In a recent article in The Financial Times, columnist Patrick McGee wrote about the threat to the global car industry from new entrants with disruptive technology. His article outlined the need for motor manufacturers to ‘update their entire business model’ in order to face the threat of tech companies taking control of their customers.
The motor industry is not alone in having to face up to such challenges.As technology advances exponentially, new markets and opportunities are opening in various industries and sectors, and those best placed to disrupt the status quo and take advantage of these opportunities are not necessarily the traditional players but those with the relevant technological skills and knowledge. There can be no doubt that this is also true for the Real Estate sector where established businesses and brands are being increasingly challenged by newcomers to the sector armed with disruptive technology.
At Remit Consulting, we have been struck by the number of new entrants into the real estate sector who do not have a property background or any of the industry’s pre-conceptions. An example of this is within the Student Accommodation market, where many traditional property managers have declined or passed on the opportunities presented to them, leaving the sector open to new players, with new methods and new means of calculating fees. As a result, it is now a sector where “10% of service charge” has become almost meaningless.
We have previously highlighted how Artificial Intelligence (AI) is playing an increasingly significant role in this new world, with automation being built into rent collection, help desks and even building design. Generally,this new technology has not originated from within the Real Estate industry, with the majority of it being imported from the tech sector. This infiltration is confirmed by the volume of start-ups entering the Real Estate market direct from Silicon Valley and other innovation hubs around the globe.
How should the Real Estate industry respond to this threat? Should it be investing in technology itself? Should we all become the innovators and disruptors that threaten us? There are no easy answers and any innovation needs to be objective in what is going to be effective for clients and customers. We have recently seen some investment in commercial real estate PropTech solutions by some of the larger players, including JLL investing £4m in digital office broker ”Hubble”; which bridges the gap in business models between people and businesses looking for a new home/office.
There has also been an influx of new business models and approaches focusing solely on Real Estate data. For example, Nested, an online estate agency that offers added value through better use of data. Complacency is not an option. As Patrick McGee reminds us in his FT article, in 2007 General Motors was the world’s largest car maker, sitting on $25bn in cash. Within a year and a half, it was bankrupt.