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Technology finds its true space in the Real Estate industry

Posted by Mark Kalkwarf in: industry news

In terms of technological innovation, 2014 was year of shifting mind-sets and shifting budgets for realestate companies around the globe. As with many industries, since the global economic downturn in 2008, the real estate industry put the brakes on technological investment. Over the past year, there has been a realisation that the limitations of current systems will not be able to meet companies' future requirements. Thankfully, this has brought about a new drive for real estate companies to invest in technology.

Technology finds its true space in the Real Estate industry

Historically, the real estate industry has been seen as a "technology laggard" and now, more than ever, companies have fallen behind in comparison to other sectors. Many businesses are under pressure from consumers and executives to "catch up" digitally, as people have become more comfortable using technology in their personal space (using iPads etc). What's more, the world is advancing digitally at a lightning fast pace… what seemed like sci-fi technology just a few years ago is now being used in industry and adding real value to businesses. Everything from Augmented Reality, to automated inspection tools and intelligent building design, these technologies are opening companies' eyes to a new world of digital possibilities.

Cloud technology/SAAS is one such technology that represents a paradigm shift for many companies. A few years ago, they may have been resistant to it, but now it is almost considered essential. In fact, as individuals have become accustomed to it in a personal capacity, Cloud technology has become veritably commonplace. It also allows companies to "turn off" costs when they don't need them, to outsource a lot of the technical expertise required to support operations and so reduce costs. And of course, it enables mobility to a degree that was never possible before.

Research shows that investment yields have gone down by up to 50% since 2008 and are not expected to rise any time soon. This decline in yield has led investors to look more closely at their expenses and query why G&A expenses are passed on to them. It's no surprise that companies have begun to look at increasing their capital expenditure to create systems that improve efficiencies in order to reduce ongoing G&A expenses in the future. As many companies have down-sized their staff, it makes sense that there is a general move towards outsourcing to companies like Open Box.

On a broad scale, the real estate market has also felt the impact of the maturing Generation Y (born between 1979 and 1995): a generation that lives, works and plays in different way to previous generations – more urban, less suburban. This is a generation that doesn't want to drive as much, but has a desire to be mobile. As a result, the following interesting trends have taken shape over the past year:

  • Office space has been reconfigured with collaboration in mind
  • Retailers have adopted new urban formats
  • Industrial space has begun to meet the needs of online retailers more efficiently
  • Multifamily space requirements have brought about a shift in the residential space

As the economy has improved, we've also seen a recovery of US real estate with increased focus on secondary markets which show potential for growth. Specifically, there's been notable Industrial expansion (with manufacturing returning to the US due to rising labour costs in China). The demand for modern, bulk distribution facilities exceeds available supply by six to one in primary markets, so investors are turning elsewhere.

In the Office space, changing workplace expectations, a younger workforce, and a competitive talent pool are pushing companies to want dynamic, evolving and creative office spaces. This is impacting building selection and floor plan design.

In the Retail space, many online retailers are investing in bricks-and-mortar stores to give online shoppers a chance to physically interact with products. Urban retail will be driven by more consumers moving to cities and demanding live-work-play environments.

From a global point of view, there has been significant growth in capital investments across Asia, especially China. Chinese investment in Europe tripled in 2013 due to the relaxation of restrictions on overseas investments.

There's also a growing demand for residential investment in Europe. The shortage of prime assets available to purchase on the continent has led to an interesting development which shows secondary assets transforming into core assets.

These are just a few of the noticeable trends that emerged over the past year. But the best way to predict what the future holds is to remember how we arrived here. In fact, it was Roosevelt who said, "The more you know about the past, the better prepared you are for the future".





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