Co-authored by Wayne Berger & Peter Levett

Joint Chief Executives of iShack Ventures, a venture building technology business with specific focus and expertise in property, providing a number of technology digital capabilities to the property sector.  

 

3 Steps to Tackling Digital Transformation in Real Estate in 2022

As a real estate professional, you may wonder if you even need a digital transformation strategy. After all, real estate companies have operated very effectively for decades without significant digital transformation. Any strategic change fundamentally changes how the people inside and outside the business interact and operate, and digital transformation certainly does this.

 

Though the real estate sector has, historically, been synonymous with being slow to adopt technology, international PropTech saw a record $32 billion invested in real estate technology in 2021 – up 28% from 2020. Growth in revenues of the PropTech industry (as a measure of increased usage) worldwide has increased by over 10% per annum over the last few years and is expected to grow at a faster rate going forward. The PropTech industry is booming, with almost 10 000 PropTechs in operation globally.

 

In my years as a digital transformation consultant, I have seen many real estate companies burning through small fortunes, not to mention years of time, only to end up with failed technology engineering and adoption projects. It’s understandable, then, that real estate companies are thinking more carefully about their approach as landlords ponder the question: How do I maximise my digital transformation journey and improve my portfolio’s yield through digital?

These are the 3 steps to tackling digital transformation in Real Estate in 2022:

• Understand why a technology (or digital transformation) strategy is important

Any strategy, including a digital one, needs to be central to the business strategy and driven from the Board and executive management. Unfortunately, technology is too often seen as a matter to be driven by the IT department or similar in the business. But we are seeing a seachange in the industry as Boards and executive management are beginning to understand the importance and significance of technology.

While everyone was locked down at home during the COVID-19 pandemic, digital solutions to everything – from healthcare to shopping to customer service – gained momentum. And consumers are not keen to go back to the days of sitting in waiting rooms, standing in till queues or listening to panpipe hold music while waiting for a customer service agent to answer the phone. From managing car insurance claims paperfree through an app, to getting groceries delivered to your house in 60 minutes, the world has changed and there’s no going back. 

In real estate, the opportunities for more effective facilities and utilities management, tenant communication, and even residential or commercial property sales and rental management are endless.  One fast-growing sub-sector, for example, is smart building which allows real estate owners to digitally manage their buildings, as well as reporting, inspections, communications and more between all those that connect to the building – all using an app on your phone. This has increased relevance with the introduction of ESG reporting requirements. 

• Exploring potential benefits & current pain points

 

The key to benefitting from your investment in PropTech is taking a strategic approach. Digitally transforming for the sake of it is a fruitless endeavour. Instead, tackle your digital transformation with a clear understanding of the potential benefits and current pain points you want to alleviate and develop a strategy that addresses these. Critically, your strategy should include targets that you can measure against your business goals to ensure you can report on whether or not your PropTech solution is working for you. 

 

Whether you’re aiming to achieve cost reduction targets through better utilities management, seeking to attract new long-term commercial tenants through improved sustainability and energy efficiency reporting, or wanting to improve facilities management efficiency through quick and easy facility bookings, digital transformation must support your strategic goals if it is to give you a return on your investment.

 

• How do we choose the right digital solution mix?

Implementing your digital transformation strategy will boil down to choosing between three possible solutions: Build it yourself, outsource it, or buy into Software as a Service (SaaS).

 

Build it

Landlords are asset managers and, by nature, there is a tendency to want to own any assets they invest in. So building your own solution probably sounds very tempting. However, software engineering is a very different game to real estate investment and the skills required to maintain and innovate your bespoke technology solution are scarce, costly and – frankly – unlikely to respond well to the same management techniques that work for your employees in your core business. 

 

Outsource it

For most real estate companies, outsourcing is a more realistic option. It gives you access to the scarce and expensive technical skills you need, often at a more affordable rate, and without all the challenges that come with managing a software engineering team in your business. In this scenario maintenance and innovation is outsourced to a specialist company.

 

An important consideration for outsourcing is the ownership of the ‘Source code’. An unwitting customer may purchase the ‘executable program’ but be unaware that from the onset they must request that the software engineering supplier’s quotation includes the intellectual property of the programming, known as the source code. This gives the purchaser the flexibility to move the development project to a new service provider, should problems arise in the future with their current supplier.

 

SaaS it

The last possibility and the most cost effective upfront and monthly is SaaS. SaaS solutions save you time-to-market, while ensuring that your PropTech solution is regularly updated with improved functionality and cybersecurity measures, without the hassle and expense of maintaining or outsourcing the teams behind the software.  This makes SaaS solutions accessible and ideal for smart real estate businesses looking to accelerate their digital transformation. 

 

It’s important to select SaaS solutions that integrate easily with other software packages your business uses to ensure smooth data sharing and shared functionality. Licensing archaic or international PropTech systems that can’t easily be customised for the local market can get very expensive, very quickly.

 

If these three steps seem daunting, you may want to consider appointing an Innovation Manager or equivalent in your business whose sole responsibility is to navigate your company through the treacherous waters of digital transformation. The right digital transformation strategy, supported by the right skills to deliver against it, is the recipe to a nimble and ultimately effective technology adoption journey.