, multiple
work together physically to consult and
cycles of developing, testing by third
coordinate ad hoc.
parties or potential clients, redeveloping
and testing again, have generally proved • Social proximity: Being in, or being able
to be more effective than linear in-house to find contact with like-minded people
developments. Innovation activities are (socializing).
therefore often strongly spatially clustered.
• Institutional proximity: Belonging to
A campus offers the possibility to facilitate
a certain "subculture" or group with
the required geographical proximity and
corresponding norms and values. It can
cooperation between different parties.
have a virtual or physical component.
The real estate environment can therefore
serve as a catalyst for innovation and • Cognitive proximity: Access to people/
lead to the development of new products databases, events, etc. with the same,
and services. related or relevant knowledge levels to
make knowledge sharing easier.
A shift in housing: Nowadays companies
• Organizational proximity: Reduction
require fewer square meters of housing,
in barriers by belonging to the same
because of shared workplaces, co-location,
organization/institution.
flexible workplaces, smart building
technology and more efficiency. By • Financing proximity: The possibility to
reducing their own footprint, companies get in touch with potential financiers
create space for third parties within and investors.
their properties, which saves costs and
generates additional revenues. This also Campuses are a spatial translation of the
applies to shared facilities. Research has emergence of local innovation ecosystems.
shown the campus-concept meets these However, only spatial proximity is not
workplace requirements of the future. sufficient to exploit the benefits of the
The workplace of the future is focused campus environment and to facilitate
on cooperation, sustainability, flexibility, innovation. The benefits of working in a
shared facilities and entrepreneurship. campus environment are only achieved
under certain conditions. Firstly, the
Soft exit: When relocating to a new cooperation that underlies innovation must
location, companies want to make sure also be facilitated by programming (for
their existing buildings do not sit empty. To example, workshops, lectures,
prevent vacancies and knowledge loss, they congresses, events, etc.) and by informal
leave the old location in phases, while new meeting places. Secondly, the physical
companies gradually take over their place. space must be arranged in such a way that
Knowledge and facilities are then shared by cooperation is encouraged.
a wide range of new parties.
19Real Estate Predictions 2020 |
Campus
This includes a strong organization that A campus as a physical environment Authors
actively shapes the cooperation. Thirdly, can facilitate the development of new Mark Platier
a clear content driven profile that is partnerships and innovations and can Director | NL
supported by the various users is also attract scarce talent. Parts of the campus mplatier@deloitte.nl
essential to make optimum use of the concept can be beneficial for several
benefits that a campus environment can parties that want to create a future-proof Sofie Woldring
generate. working environment. The benefits of a Manager | NL
campus are such that more and more
Conclusion parties are opting for a campus solution.
To be able to keep up with the pace at
which innovation is taking place, it is crucial There is no blueprint for "how a campus,
to recognize that leveraging third parties’ valley or district is successfully set up". This
resources, generates more benefits within depends on the type of organizations and
a shorter timespan than doing everything the goals they wants to achieve. Specific
in-house. knowledge of real estate in combination
with how to set up partnerships is essential
for creating a successful campus.
Value creation is increasingly taking place in ecosystems
SMEs
Start-ups
Investors
Major
Consumers
corporates Financial
Institutions
Party X
Technology Hospitals
Companies
Governments
20Real Estate Predictions 2020 |
Proptech on the move
Proptech on the move
As Forbes defines it, proptech is “businesses using technology to
disrupt and improve the way we buy, rent, sell, design, construct, and
manage residential and commercial property.” Although a relatively
young field, proptech startups have already raised over $43 billion
in funding worldwide since 2012. In 2018 alone there was an 82%
increase from the year before.
To emphasize the current size of this The Geograpghy of 2018 Proptech Companies
developing ecosystem, proptech today
has the same funding size as fintech did
3.5%
back in 2013. And given fintech’s growth of 9.6%
44.8% (CAGR) since then, the prospects for
proptech are strong.
The rent generation
27.2%
According to CNBC , the fastest growing
59.7%
trend in the housing industry is the
demand for rental units and for fast
development of vertical rental properties a
trend also known as the “rent generation.”
This shift in preference from owning to
renting real estate is a major driver of the USA Europe Other Asia
proptech trend. Tenants today have a
constant desire to move into better, more
updated spaces – spaces that include the
Funding perspective: Real estate vs. Fintech
latest technology, or what is now termed
the “digital occupant experience.” 20
Whether it is in their work, retail, or
living environment, consumers want an 15
“experience” they can control – control of
lights, temperature, access, and more – 10
either from their mobile phones or some
other digital channel. Proptech not only
delivers this digital occupant experience, 5
but with the use of technologies like
augmented/virtual reality, it can radically
0
enhance the customer experience while
2013 2014 2015 2016 2017
tenants and companies choose, manage,
Real estate Fintech
and use any property. In this way, co-living
companies can now allow flexible leases
and offer a high-quality furnished living
experience.
21Real Estate Predictions 2020 |
Proptech on the move
22Real Estate Predictions 2020 |
Proptech on the move
And fintech-proptech companies can latest technology, or what is now termed provide insights as to the future of the
now offer a seamless tenant onboarding the “digital occupant experience.” burgeoning proptech sector. Known to be a
process. Proptech not only reduces costs Whether it is in their work, retail, or leader in disruptive technologies and a first
in operational support but enhances the living environment, consumers want an mover in new trends and fields, Israel was
overall customer experience. “experience” they can control – control of ranked the world’s sixth most innovative
lights, temperature, access, and more – country by the Bloomberg Innovation
Smart buildings are the foundation of these either from their mobile phones or some Index in 2020 and has the second-largest
solutions. By offering a platform to collect other digital channel. Proptech not only number of startup companies in the
and analyze data, integrated systems that delivers this digital occupant experience, world – more than 7,000 – after the United
provide a better understanding of the but with the use of technologies like States. With a population of only 8 million
end user can be enabled. The advanced augmented/virtual reality, it can radically people, the country has more startups per
technologies that support these platforms enhance the customer experience while capita than any other country in the world,
are now reaching a maturity stage where tenants and companies choose, manage, concentrated around the city of Tel Aviv in
they can be implemented. and use any property. In this way, co- an area called Silicon Wadi (valley).
living companies can now allow flexible
To emphasize the current size of this leases and offer a high-quality furnished Currently, there are more than 100
developing ecosystem, proptech today living experience. And fintech-proptech proptech startups operating in Israel, and
has the same funding size as fintech did companies can now offer a seamless tenant this number reflects a 80% CAGAR in the
back in 2013. And given fintech’s growth of onboarding process. Proptech not only number of proptech startups over the last
44.8% (CAGR) since then, the prospects for reduces costs in operational support but five years. In 2018 alone, $200 million were
proptech are strong. enhances the overall customer experience invested in proptech startups in Israel,
closing a decade that saw over $1 billion
The rent generation Smart buildings are the foundation of these in capital raised, with several companies
According to CNBC , the fastest growing solutions. By offering a platform to collect raising more than $100 million. Given the
trend in the housing industry is the and analyze data, integrated systems that vast definition of proptech, which refers to
demand for rental units and for fast provide a better understanding of the the entire value chain of property, several
development of vertical rental properties a end user can be enabled. The advanced of the proptech companies are fintech
trend also known as the “rent generation.” technologies that support these platforms related, demonstrating the connectivity
This shift in preference from owning to are now reaching a maturity stage where between the two industries.
renting real estate is a major driver of the they can be implemented.
proptech trend. Tenants today have a One innovation hub’s proptech story The key to Israel’s success in proptech
constant desire to move into better, more With its more than 400 multinational R&D can be seen more clearly when analyzing
updated spaces – spaces that include the centers and innovation hubs, Israel can the leading sectors within the proptech
ecosystem – which includes investing
and financing; planning and building;
Israeli stratups founded buying, selling, and renting; and managing
and operating. It’s this last sector that
160 really stands out in Israel. That is, the
140 strongest Israeli proptech startups
focus on managing and operating,
120 132 using technologies that digitalize
100 tenant management, payments, and
80 communication between buyers, sellers,
86 and property owners.
60
40
47
20
7 9 18
0
2008 2010 2012 2014 2016 2018
23Real Estate Predictions 2020 |
Proptech on the move
These startups draw on such relevant Authors
solutions as data analytics, maintenance, Doron Gibor
energy management, and tenant Partner & Leader of RE | IL
experience. They are fueled by the dgibor@deloitte.co.il
advanced technologies referred to above
and, as such, thrive in the Israeli ecosystem. Amit Harel
Director | IL
Proptech’s prospects aharel@deloitte.co.il
Like other traditional industries, real
estate is a market that hasn’t changed very Maya Trajtenberg Madar
much in decades – maybe even centuries. Senior Staff | IL
Proptech presents that rare chance to mtrajtenbergmadar@deloitte.co.il
disrupt such an industry and its attracting
a lot of attention from entrepreneurs,
investors, and industry incumbents all
at once.
Innovation centers like Israel are jumping
on this opportunity and companies like
those based in the Silicon Wadi tech cluster
will play an important role as the proptech
trend evolves. Because challenging
orthodox thinking, while implementing new
business models and technologies, is the
key to success in today’s real estate world
– a world in which proptech is now staking
a claim.
24Real Estate Predictions 2020 |
Diversity & Inclusion
Diversity & Inclusion
In the Real Estate Industry
Traditionally, real estate has been a male-dominated
industry, especially in key management positions. Although
various efforts have been made to develop a more inclusive
environment, there is still a gap that needs filling. It’s a
situation that is gaining increasing visibility – as demonstrated
by the 2019 publication of the book Managing Diversity &
Inclusion in the Real Estate Sector, which focuses on unlocking
the potential of diversity and inclusion (D&I) in the sector.
Unpacking the question of Diversity & Why diversity and inclusion matters eight times more likely to achieve better
Inclusion in the Real Estate Industry As recognized by the 2017 Deloitte Global business outcomes, as Deloitte partner
D&I covers a broad spectrum of topics, Human Capital Survey, D&I matters Juliet Bourke found in her research.
including gender balance, generation gap, critically to business performance, as Indirect effects from having a diverse
ethnicity, disability, sexual preference, it increases creativity and innovation and inclusive workforce include a
religion, and more. But with many official within teams1. In other words, D&I can better company image and improved
definitions around, it can be agreed that bring organizational benefits that are transparency as well as benefitting talent
a diverse and inclusive environment is an directly linked to company performance. attraction and retention. Also, there are
environment in which everyone is part Organizations with inclusive cultures are external pressures driving D&I practices
of a whole and where individuals can twice as likely to meet or exceed financial within companies, including potential
participate and uncover their potential. targets and three times as likely to be high- blaming and shaming of an organization
performing. And companies are six times and risk mitigation.
more likely to be innovative and agile and
Figure 1: How diversity and inclusion makes sound business operations
Organizations with inclusive cultures are:
2x 3x 6x 8x
as likely to meet or as likely to be more likely to be more likely to achieve better
exceed financial targest high-performing inovative and agile business outcomes
Source: Juliet Bourke, Which Two Heads Are Better Than One? How Diverse Teams Create Breakthrough Ideas and Make Smarter Decisions
(Australian Institute of Company Directors, 2016)
1 https://www2.deloitte.com/us/en/insights/deloitte-review/issue-22/diversity-and-inclusion-at-work-eight-powerful-truths.html
25Real Estate Predictions 2020 |
Diversity & Inclusion
26Real Estate Predictions 2020 |
Diversity & Inclusion
Figure 2 – Identified barriers for Diversity and Inclusion in business
In order to put the vision to work,
there are specific resources and
tools needed:
• Knowledge and skills – First
Complexiity Non-core area
of all, there needs to be the
of the topic for business
opportunity for everyone
involved to acquire the needed
skills and knowledge. This starts
with creating awareness on
every level of the organization.
• Engagement – After awareness
Taking the first steps challenges need to be worked on. This comes active engagement,
As the real estate sector progresses toward analysis should focus on more than just which requires a continuous
a more inclusive environment, how can gender in order to uncover any additional loop of learning and engaging
a company get started? Of top priority is discrimination in the organization. Forms with an agenda that is carried
recognizing that D&I requires a mindset of discrimination that may be neglected throughout the whole year and
change across stakeholders, management, through unconscious bias can then be company.
and employees. Developing a vision identified and proper action taken.
• Role models throughout
statement that includes D&I as part of
– A frequently discussed
organizational goals can help achieve this. As we progress…
and proposed solution is
That vision should include three themes By actively integrating the above themes
representation. Representation
that are critical for change regardless of the into initiatives, 2020 may very well be the
is crucial in regard to the
field of business: year D&I gains traction in the real estate
multiple effects it has. It holds
• Leadership: The value of leadership industry. With its positive impact on
with the idea that role models
is crucial for driving change—and the business outcomes and talent attraction
are vital for minorities to be
complexities of D&I demand a strong and retention, diversity and inclusion has a
given the confidence that it is
leader to guide an organization. A proven track record and it’s time real estate
possible to attain certain goals.
company needs visionary leadership unlocked its potential.
Representation does not only
that can set the tone and be available
apply to higher management as
for needed support. It is vital to create Authors
it is important for minorities to
a working environment where all Mary Enriquez – Ramones
participate both vertically and
employees are heard and able to suggest Manager | LU
horizontally.
and create change. menriquez@deloitte.lu
• Commitment: For D&I initiatives to • Facilities – Finally, there has to
succeed, there needs to be a sense of Christian Van Dartel be policies and facilities catered
commitment from people throughout the Partner | LU to the needs of minorities.
entirety of the workforce. Commitment cvandartel@deloitte.lu An example of these types of
leads to action and is the first stepping policies include paternity leave
stone for establishing a diverse and Chiara Schlösser and child-care provision. Another
inclusive environment. Taking a stand Master Student | NL often neglected minority group
on certain matters can have a catalyzing cschlosser@deloitte.nl are disabled workers. Creating a
effect, and a dedicated team that can work environment that not only
put this commitment into action will Feike-Jan Nauta removes the physical barriers
enhance the visibility of D&I endeavours. Business Analyist | NL but is also flexible in providing
By building a team that oversees and fnauta@deloitte.nl the policies disabled workers
monitors this commitment, the efforts need to thrive and succeed in
of a company will dive deeper than just any organization will help build a
window-dressing, and, therefore, improve diverse and inclusive culture.
the organization’s reputation and brand.
• Reflective: A company needs to
reflect D&I in its own operations and a
company-wide analysis can show what
27Real Estate Predictions 2020 |
Real estate in 2020
Real estate in 2020
The year climate change catches
up to investment pricing
Nearly 35 years have passed since the publication of Our
Common Future—otherwise known as the Brundtland
Report—and its definition for sustainability: “Development that
meets the needs of the present without compromising the
ability of future generations to meet their own needs.” Roll the
clock forward and sustainability—long time anathema to the
world of real estate—is now on the verge of impacting sector
values in a way that will redefine the market in the form of
climate change risk.
The momentum for sustainable change This adjustment is underscored by
within the real estate sector has been increasingly transparent performance
building for some time, setting the benchmarks in the sector, with disclosure
stage for both technical capability and now the focus of such climate change
market choice. But today, with headlines groups as the Taskforce on Climate Related
dominated by such movements as Financial Disclosures. The taskforce is now
Extinction Rebellion and Greta Thunberg’s supported by almost 1,000 organizations
activism, mindsets are shifting across the with assets under management well
general population rather than in niche in excess of $100 trillion. But though
quarters alone. No longer are climate the taskforce reported in 2019 that
change-informed investments modeled so transparency in reporting is growing, more
that they appeal to so-called “responsible” is required in light of the United Nation’s
investors only. Instead, not engaging in prediction that climate change risk to
sustainable behavior is regarded as a business over the next 15 years is in the
business risk in its own right. region of $1.2 trillion.
With the built environment contributing The response to climate change risk is
between 30% to 40% of all global carbon manifest within the real estate sector,
emissions—and the push to keep average with multiple investors and owners
temperatures from rising beyond 1.5 committing to delivering net zero carbon
degrees—climate-change risk is of portfolios by 2050 through organizations
particular relevance to real estate. Most like the Better Buildings Partnership, a
significantly, investors are now considering UK-based collaboration of commercial
new and emerging risks as part of real property owners focused on improving
estate pricing. the sustainability of existing commercial
building stock.
28Real Estate Predictions 2020 |
Real estate in 2020
29Real Estate Predictions 2020 |
Real estate in 2020
Others in the sector are challenging Those assets equipped to address the Authors
themselves with even stiffer timescale challenges of climate change should find Philip Parnell
ambitions. Delivering on such a themselves less exposed to the risks and Partner | UK
commitment is far from straightforward consequently the specter of premature pparnell@deloitte.co.uk
and will undoubtedly require immediate obsolescence. They should also find
changes in approach. themselves better placed to participate in Bo Glowacz
market-led growth and therefore enhanced Manager | UK
At a more modest level, yet nonetheless as performance compared to their peers. The bglowacz@deloitte.co.uk
illustrative of the changes afoot, regulatory corollary is that assets that are more poorly
valuation standards are sharpening their able to address climate change will become
focus. The new RICS Red Book, effective increasingly exposed to elevated risks of
from the end of January 2020, sees a value erosion.
tightening of requirements placed on
valuers with a new mandatory obligation to This value arbitrage may sound similar
include comment on assets’ sustainability to the notion of a green premium, that
credentials. is, sustainable buildings yielding a higher
financial return. But climate change is
With the drive toward ever increasing indiscriminate. It is an issue for all built
data and management information stock, not just those buildings regarded
transparency, coupled with investor as “sustainable” or “responsible.” While a
appetite for climate change-resilient assets, green premium can only ever apply to the
climate change risk will inevitably and few, the reality is that exposure to climate
demonstrably move the value dial. change risk applies to all.
30Real Estate Predictions 2020 |
Where and how will we live in 2040?
Where and how will we live
in 2040?
Lessons from Brazil’s real
estate market
Brazil is facing a series of trends that are affecting the real
estate sector across the globe. From rapid urbanization to
changing demographics, the challenges in Brazil’s real estate
market can be seen in major markets everywhere. As such, an
analysis of real estate in this increasingly robust market can
offer valuable insights for the sector—insights that can help
answer the all-important question, “Where and how will we
live in in 20 years?”
Global trends, local market of greater mobility, connection, and space, and convenience are already priority
In terms of its economic, social, and immigration, as can be seen in Europe elements when choosing a property
behavioral aspects, the real estate and the United States. and these factors are likely to remain
market in Brazil reflects movements relevant until 2040, even as they adapt to
• Changing demographics: Due to the
that have been gaining strength around the financial constraints and behavioral
increase in life expectancy, Brazil is
the world. According to Real estate characteristics of new generations.
undergoing a demographic transiton that
consumer behavior in 2040, a report from
many developed countries have already
Deloitte and the Brazilian Association of The changing needs of residents as they
experienced and which many developing
Real Estate Developers (Abrainc), these enter different periods of their life, such
countries will face in the near future.
movements include: as living near work or having more room
• Sustainability: The evolution of Brazil's for children, are also priority factors in
• Urbanization: Like many countries
reliance on and use of its large wealth of choosing a property. This requires greater
around the world, Brazil is experiencing
natural resources is making sustainability flexibility and diversity in the real estate
intense urbanization. It’s a process
a fundamental and strategic part of offered by builders and developers. And
that has been going on for decades,
the long-term development of its real while the need for larger spaces can be
especially in its megacities (São Paulo
estate and construction sectors. It’s a met in the regions around urban centers,
and Rio de Janeiro), but it is also now
reality already observed in more mature which offer larger housing at lower prices,
impacting the development of the other
markets, where the relationship with the larger condominiums are helping to meet
regional capitals.
environment is playing an increasingly some of the same social demands for
• Diversity: As a country of continental larger role. quality of life within urban centers. These
dimensions, there is a rich diversity of spaces can offer recreational and green
cultures and living habits that coexist The state of real estate in Brazil areas as well as jogging spaces, multi-sport
in Brazil. Reconciling this multicultural According to the Deloitte-Abrainc study, courts, swimming pools, and even personal
character is an increasing challenge for all real estate in Brazil continues to evolve services.
countries in today’s global environment along a few key trends. Security, privacy,
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