How people, place and purpose align to redefine real estate

In brief

• The biggest digitisation challenges for the real estate sector are not technical – they are structural and cultural.
• But the sector’s leaders are embracing digital disruption to rethink the very reason why real estate exists.
• How fast will technological change occur? More than half the respondents to a recent EY real estate poll think “big step changes” are ahead.

As we continue to ride the COVID-19 rollercoaster a new world order is ahead for real estate. The sector is coming to grips with major change as the interplay of people, place and purpose align to redefine how we think about the built environment and the skills we need to reimagine it.

In fact, nearly 20% of those polled by EY professionals recently see data scientists as an emerging in-demand role for the real estate sector, alongside experience managers (20%) human-technology integration experts (18%), workplace productivity specialists (14%) and augmented reality builders (12%). Have we reached the tipping point as the real estate sector delivers on the ambition to have technology and data at the heart of better human experiences? 

Dr Andrea Chegut, co-founder and director of MIT’s Real Estate Innovation Lab, is not surprised by EY poll results. Digitising our buildings has been an ongoing challenge, she told a global audience during the latest instalment of the EY/MIT Innovation in Real Estate webinar series.

“In the past, we faced disconnected systems, data hijacking from different manufacturers, complicated legacy systems, and poor data quality analysis. But the biggest challenges are not technical – they are structural and cultural,” Dr Chegut said. This is why we need to upskill people.

We are seeing this too at EY organisation, where we are walking our talk and are applying some of the best consultancy brains to investigate the interconnections between the three Ws of workforce, workplace and work smart. We are surveying our people, speaking to clients, mining a rich vein of data and using AI to understand new working patterns and what this means for the places we inhabit. We are bringing in new skills to look at space in new ways – all with the goal of accelerating innovation and building better human connections.

While we are in uncharted waters we are not alone. Some of the best minds are deploying digital technology to rethink the very reason real estate exists and how changing human behaviours will influence the places we inhabit. 

What we know now

Property companies that had invested in a strong technology spine prior to Covid-19 found it easier to ride 2020’s waves of disruption. On the other hand, “companies without a digital core – that haven’t started digitizing and automating their back-end processes – have struggled to offer the services that tenants demanded almost overnight,” Dr Chegut told our webinar audience.

Healthy buildings were on the real estate radar before Covid-19, but 90% of real estate investors are now ramping up their focus on health and wellbeing, according to the United Nations Environment Program.

Touchless technology has evolved rapidly in response to social distancing requirements, and QR codes and Bluetooth, facial recognition and gesture control are now “everyday tech,” Dr Chegut said. 

What is next?

The next evolution of the digital core is the digital twin at scale. At present, a smart building feature that is “still rare,” Dr Chegut admitted, but will gain traction as the benefits become widespread.

“The evidence so far points to a 7% reduction in construction timelines, up to 20% decrease in capital expenditure and a 3.5% increase in occupancy,” when project teams have access to a digital twin. Beyond the horizon are volumetric displays, Dr Chegut added. These 3D projections of buildings will “enable tactile and live storytelling”.

We will also see AI powered building management systems that integrate 5G, IoT, big data, cloud computing, AI technology and machine learning. GE Digital, for example, is using AI prediction to predict performance and failures in HVAC systems and has saved customers US$1.5 billion.

Case study: A step towards the smart city

The EY organisationis leading the preparation of a business case for the creation of a spatial digital twin for the entire state of New South Wales in Australia. This 4D digital model – three dimensions plus time – will cover more than 800,000 square kilometres. This means mapping every single street and highway, every building and tree, every power pole and below-ground pipe.

The benefits and beneficiaries of the spatial digital twin are economy-wide and are constrained only by people’s imagination. Emergency services will be able to visualise, model and predict bushfire impacts. It will reduce the time a school, hospital or public housing project takes to go through the planning and approval process. Citizens will be able to visualise past, present and proposed infrastructure projects, ensuring that community insights better inform government planning and delivery. It’s the next step on the smart cities journey.

But the main game as we lift our heads from the COVID-19 battleground is net zero. With our built environment responsible for 39% of global emissions, net zero is the ultimate in healthy building. A quarter of our webinar audience agreed, citing ‘net zero credentials’ as the primary driver of value in the future.

Case study: Energy-efficient, experience engine

Johnson Controls unveiled an ambitious net zero commitment in January 2021 and aims to double customer emission reductions through its OpenBlue platform. Johnson Controls’ Vice President and General Manager for Digital Solutions Asia-Pacific, Alvin Ng, describes OpenBlue as an "analysis engine, an experience engine and a space utilisation engine" that is already saving asset owners millions.

From his base at Johnson Controls’ new $50 billion Innovation Centre in Singapore, Ng is working at the intersection of wellness and building science to create human experiences that are “rich, robust and sustainable”. OpenBlue – a platform that is both a “cockpit and a single pane of glass for customers” enhances energy efficiency and how people use space.

One of Asia’s largest developers, with assets of S$100 billion, is using OpenBlue across 42 assets. By ingesting and analysing data from 11 building information systems, OpenBlue is optimising energy systems to save S$4.3 million in energy costs and $2.2 million in operating expenditure. “Net zero is pushing big real estate owners towards a more profitable future,” Ng said during our webinar.

A peek beyond

So how fast will this technological change occur? According to more than half (54%) of our poll respondents “big step changes” are ahead. Another 18% expect the change to be radical and that the real estate sector will “struggle” to keep up.

Dr Chegut outlined some of those next horizon technologies she is seeing in the lab. Hologram meetings will help remote workers beat the Zoom gloom. The start-up Spatial, established by MIT alumni Jinha Lee, is already simulating the experience of in-person meetings with lifelike avatars, dynamic sound and interactive controls. Digital fibres and fabrics will optimise the environment the moment we walk through a building’s doors – and “prototypes are moving into individual biometric configuration,” Dr Chegut said. Then there are virtual lands or buildings – which can already be bought and sold in online digital games – that may “revolutionise the health, social connectivity and wellbeing of people”.

As digital transformation steps up another notch, the big takeaway from our webinar was clear. The best time to start work on digital transformation was yesterday, but the next best time is now. Organisations that have invested in digital solutions are positioned to think differently about the future – and to act differently.

Case study: Project managers become information managers

A laser-focus on customers has kept the real estate sector busy over the last year – and rightly so. But there are many opportunities for industry to improve the way it works, and the human experience with it.

Lendlease is using digital technology to rethink inefficient linear processes and create a “digital mentor” that, as Project Lead Andrew Rampton explained during our webinar, “guides people through the project lifecycle and promotes a consistent ‘Lendlease way’ of operating, using data and knowledge gathered over 60 years”.

OLi – an acronym for One Lendlease Interactive – already manages a global construction project pipeline worth nearly US$34 billion. Greater consistency will give external stakeholders confidence, Rampton said, but the biggest winners are the employees – who have everything they need in one place to make better decisions.

By the end of 2022 OLi will cover Lendlease’s entire development portfolio – that’s 350-plus prospects and projects worth $114 billion. And over the next five years, Rampton expects many more property companies along the value chain will realise their role as “information managers”.

So, what can you do now?

1.Plan based on purpose: Technology is moving so fast that any investments today will be obsolete in just a few years. Paradoxically, this means looking further ahead than ever before. Start with scenario planning to imagine all the possible futures that may unfold. What are the risks, opportunities and conditions of play? We call this ‘future-back’ thinking. Then, with this view of the distant future, work backwards to understand the strategic and tactical implications. Use your purpose to chart a course. Only then do you choose the tech that will help you get there.

2. Get your (back of) house in order: We have seen back-office automation change the way our real estate clients make decisions all the way up to the board level. The efficiencies being made are eye-watering: trust distributions that once took weeks to complete can now be finalised in just 28 seconds. Companies often don’t consider this ‘real automation’, but it can create permission to play and move your company up the maturity curve far quicker.

3. Hero your humans: We believe leaders must look at business transformation through a fresh lens: with innovation at scale, technology at speed, and most importantly of all, with humans at centre. Prioritising people, rather than technology, will help guide ethical decision making and ensure you are solving a real problem.

Just 6% of our poll respondents thought it would be people from inside the real estate sector that would drive change. Instead, it will be occupiers (33%), their companies (23.5%) and investors (27.5%) stepping up simultaneously to demand better experiences in their buildings.

At EY, we are not so convinced that change will be driven from outside real estate. We are seeing inspiring and imaginative leadership from across the sector as organisations recognise how technology and data can enhance the human experience.