When it comes to technological innovation, is it sometimes better to be an adopter of bold new solutions — or does success accrue only to the pioneers?
There’s no denying that commercial real estate has long lagged other industries when it comes to employing disruptive technology. But while CRE may not be a pioneer in innovation, the industry is far from broken and is instead evolving at a pace that reflects its history and its values. With a range of groundbreaking new technologies being developed, CRE is poised to capitalize on the benefits of innovation, from unprecedented market and asset intelligence to improved profitability.
Real Estate Tech Reality Check
To be sure, CRE is confronting a host of issues: There is a record amount of undeployed dry powder on the sidelines and the industry’s relative dearth of experience with innovative technologies can make integrating new solutions challenging.
Yet CRE professionals are savvy enough to know that sleek technology is highly complex and costly to build — and for an industry that prizes robust returns on investment, it’s hardly surprising that real estate hasn’t been pouring massive resources into technological innovation. Lots of new investment, training and other major shifts must happen to revolutionize investment tactics — and the world of real estate is understandably risk-averse. Naturally, CRE, built as it is on actual steel and concrete, has been cautious about leaping into the new world of data science and machine learning.
Credit Where It’s Due
The new wave of advanced tech is built on the shoulders of other verticals that matured faster, but which had to suffer through infinite trials and setbacks before seeing truly groundbreaking advances materialize.
But I see firsthand how AI has reached a level of sophistication leaps and bounds beyond where it stood just a few short years ago. Combining human expertise and AI capabilities, for instance, it’s now possible to predict the results of breast cancer biopsies with 99.5% accuracy. IBM’s Watson can do more than beat the competition in a game of Jeopardy!; this sophisticated AI is now being deployed for cybersecurity, healthcare, customer service and more.
While CRE hasn’t experienced the fits and starts of developing powerful AI-based technologies — thereby saving the industry billions — it now stands to benefit from advanced technology thanks to progress in other domains. With a more mature approach, aided by the availability of strong data and proven models, CRE can prove that in the race for innovative new business models, it often pays to be the tortoise — not the hare.
Slow And Strategic Wins The Race
There’s a dizzying array of data not captured by traditional real estate analysis that’s nevertheless relevant for the CRE industry — and thanks to AI and data science, it’s becoming harder for that data to go overlooked. AI makes possible a highly granular, more transparent level of analysis across factors like climate, transportation, economics and commerce and much more. What’s more, sensory questions that are beyond the scope of traditional real estate analysis (Does a building smell? Is the floor tilted? Are residents really paying what you think they are?) can now be asked and answered, proving a much more complete picture of an asset’s real value. Employing AI tools, CRE professionals can identify worthwhile deals, better understand the market landscape and find strategic uses for their dry powder.
As the Bank of Singapore’s Eddy Tai notes, there’s often a significant advantage in being an adopter rather than a pioneer of new technologies. For many clients, Tai says, it’s prudent to take “a smart, focused and deliberate approach to leapfrog technology investments,” adopting technologies that provide solid business solutions without having to go through the long, winding and frequently costly journey of R&D, product development, setbacks and so on.
CRE may be seen as a laggard in innovation, but what will ultimately determine the industry’s future isn’t how early it was to trial and develop the latest technologies, but whether the industry commits to adopting valuable solutions that serve real business needs. With 2019’s proptech investments smashing previous records, there’s mounting evidence that industry professionals understand this. Sometimes, it really is possible to teach an old industry new tricks.