Real Estate Predictions 2021 - From Location, location, location to Location, insights and experience - Deloitte
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Real Estate Predictions 2021 From Location, location, location to Location, insights and experience
The COVID-19 pandemic has accelerated a number of trends in the world of real estate. What is the value of real estate in an increasingly digital world? And how can we prepare for an even more data-based, digital – and preferably sustainable – future? Deloitte can help. Our real estate professionals have deep industry experience and knowledge to help you achieve your business goals.
Real Estate Predictions 2021 |
Executive Summary
Executive Summary
Welcome to the 2021 edition of the Real Estate Predictions. Deloitte firms from around
the world have collaborated to analyze the latest developments that are impacting the
future of real estate. For an inspiring outlook on 2021 and beyond, please read our
predictions and find out more about the future of work, sustainability, digitalization,
and innovation in the real estate sector.
5G as an enabler for new and smarter Innovation & construction in the shade The impact of social good on real
ways of working of global crisis estate
2020 has been a tumultuous year full The COVID-19 crisis has shed light on “ESG”, the generally used acronym for
of seismic shifts. It is easy to forget that another well-known crisis that has the “Environmental, Social and Governance”,
another impactful infrastructure change potential of exponentially harming has become an important business
is quietly taking place. The next wave of humanity to a point of no return - global consideration all around the world. For
digital disruption is on course and 5G will warming. If we want to avoid the many instance, real estate investors have an
be the ”glue” that will tie all of our devices, consequences of global warming, we increasing focus on sustainability. However,
buildings, and cities together, enabling new should accelerate our efforts, starting ESG in real estate can be so much more
and smarter ways of working. now. How can digitalization and innovation impactful. How can it become an important
enable the industry to prepare for a value driver?
Gaming the commercial real estate sustainable future?
talent conundrum Understanding Private Rented
COVID-19 has disrupted human The virtual office for Corporate Sector property
connections, which are at the heart of the Real Estate One of the megatrends in real estate is
commercial real estate (CRE) business. The widespread adoption of remote the need for rented housing in the main
Last year, leaders in all industries were working in 2020 has greatly shifted the role capitals. COVID-19 has accelerated this
challenged to digitalize many aspects of the workplace within organizations. All trend. However, there is an insufficient
of work while shifting and engaging indications point to a future where hybrid and inadequate stock of rental housing,
employees in a virtualized environment. working is here to stay. So how do real so a specifically designed product must
Looking ahead, what does this tell us about estate owners respond as the virtual office be developed to match demand and offer
the future of work in real estate? becomes a key component of working in new real estate opportunities. Enter Private
the ”new normal”? Rented Sector (PRS) property.
Gaining a competitive edge in real
estate with AI-driven geospatial Real Estate-as-a-Service: From Optimizing your use of office space and
analytics “product and space” to “system and real estate footprint
Data analysis can significantly improve service” COVID-19 has accelerated new ways of
decision-making in real estate. From Real estate is undergoing a fundamental working, which in turn will impact the use
valuation, sale/purchase of properties and business model redesign enabled by of office space. What are the implications
contracting to negotiations, risk analysis digitalization and a growing market of for the real estate industry and corporates?
and planning. In 2021, all eyes will be on AI- smart buildings. What business model will What opportunities will arise? How to
driven geospatial analytics. Why? Because be successful in the future? What can the prepare the property portfolio for a more
it is a quick, lean and affordable way to real estate industry learn from tech? What agile future of work? The urgency is clear:
provide address-specific rental predictions is Real Estate-as-a-Service? And what is the time to act is now.
and explainable transparency. the impact on strategy and organizational
performance?
03
Real Estate Predictions 2021 |
Executive Summary
Protecting your identity in the Digitalization is here to stay How to support strategic decision-
digital world The real estate industry is currently making in real estate
Protecting (proof of) our identity is adapting to evolving market conditions, Urban planning, asset management and
extremely important in our society. a changing regulatory environment, and investment decision-making require a
Particularly in the digital world, identity a fast-growing technological landscape. thorough understanding of the current
theft or misuse is a serious risk, and This is described in detail in our 2019 and future supply-demand dynamics and
interactions and transactions in the digital European Operations and Technology underlying macro-economic factors. The
world have a serious impact for us in the Survey for Real Estate Investment integration of Artificial Intelligence (AI) with
real world. Self-sovereign identity is all Managers. A survey that was completed by real estate and financial planning expertise
about control over our digital identity. a range of European real estate investment can help support new ways of analyzing
and asset managers. What can we learn historic data in an attempt to improve
Improvise. Adapt. Overcome. How to from their replies? How to achieve an future decisions.
cope with the impact of climate change effective digital transformation in our
Climate change has consequences for industry?
nature, people, and therefore also real
estate. Mitigation and adaptation are
strategies to deal with the potential risks
of climate change. What is the impact of
climate change strategies on the future of
real estate, in terms of markets, planning,
construction, and renovation?
04
Real Estate Predictions 2021 |
Table of contents
Table of contents
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 03
5G as an enabler for new and smarter ways of working . . . . . . . . . . . . . . . . . . 06
Gaming the commercial real estate talent conundrum . . . . . . . . . . . . . . . . . . . 09
Knowing what others don’t: gaining a competitive edge
in real estate with AI-driven geospatial analytics . . . . . . . . . . . . . . . . . . . . . . . . . 14
Innovation & Construction in the Shade of Global Crisis . . . . . . . . . . . . . . . . . . 17
The virtual office for Corporate Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Real Estate-as-a-Service: From “product and space” to
“system and service” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
The impact of social good on real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Understanding Private Rented Sector property . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Optimizing your use of office space and real estate footprint . . . . . . . . . . . . . 34
Protecting your identity in the digital world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Improvise. Adapt. Overcome. How to cope with the impact
of climate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Digitalization is here to stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
How to support strategic decision-making in real estate . . . . . . . . . . . . . . . 49
Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
05
Real Estate Predictions 2021 |
5G as an enabler for new and smarter ways of working
5G as an enabler for
new and smarter ways
of working
Implications for real
estate and construction
2020 has been a tumultuous year full of seismic shifts in everyday norms. In a year
marked with greater public scrutiny of embedded social structures and behaviors, it is
easy to forget that another impactful infrastructure change is quietly taking place. The
next wave of digital disruption is on course and the 5G rollout will be the enabler. 5G
will be the ”glue” that will tie all of our devices, buildings, and cities together, enabling
new and smarter ways of working for all of us.
The need for speed, latency, reliability, More to come Implications for real estate and
and capacity The first 5G networks were launched in construction
For the last several years, 4G – which was 2019 and were largely deployed from Numerous industries have made
itself revolutionary at its introduction existing 4G base stations. Since then, significant digital transformation strides
around 2010 – has served our society well. various major network organizations with 4G capability. What are the benefits
However, our demand for accurate and fast have also launched 5G mobile network of 5G? How can real estate leverage this
data is growing exponentially, and inherent capability in a limited number of cities new technology to accelerate digital
limitations relating to speed, latency, and towns. There is much more to come transformation within an industry that
reliability, and capacity are becoming – 5G could solidify the business case for is well behind others? Let’s explore the
more and more apparent. 5G mobile transformational technologies such as the answers to these key questions further.
internet is a major leap forward from 4G. Internet of Things (IoT), Artificial Intelligence
If its full potential is realized, it will not only (AI), Augmented & Virtual Reality (AR & VR) Greater network speeds
address 4G’s limitations, but will transform and Digital Twins all of which could have Standard 4G provides a maximum
the way we live, work, travel and play. a significant impact in digitalizing various potential real world speed of around
sectors – the sky is ”virtually” the limit. 80Mbps whereas 5G could reach peak
5G operates over much higher radio speeds of 10-20Gbps1. In combination
frequencies than 4G, which requires the Unsurprisingly, the rollout has been with increased bandwidth, improved
substantial upgrade, and addition of, cell impacted by trade and tech disputes network speeds could greatly enhance
towers. Higher frequencies require the regarding certain 5G equipment and by construction processes. For instance,
closer proximity of cells, meaning that the outbreak of COVID-19 for reasons the remote use of VR could support
”small cell sites” will need to be added to including a reduced consumer demand communicating ideas to project teams in
buildings, light poles and other structures (due to the increased Wi-Fi usage working an agile setting. Also, 5G could increase the
across the country. Network providers are from home), allegations linking 5G rollout use of off-site manufacturing, unlocking
building this high speed infrastructure at with the COVID-19 spread, and lack of AI to optimize quality control and risk
pace though, to date, the initial commercial understanding concerning the benefits escalation processes, and increase the use
application for the 5G rollout has centered of 5G. of 3D printing to create standard building
upon mobile broadband. components. It could improve information
1 House of Commons Library, 5G Briefing Paper 2019, September 6, 2019, page 4.
06
Real Estate Predictions 2021 |
5G as an enabler for new and smarter ways of working
07
Real Estate Predictions 2021 |
5G as an enabler for new and smarter ways of working
storage, progress tracking and automated development appraisals to enhance value 5G as an enabler for workplace
project controls. And track and trace supply and marketability. transformation
chain logistics could support ”just in time” As pre-existing working patterns continue
delivery and minimize corruption. High capacity to shift, 5G could further consolidate the
More bandwidth and data capacity would workplace transformation. Fully integrated
The most significant benefit for the reduce competition for connection and 5G offices could create enhanced revenue
construction industry will most likely be would allow the support of up to one million opportunities for landlords through
5G’s ability to take Building Information devices per square kilometer. 5G combined different types of leasing models. Business
Modelling (BIM) to the next level, which with big data applications and cloud storage models of flexible office operators, booking
will enhance the potential for fully capabilities could increase data on space desks and meeting rooms with specific
confederated 6D Models and enable utilization, power and energy consumption. digital capability, may become more
the creation of a cloud-based ”digital A much-needed retail revolution could start common as 5G networks expand.
twin”. This will support more efficient with VR and AR to create experiential retail
delivery, integration and better decision environments and be further developed by Key observations
making throughout the building lifecycle in-store analytics to personalize shoppers’ 2020 may have slowed down the 5G
from concept design through to experiences. Big data applications could technology revolution, but it has also
decommissioning. Further, the creation also support the continued effort to enforce further highlighted the need for improved
of these models will allow clients to ”look social distancing as more offices and retail connectivity, greater network speeds,
and feel” their projects earlier in the outlets open. reduced latency and wider bandwidth
delivery process. capacity to support digital transformation.
In time, collecting and interpretation of Although there are challenges in
Low latency data produced by real estate assets will implementing 5G and no doubt greater
5G is expected to reduce latency2 in the become a defensive strategy for most real speeds will soon exceed it, the economic
order of 1 millisecond3. In other words, 5G estate stakeholders. It will help them to and social benefits will outweigh the costs.
response times will feel instantaneous4. maintain an edge over their competitors. The real estate sector has the ”bandwidth”
The implementation of IoT in real estate Also, more regulatory requirements are to reap some of the greatest benefits from
is progressing at a rapid pace, with imposed by governments to encourage its implementation.
more and more new buildings being the use of 5G technology, as it will increase
specified with sensors inside and out. 5G productivity and efficiency and improve Authors
will enable instantaneous connectivity sustainability performance. Scott Dudley
to real time building usage data and Director | Financial Advisory | UK
infrastructure, providing scope for accurate Challenges sdudley@deloitte.co.uk
tenant occupancy data and optimized It is important to factor into any business
maintenance regimes on assets. In the case the challenges involved with optimizing Peter Adeleye
future, landlords may take advantage of 5G and the various technologies it enables. Consultant | Financial Advisory | UK
private 5G splicing (i.e. pay for what you These include but are not limited to: peteradeleye@deloitte.co.uk
use, down to the device) to increase yields
by offering bespoke services to their • shorter frequency waves requiring small Contact
tenants. The potential for building assets cell site technology with antennas as Andrew Carey
with wire-free connections instead of Wi-Fi close as 500 feet apart Partner | Financial Advisory | UK
could radically reduce the implementation ancarey@deloitte.co.uk
complexity of core building management • higher risk of obstacles (including building
systems (including fire, security, lighting, materials) blocking or disrupting high
HVAC and energy/utilities). frequency 5G signals
Faster response times between devices will • many devices that will need to be 5G
also allow for the more widespread use of enabled, e.g. better battery technology
autonomous vehicles and the associated
transport infrastructure. With more people • GDPR legislation and privacy laws that
working from home, 5G connections may limit 5G optimization.
may soon replace the need for Wi-Fi.
Valuation of 5G technology infrastructure
will have to be considered within future
2 Latency is the time taken for devices to respond to each other over the wireless network.
3 4G is around 30 milliseconds
4 Ofcom, What is 5G, March 9, 2018; [accessed November 28, 2020]
08
Real Estate Predictions 2021 |
Gaming the commercial real estate talent conundrum
Gaming the
commercial real estate
talent conundrum
Talent strategy in a post-
pandemic world
The COVID-19 pandemic has disrupted human connections, which are at the heart of
the commercial real estate (CRE) business. Leaders in all industries were challenged
to digitalize many aspects of work while shifting and engaging employees in that now-
virtualized environment. Companies had to provide the infrastructure that would
enable employees to work effectively from home, while prioritizing health and safety.
Looking ahead, what does this tell us about the future of work? How can we prepare
for the challenges of talent strategy in real estate?
One implication is that the ability to development, and cloud computing (see agree that their company has accelerated
succeed in the post-pandemic world will be Figure 1). Additionally, our analysis of job efforts to use technology and tools
hampered in the near term by employee openings for 500+ roles showed that in redefining business processes, job
concerns about returning to work. This traditional skills were highlighted as “must roles, and skill requirements (Figure 2).
was acknowledged by more than 50% haves” across all construction and general Regionally, a higher proportion of European
of respondents to the Deloitte Center management job openings. Only risk respondents (47%) are likely to do this,
for Financial Services’ Global Outlook management, and marketing and CRM- as compared to those in APAC (44%)
Survey 2020. related job postings required advanced and North America (32%). And only 36%
tech skills in more than 10% of job postings. of the respondents acknowledge that
Traditional skills or advanced their organization is refreshing its talent/
technology skills? The focus on traditional skills was pervasive recruitment strategy to shift to future
The pandemic also highlighted challenges across different CRE subsectors as well. For technology and skills needs.
in a highly manual business model instance, REITs looked for traditional sales
dominated by traditional job roles and and marketing skills in more than 60% of job CRE companies should consider the
skills in critical business areas including openings. More than 50% of brokers’ job following actions to envision the future
accounting, building maintenance, and listings sought finance and accounting (F&A) work and skill matrix and to facilitate the
customer service. Pre-pandemic, some skills. However, advanced data analytics recruitment of right-skilled talent:
CRE companies were continuing to lag skills were sought by REITs and brokers in
other industries in their adoption of certain only 1% and 3% of job listings, respectively. 01. Redefining roles and skills
technologies and recruitment of tech-savvy 02. Modernizing recruiting approach
talent. To support this, our analysis of Refreshing talent strategy is a growing 03. Creating alternate talent marketplaces
skills demand in the United States during imperative 04. Strengthening talent analytics
the 2014-2019 period revealed a higher It is a growing imperative for CRE
and sustained demand for traditional companies to digitalize business processes
skills. In contrast, there was muted growth and refresh their talent strategy so as to
in demand for advanced technology not lag further behind. Of note, 41% of
skills such as data analytics, software survey respondents agree or strongly
09Real Estate Predictions 2021 |
Gaming the commercial real estate talent conundrum
10Real Estate Predictions 2021 |
Gaming the commercial real estate talent conundrum
Figure 1: CRE companies continue to demand traditional skills
Proportion of job openings demanding traditional and advanced tech skills
40%
35%
35%
30% 30%
30%
26% 27%
24% 25%
25% 24%
25% 22%
21% 24%
20% 19%
18%
17% 17%
15%
15%
10% Growing ‘skills demand gap’
10%
5% 4% 4% 4%
3% 3% 3%
1% 1% 1% 1% 1% 1%
0.3% 0.4%
0%
2014 2015 2016 2017 2018 2019
Traditional skill areas Finance & accounting Sales and marketing Property management
Advanced tech skill areas Data analytics and AI Software development Cloud computing
Source: LinkUp jobs data of US real estate companies; Deloitte Center for Financial Services analysis.
Figure 2: CRE companies’ urgency to redefine talent
My company has accelerated redefining business processes, job roles, and skill requirements to include use of technology and tools
Europe 2% 5% 17% 30% 29% 18%
APAC 20% 18% 18% 35% 9%
North
America 7% 26% 34% 24% 9%
Note: Responses might not add up to 100 Strongly disagree Disagree Neither agree nor disagree Agree
due to rounding-off.
Source: Deloitte Center for Financial Services’ Somewhat disagree Somewhat agree Strongly agree
Global Outlook Survey 2020.
11Real Estate Predictions 2021 |
Gaming the commercial real estate talent conundrum
Redefining roles and skills For job postings, CRE organizations should improve their use of digital tools and
To illustrate future work and job roles, we use shorter descriptions and enable a absorb the business impact of digitalization.
have envisioned how modernizing work more mobile-friendly application process,
could transform three positions: leasing which would help candidates apply easily. Strengthening talent analytics
manager, valuation advisor, and accounting For shortlisted candidates, organizations CRE leaders are more likely to make sound
specialist. (See figure 3). Analysis of three could use automated interview scheduling talent decisions if they are backed by data
main job components – the automation of solutions that are synced with interviewers’ and analytics. Workforce analytics programs
certain tasks, emphasis on analyses and calendars, allowing candidates to find an can also help CRE organizations attract and
insight generation, and tenant engagement interview slot in real time2. retain the right talent. For example, data
– reveals how CRE roles would likely need analytics can be used to improve resumé
to evolve to meet future needs. Workers Creating alternate talent marketplaces sourcing and screening to get candidates
in these roles will probably spend more To get access to these new skill sets with the right fit, while avoiding any selection
time using technology while devoting their and increase workforce agility, CRE bias. Data mining and pattern recognition
expertise to conducting analyses and organizations should consider recruiting can help talent leaders to shortlist
strengthening tenant engagement. For through a variety of channels and not appropriate candidates, after matching their
instance, leasing managers could have rely on the traditional approach alone. skills, experience, and background with job
more time to focus on enhancing tenant or For example, the alternate workforce, requirements4. As shortlisted candidates
client engagement if they used predictive consisting of e.g. contractors, freelancers, go through the interview process, more
analytics to help develop different lease and gig workers, is expanding rapidly structured and unstructured data would
optimization strategies. And other tasks, and could offer CRE organizations wider be generated based on their responses
such as invoicing, would be automated, access to talent with advanced tech skills. and behaviors. CRE organizations can then
freeing up even more time. For instance, the estimated number of combine this data and select candidates
self-employed workers in the United by predicting their success in a role
As responsibilities shift, the skills and States in 2020 is 42 million3. Therefore, CRE through machine learning models, which
qualifications needed for each role are companies should consider developing leverage past data on hiring and success
expected to evolve as well. At a minimum, a talent marketplace to include alternate of candidates5. Essentially, digital HR
each role would require technology or workforce, and offer rotation programs, systems can help firms collect and manage
analytics coursework such as a bachelor’s stretch or voluntary assignments to data better which, in turn, would enable
degree or certification in big data or real existing employees. predictive analytics to help leaders make
estate analytics. Employees will also more informed talent decisions.
need to excel at soft skills such as critical For an internal talent marketplace,
thinking, problem solving, communication, companies would need to look at job Gaming the talent gap
presentation, and relationship building. processes and identify intersection The need to quickly change and adapt has
opportunities where employees in one never been so high for the CRE industry.
Modernizing recruiting approach department could work in another. They Right-skilled talent can play an important
CRE organizations could use different may have to upskill or reskill existing role in determining whether a company
technologies during the recruitment process employees, which could include revamping stays ahead of the competition or plays
to attract the right-skilled talent. Talent of existing training curricula, redefining catch-up as the business environment
leaders can create digital content and use expectations and skills, and developing evolves over time. CRE leaders should
an array of social media channels and job effective measurement criteria. consider redesigning talent – rethinking
platforms to promote open positions. and adapting the way their employees
For instance, Intuit uses virtual reality CRE organizations could consider work, embedding technology into their
technology to provide candidates with a developing internal knowledge-sharing decision-making, and redefining skills,
real-time experience of what it would be like and mentoring programs. Experienced talent processes, and practices to help
to work at its campus, and to gain a deeper professionals could then teach younger them prepare for the future of work.
understanding of the organization’s culture employees core sector and soft skills that
and ethos and its use of technology in day- are related to leadership and relationship- Author
to-day activities1. This is likely intended to not building. At the same time, younger Surabhi Kejriwal
only enhance a candidate’s understanding of employees can provide informal learning Real Estate Research Leader | US
the company, but also its brand. sessions with older employees to help sukejriwal@deloitte.com
1 Mohammed Faraz Khan and Richa Kejriwal, “Digital Workspaces – A Talent Management Strategy,” Zinnov, May 31, 2019.
2 Ruma Batheja, “Recruitment technology tools that every recruiter must know,” People Matters, May 23, 2019.
3 Erica Volini, Jeff Schwartz, and Brad Denny, “2020 Human Capital Trends Ethics and the future of work: From “could we” to “how should we”,” Deloitte
Insights, May 15, 2020.
4 “Talent acquisition analytics Driving smarter sourcing and hiring decisions with data,” Deloitte, 2018.
5 Ibid.
12Real Estate Predictions 2021 |
Gaming the commercial real estate talent conundrum
Figure 3: Evolution of CRE roles
Automation of Emphasis on analyses Strengthening
Key components of the role
certain tasks and insight generation tenant/client engagement
Leasing Manager • Conduct predictive analytics and
identify opportunities for lease
Current tasks
• Prepare and maintain physical lease optimization
contracts and invoices • Be the single point of contact for
(2020)
• Draw insights from sensor data to
• Manually enter and extract lease tenants and enhance engagement
improve building management
data and manage on disparate and service
systems • Work with sales team to promote
properties and with legal team to vet
lease documents
• Create and maintain digital lease
Future tasks
contracts • Interpret and share lease
information and analysis on
(2023)
• Manage integrated digital lease data spreadsheets • Follow-up on rent payments with
using cloud-based software tenants
• Share lease and market information
• Manage automated invoicing and with internal departments
lease data abstraction
Current tasks (2020)
CRE Valuation • Conduct physical property
Advisor inspection and manually document • Gather data on traditional variables
the details from internal or third-party • Provide valuation report to clients, as
• Prepare valuation reports on paper databases per the agreed timeline
or spreadsheets • Perform competitive analysis • Manage regular communication with
• Fill back-up data like demographics, of rents, market value of similar clients and resolve queries
comparable properties etc. into properties etc.
report
• Conduct virtual inspection using
geospatial platforms and use mobile
Future tasks
apps for physical visits to centrally • Advise clients on asset strategy
• Utilize Al-assisted valuation models based on valuation forecasts
(2023)
store the data that combine and analyze sensor
• Automate generation of valuation and other alternative forms of • Perform risk modelling and advise
reports and autofill background data property and market data clients on wider risks associated with
a property
• Provide more reliable and real-time
valuation
• Collect and sort actual bills and
Accounting checks
Current tasks
Specialists • Enter daily ledger entries into the
• Provide relevant accounting
(2020)
system • Manually compare and analyze work
information to internal clients and
• Reconcile accounts and bank orders, invoices, and payments
stakeholders
statements
• Create recurring and ad-hoc reports
on standard timelines
Future tasks
• Enter digitized source documents of
bills and checks • Partner with internal clients and
• Leverage AI and data analytics to
(2023)
stakeholders on accounting
• Automate ledger entries, identify irregular expenses and raise
treatment and help forecasts
reconciliation, reporting, and flags for review
income, expenses, and budgets
compliance checks
• Enhanced efficiency and productivity
• Deeper and forward looking insights • Learning and exposure for
• Simplification of tasks employees
• Risk mitigation
Key benefits across roles • Improved data accuracy • Increased synergy within teams
• More nuanced, informed, and faster
• Additional time to perform higher decision-making • Stronger relationship with clients
order tasks
Source: Deloitte Center for Financial Services analysis.
13Real Estate Predictions 2021 |
Knowing what others don’t: gaining a competitive edge in real estate with AI-driven geospatial analytics
Knowing what
others don’t: gaining
a competitive edge
in real estate with
AI-driven geospatial
analytics
Micro-analysis on address level
Data analysis can significantly improve decision-making in real estate. From valuation,
sale/purchase of properties and contracting to negotiations, risk analysis and planning.
In 2021, all eyes will be on AI-driven geospatial analytics. Why? Because it is a quick,
lean and affordable way to provide address-specific rental predictions and explainable
transparency.
Micro-analysis on address level Major challenges However, once all of these barriers have
The availability and interpretation of the However, when it comes to data been cleared, the insights, which can be
right information is crucial in any sector, management in the real estate sector, there derived, will usually pay off well.
including real estate. After all, data analysis are still a number of major challenges.
can significantly improve decision-making, Often the required data are simply Reaping the benefits
from valuation, sale/purchase of properties not available, not granular enough, or Real estate companies that are able to
and contracting to negotiations, risk outdated. If they are available, they might gain a lead in mastering their own and
analysis and planning. Obviously, there is not yet be harmonized across geographic acquired data by means of advanced
an abundance of data about the world’s areas. So even before the start of a simple data analytics, will reap the greatest
biggest cities. This makes macro-analysis analysis, a lot of effort is required. This also benefits. Enhancing your own datasets
for these places straightforward and pertains to other manual data corrections, with additional geographic features will
relatively easy for skilled data scientists. such as missing values or incorrect master justify the application of powerful analytics
However, the smaller the place, the harder data. While for master data the case is techniques such as deep learning. This in
it gets to create a good understanding of clear-cut (a value is either correct or not), turn will lead to much better insights into
locations – even on the aggregated view other data issues might require expert previously not well-understood market
provided by zip code areas. For single judgement. In other words, there is a risk developments, sub-markets, locations and
addresses (micro level) this is even more of ending up with expensive but worthless interdependencies.
difficult. The same is true for data-rich or even misleading analysis results, due to,
hotspots, if the required skills are lacking. for instance, personal bias by the expert Digitalization: digital location twins
For instance, the rental value of two “correcting” the data issues. The alternative can bridge the knowledge gap
properties that are only a couple of meters is buying data on social demographics, A combination of various approaches
apart, can already differ significantly due rents, purchase prices and geographic to ”digital twins” can be of great value in
to the presence of e.g. railway lines, noisy points-of-interest (POIs), but good data real estate. Whereas the sensor-based
streets or polluted waters. always comes at a (potentially steep) price. approach (i.e. Internet of Things, or IoT)
14Real Estate Predictions 2021 |
Knowing what others don’t: gaining a competitive edge in real estate with AI-driven geospatial analytics
15Real Estate Predictions 2021 |
Knowing what others don’t: gaining a competitive edge in real estate with AI-driven geospatial analytics
The AI learns geospatial patterns from data rich samples, allowing it to identify locations with a similar fingerprint and making
predictions for those data poor ‘digital twins’.
offers insight into the inner workings of Explainable AI is trustworthy AI users in order to make a real impact in the
a building, the concept of the learned Of course, replacing any blind spots with market. This will unleash its full potential
”digital twin” focuses on the environment predictions from a black box AI is never a for the first time. For those who have
of a building. Here, the goal is to use good idea. With so much at stake, investors invested early, time- and cost-intensive
information from data-rich areas to gain will always ask why they should have faith data gathering, and cleansing efforts will
an understanding of relevant drivers in a machine prediction, especially if it is eventually become a thing of the past.
and forces behind interesting market purchased externally as a service. Once
developments. This knowledge can then be again, technology comes to the rescue with Authors
applied to somewhat similar but data-poor a conceptual approach called “Explainable Tobias Piegeler
areas. Based on the right data and on a AI”. In short, Explainable AI means that AI Director | Real Estate Consulting | DE
machine learning algorithm, the computer is applied in such a way that the results of tpiegeler@deloitte.de
will build a model. Afterwards, when the solution are easy to understand, as
provided with some basic information opposed to the predictions from a black Sascha Bauer
such as an address, the construction year box, as mentioned above, where the results Senior Manager | Insight Driven
and the condition of an object, the model cannot even be explained by its designers. Insurance | DE
will render valuable answers. Precise Explainability is not just a regulatory sasbauer@deloitte.de
predictions of current and future rental obligation but can also provide trust and
values or recommendations for the highest valuable business insights to businesses Contacts
yielding refurbishment options are just and end users. For instance, it will provide Stefan Ondrusch
some of the potential use cases. To ensure clarity on why one property is worth 15% Senior Manager | Real Estate
efficient and effective processes, these more than a similar one nearby. Consulting | DE
prediction models will be integrated via API sondrusch@deloitte.de
(often in the form of ‘AI as a Service’) into 2021: the year of maturity
the workflows of real estate management The year 2021 will initiate an era in which Joerg von Ditfurth
software, feed planning or risk models. enhanced AI-driven location analytics for Partner | Real Estate Consulting | DE
They will enrich reports and provide real estate will reach maturity and become jvonditfurth@deloitte.de
meaningful visualizations to human suitable for the masses. It will become
decision makers. mature enough to be adopted by enough
16Real Estate Predictions 2021 |
Innovation & Construction in the Shade of Global Crisis
Innovation &
Construction in the
Shade of Global Crisis
Two technology trends
that will move the real estate
construction industry forward
The COVID-19 crisis has shed light on another well-known crisis that has the potential
of exponentially harming humanity to a point of no return - global warming. If we want
to avoid the many consequences of global warming, we should accelerate our efforts,
starting now. How can digitalization and innovation enable the industry to prepare for
a sustainable future?
Global warming and operates, and momentum to implement operate under extreme and frequently
construction waste new approaches to manage long-time changing conditions. It is still a labor-
The real estate construction industry practices. Disruptive technologies have intensive industry, where implementing
is one of the biggest contributors to the potential to provide the efficiency, automation is deemed essential. The
global warming. It is responsible for 40% productivity, waste control, and more industry’s low productivity, specifically
of all global carbon emissions1. With a that the industry has been seeking for low labor productivity, is one of its biggest
percentage that high (compared to other decades. In this article we will focus showstoppers, effectively putting a brake
industries), the Paris Agreement’s2 push on two technology trends – Robotics on further internally driven innovation
to limit total emissions to 1.5 °C / 34.7 °F is & Automation, and Management Tools and digitalization, and so it has become
particularly essential for this sector. Also, for the Construction Site – and how increasingly difficult to meet the growing
according to a report from Transparency the implementation of these trends will demand in the market.
Market Research, the volume of worldwide move construction forward into a more
construction waste is predicted to double sustainable future.
to 2.2B tons by 2025.
Robotics and Automation
Crisis: a catalyst for change The 1960s saw the launch of the first
The good news is that in a reality where Industrial Robot – ”Unimate”3. It was the
construction is riddled with inefficiencies, first step towards progress, transformation,
such as wasted energy, high costs, lower and foresight that brought us to where
profit, and material waste, there is room for we are today. Still, despite advancements
significant improvement. Moreover, crises like Unimate, automation in the real estate
can be profound catalysts for change. construction industry is often challenging.
They can create opportunities to gain a Construction sites are full of surprises
new understanding of how the industry and uncertainty, and workers continue to
1 https://www.worldgbc.org/news-media/WorldGBC-embodied-carbon-report-published
2 https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement
3 https://www.invent.org/blog/inventors/George-Devol-Industrial-Robot
17Real Estate Predictions 2021 |
Innovation & Construction in the Shade of Global Crisis
18Real Estate Predictions 2021 |
Innovation & Construction in the Shade of Global Crisis
A few examples More examples Authors
Therefore, technologies that can replace For instance, software has been developed Doron Gibor
these traditionally physical tasks are on that creates a “digital twin” of the Partner| Audit Services| IL
the rise. A number of companies develop construction site using hardhat-mounted dgibor@deloitte.co.il
intelligent, mobile, multi-purpose, and 360-degree cameras. These allow project
autonomous robots for use in construction managers at construction sites to get an Amit Harel
sites. Some focus on wall rendering (e.g. overview of the state of a project and Partner |Financial Advisory | IL
stucco, exterior insulation and finish whether it remains on schedule. Another Aharel@deloitte.co.il
systems, concrete, primer, and adhesives), helpful innovation is an automated cloud
others automate the construction site platform that was designed and built Contact
layout process with a mobile robot. for infrastructure construction projects. Maya Trajtenberg
Drones are another pivotal trend, e.g. for It enables real estate construction Consultant | Financial Advisory | IL
the collection of high-resolution data to companies to monitor project progress, mtrajtenbergmadar@deloitte.co.il
generate field intelligence, or to improve ensure quality, and control budgets based
land surveying services (especially in on actionable project execution metrics
infrastructure). AI and Machine Learning extracted from field data.
will automate many construction tasks in
unprecedented ways. For instance, there Moving forward
are startups that use AI and an IoT platform Though these technologies are impressive,
on cranes to transform any site into a they will end up being wasted if they are
smart, data-collecting field, automating not accepted and ultimately utilized by
decision-making tasks on-site. the people in charge. They will not simply
catch on. Innovation has led real estate to
Management Tools for the new heights before, and we must be open,
Construction Site receptive, and critical (when necessary)
A large amount of construction waste to technology that could further improve
is due to poor management. 38% of the industry. COVID-19 will probably end
construction management professionals like other pandemics before. However,
consider poor processes and procedures global warming is quite another story.
to be a vital cause of technology failures4. When it will hit, it will hit hard, and with long
45% report that they spend more time lasting consequences. Innovation and the
than expected on non-optimal activities5. implementation of new technologies could
Adopting many of the emerging digital be our ”vaccine” to help us prepare for the
technologies on-site could enhance the next crisis to come, and enable the real
rise of smart project management. These estate construction industry to thrive.
technologies, combined with real-time
data, could enable ground field managers
to make better informed decisions around
scheduling labor and materials for a
particular project.
4 https://jbknowledge.com/2019-construction-technology-report-survey
5 https://www.plangrid.com/ebook/construction-disconnected/
19Real Estate Predictions 2021 |
The virtual office for Corporate Real Estate
The virtual office for
Corporate Real Estate
Where right sized
workforce meets
best fit workplace
The widespread adoption of remote working in 2020 has greatly shifted the role of the
workplace within organizations. All indications point to a future where hybrid working
is here to stay, as employees reap the benefits of greater choice in their working week
and employers re-examine their real estate requirements. So how do real estate
owners respond as the virtual office becomes a key component of working in the
”new normal”?
Remote working is nothing new shorter commuting times and the chance building spaces equipped with a multitude
Although the transition into remote to spend more time connected to their of sensors are providing organizations with
working during 2020 has been tough for local area and its people and businesses. increasingly large volumes of real-time data
individuals, teams and organizations, it’s Organizations will look to a distributed on their workspaces. The more data-rich
nothing new. Since at least the peak oil real estate model, diversifying their office our spaces become, the greater value
crises of the 1970s organizations have space mix across both a central CBD hub we can extract from them, driving up the
been grappling with the idea of both and co-working spaces or smaller offices in cost per square meter of premium smart
geographically distributed and remote suburban and regional areas. This will allow offices. Organizations will need strategies
working. Advancements in personal staff to leave their homes to experience to effectively utilize this data to extract
computing and the internet have meant a greater separation between home maximum value, resulting in a shift from
there have been few technological and work life and connect socially with a ‘set and forget’ approach to workplace
barriers to this phenomenon. COVID-19 colleagues, while avoiding long commutes. design of the past to make spaces hyper-
has ultimately been the trigger for a This makes a lot of sense as people also flexible and responsive to real-time needs.
widespread shift to take place, as an become increasingly aware of climate Concurrently, cyber will play an increasingly
enforced critical mass of remote working change and make conscious decisions to important role in organizational data
to prioritize worker safety has forced us to reduce their carbon footprint. Office spaces security across the virtual office, enabling
overcome the perceived cultural barriers must be smart and flexible enough to an efficient, hybrid workforce to work
towards it. Now that remote working has facilitate these changes, as data becomes a securely.
become largely normalized, the traditional critical component of workplace innovation.
notion of a workplace could be changed Best practice: Australia’s Virtual Office
forever. Data is crucial Our own thinking in this space comes as a
Data has a crucial role to play in the result of the success of Deloitte Australia’s
Reimagining the role of the office emerging workplace, driving the success Virtual Office. A small, dedicated team was
Mass adoption of remote working offers of spaces, just as it does for the digital created during mid-2019 with a human-
organizations the chance to reimagine world. Workers will need to be equipped centered approach to first understand
the role of the office in a new real estate to seamlessly transfer between physical and then deliver solutions for the remote
operating model. 2020 has witnessed and virtual settings to work effectively working needs of the firm’s staff. Providing
the rise of the local community: a trend with colleagues regardless of whether or greater optionality to the staff was a key
which looks set to stay, as people enjoy not they’re physically co-located. Smart driver for the team’s work, providing key
20Real Estate Predictions 2021 |
The virtual office for Corporate Real Estate
21Real Estate Predictions 2021 |
The virtual office for Corporate Real Estate
resources, training and information to uplift
our staff’s remote working experience,
regardless of where they choose to work
from, including the new Melbourne and
Pyrmont office spaces.
The time to embrace change is now
As the dust settles on a tumultuous year,
the one factor that’s emerging loud and
clear is the groundswell of support for
hybrid working to continue into a post-
pandemic future. With remote working
experience under the belts of nearly every
organization globally, the time to embrace
change is now. Real Estate operators can
get ahead of the curve, adapting traditional
approaches by reimagining the role of
the office and their operating models by
keeping employee choice, community
and data front of mind. Hybrid working is
here to stay, and those that embrace the
resulting changes will reap the rewards.
Authors
Robbie Robertson
Partner | Customer Strategy &
Experience Design | AU
rorobertson@deloitte.com.au
Rowan Muller
Consultant | Customer Strategy &
Experience Design | AU
romuller@deloitte.com.au
Contact
Alex Collinson
Partner | Assurance & Advisory | AU
acollinson@deloitte.com.au
22Real Estate Predictions 2021 |
Real Estate-as-a-Service: From “product and space” to “system and service”
Real Estate-as-a-Service:
From “product and
space” to “system
and service”
A new business model for
commercial real estate
Real estate is undergoing a fundamental business model redesign enabled by
digitalization and a growing market of smart buildings. A redesign that is important in
a (post) pandemic era when so many businesses are evaluating what their property
brings to the company by providing on-demand, customizable and scalable access to
space, amenities and services. What business model will be successful in the future?
What can the real estate industry learn from tech? What is Real Estate-as-a-Service?
And what is the impact on strategy and organizational performance?
In a world of bits and bytes, the value of The evolved Real Estate value as opposed to monetizing the product.
Real Estate for businesses is increasingly proposition REaaS generates revenue based on the
determined by a different yardstick. Square In the era of the ”new normal”, work outcome of improved experience and
footage is being replaced by data, and doesn’t strictly depend on office space. productivity. These improvements are
services that enable work are taking the The function of corporate real estate has provided to the occupants working in the
place of the traditional space to work. therefore evolved from somewhere to connected building, where each digital
Where the adage for property value once work, to a workplace that enables users service to support outcomes is charged for
declared: location, location, location, the to perform better than they would do on demand.
reality of today’s real estate is location, anywhere else. It is a place of high impact
insights, experience. To unpack this further, and superior experience, offering a curated Lessons from the tech industry
property owners need to consider how the and scalable ”homefield advantage” To understand the evolved business
space is being used, not whether it is being to businesses, and transforming real model, the real estate industry can learn
occupied. Real Estate-as-a-Service (REaaS) estate from a ”space to work” into a new ways to generate revenue from the
creates the conditions for property owners ”business tool”. tech industry. Internet-based and physical
to ask themselves what the real value of ”sites” have similar requirements: people
their property is. REaaS, an innovation Updating the business model: amassed in a single location in need of
that is being enabled through smart and becoming a service provider a personal outcome with predictable
connected buildings, augments bottom line Enter “Real Estate-as-a-Service”, or frequency. ”Locality” is leveraged to
benefits from savings to new revenue and ReaaS. The term “As-a-Service” became support experience, productizing the
shifts the value focus from offering space mainstream through high-speed user rather than the infrastructure. Value
to offering digital and physical services connectivity whereby technology emphasizes rendering services to support
to users. companies leveraged their infrastructure what people do and how they do it, instead
and software, offering an alternative model of just where they do it. Real estate is
for use by targeting consumer behavior, therefore transformed from ”fixed product”
23Real Estate Predictions 2021 |
Real Estate-as-a-Service: From “product and space” to “system and service”
24Real Estate Predictions 2021 |
Real Estate-as-a-Service: From “product and space” to “system and service”
(space and infrastructure) to ”connected to take direct control of provisioning the Author
system” (information and services). infrastructure that is typically fulfilled by Marco Macagnano, Ph.D.
a tenant as a part of their initial fit-out. Senior Manager | Smart Real Estate
Smart building: connecting users and This creates a technological backbone Leader | ZA
occupants to services that not only renders basic connectivity mmacagnano@deloitte.co.za
The location where people work is de- and functionality (e.g. lighting and Wi-Fi),
prioritized, whereas the smart building but also helps tenants to improve their
connects users and occupants to services, organizational performance – by means
so that work becomes more advanced and of data about how the space is being used
connected to benefit the business. User and by whom.
output is monetized through services that
leverage the physical infrastructure as an Digital Masterplan and
enabler. This fundamentally changes the Platform Strategy
business model of property owners who To exploit the potential offered by REaaS,
are now in the position to become service a Digital Masterplan and Platform Strategy
providers as custodians of physical and is required. This masterplan can act as the
digital infrastructure. architectural design for smart buildings,
avoiding the pitfalls of capitalizing separate
Understanding digital services point-solutions that provide limited
in real estate benefits outside of core functionality.
The smart building creates conditions to
aggregate and contain all building data. A masterplan will:
These are used for targeted analytics
to inform decision-making. The data is • align the connected building to the
contained within a digital platform and enterprise architecture of the tenant or
can therefore be leveraged to provide occupant
customizable features and services.
A service is defined as the provision • define and design what data is required,
of information that is contextual or how it is generated and analyzed
personalized to any customer or user. A
digital service is one that is commoditized • support the revenue model, and
and provided electronically across multiple
platforms such as internet or mobile • determine the infrastructure required
devices. Digital services include e.g. insights to support the digital agenda and the
through analytics, features and facilities features that support the digitally
rights management, location-based augmented Real Estate.
services, and a digital marketplace for
third parties. They can be monetized in REaaS combines and cross-leverages
various ways, offering additional revenue capabilities across systems to enable
to property owners and tenants – e.g. by platform-based features and analytics that
means of subscriptions, consumption- were not possible before. This platform
based models, data monetization, API unlocks the potential to sell these features
monetization, digital marketplace, and and services to end-users. This will enable
marketing & advertising. businesses to quantifiably improve their
experience, productivity, and space usage,
Improving organizational performance and it will help property owners transform
In order to deliver a digital service, the from their “product and space” offering to a
provider must be in control of the flow of new value-adding and future-proof role as
data to the end device that benefits the a service provider.
user (e.g. a mobile device, lighting, or audio
visual equipment). In real estate terms,
this will incentivize the property owner
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