Why commercial real estate sector needs proptech solutions now

November 25, 2020 09:40
Photo: OfficeBlocks

When it comes to tech adoption, the commercial real estate (CRE) industry has typically lagged behind other sectors. However, over the past few years the industry has begun to take property technology - or proptech - seriously. Last year, proptech start-ups raised US$625.9 million in APAC, and in 2018 this figure was a record-breaking US$1 billion.

The industry has come to embrace technologies that include artificial intelligence (AI), augmented reality (AR) and the Internet of Things (IOT). And the applications of these solutions have also been far reaching - ranging from smart property management to office space design.

But the adoption of technology has been uneven across the sector. Some aspects, such as facilities management, have taken to innovations more easily. However, the investment and transactions side of commercial real estate have remained more resistant since leasing professionals prefer to meet in person to share data with clients, rather than using technology.

Solving the day-to-day pain points

For example, when making leasing and investment deals, CRE professionals are still largely reliant on physical visits. When cross-border travel grinded to a halt earlier this year, the urgent need for the real estate industry to fully embrace daily digital solutions was made all too clear.

In fact, if we dig a little deeper, a far more pressing problem emerges - the CRE sector has little transparency. It is incredibly complex and time consuming to pull even the most basic commercial building attributes - from floor space to rental price – to compare buildings.

Moreover, although COVID-19 has impacted property investments and transactions, CRE has remained an attractive asset for investors who are looking for high quality office spaces to navigate volatility. We are already seeing signs of recovery in Asia Pacific, where Tokyo and Seoul have emerged as the top two cities globally for investment year-to-date 2020, according to JLL research.

More than ever CRE investors need insights into risk and return to see a full picture of their potential and existing investments. Getting actionable data and insights through AI-powered suite of tools enables investors to make smarter decisions anytime, anywhere.

Harnessing the power of tech to achieve what the human mind alone cannot

If we look at the two of the most talked about technologies of today – Artificial Intelligence (AI) and Machine Learning (ML) - it is clear that the power lies in their ability to process enormous amounts of information on a scale and in a manner that the human mind cannot. For example, they can take millions of data points and process them rapidly, discovering patterns and providing actionable insights at the click of a button. The potential of these technologies really is game-changing.

Of the AI and ML algorithms in use today, the most powerful are Deep Neural Networks (DNNs) – which were the secret to Deep Mind’s success in beating humans at the game of Go. These algorithms are also behind the rapidly growing use of AI in medical imaging, for e.g., cancer classifications, which is able to detect intricate patterns in pixels enabling it to accurately classify disease in images it hasn’t seen before.

In the very same way, Deep Neural Networks can also be trained to provide insights into the property world - recognising building attributes (including the building age, grade and size) from photographs alone – and then combining these into accurate estimates of property value.

Better-informed decision making

When it comes to tech advancements, one of the most commonly cited concerns is whether technologies will eventually replace humans, however, I don’t think this is a big risk in the foreseeable future.

If we take the example of the medical sector - whilst technology can offer more rapid and potentially more accurate insights into the illness affecting a patient, ultimately it is the doctor who will make the final judgement on the diagnosis, prognosis, and recommend the course of action best fitting the patient. Eventually, machines may make such judgement calls, but that day seems rather far off given the current state of AI technology and its fundamental differences and limitations compared with human intelligence.

And the same applies to real estate. In short, technology gives us access to data and insights that enable us to be better informed, however it doesn’t remove the need for human intelligence and decision making. In fact, my view is that technology works best when it is used alongside expert human judgement.

A digital future awaits

I firmly believe that technology will continue to shape the future of real estate, just as it is changing the face of other industries. We’ve only scratched the surface of what’s possible. In many ways, COVID-19 has been the unexpected catalyst for technological adoption, and we’ve seen innovations as wide ranging as virtual home viewings to touchless technologies become commonplace.

There are many other areas where AI and ML can help in the industry, such as algorithmic matching of buyers with sellers or optimising property portfolios from a risk and reward perspective.

In short, anywhere where there is data, there is a role for AI and ML.

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Managing Director, Risk Integrated and Director of OfficeBlocks