Digitization: Real Estate’s Ultimate Transformation
Digitization has just started and it is shaking up all areas of big business, including the real estate industry.
Digitization has just started, yet it is shaking up all areas of big business, including the real estate industry. According to Digital McKinsey, digital technologies and processes have penetrated only about 35% of the way into the average industry, meaning that merely a third of a typical company’s products and operations that could be digitized have been. Yet the impact has already been dramatic: Globally, digital disruption is shaving 45% off incumbent companies’ revenue growth and 35% off their earnings before interest and taxes (EBIT).
By 2020, an entire generation, Gen C –a powerful new force in culture and commerce– will have experienced and grown up in a predominantly digital world. Google considers that sixty-five percent are under 35, but they span the generations, empowered by technology to search out authentic content that they consume across all platforms and all screens, whenever and wherever they want.
The real estate sector is just like any other market. It transforms and adapts, sometimes promptly, other times not. But overall, the industry itself welcomes this new trend. In a study done by the consultancy firm Drees & Sommers, digitization shows a 68% of approval. The participants see the digital revolution as an essential factor and a major source of transformation for the industry.
There is a major shift on its way. It may be years before it takes over the industry, nevertheless it is happening. We are talking about the transformation from focus on investment to focus on information. Even though it might sound like a contradiction, it is not.
In the study entitled “The Digitization In The Real Estate Business”, written by Carsten Lausberg and Patrick Krieger, the authors mentioned how digitization can profit the industry. “Real estate does indeed possess two characteristics that can benefit from digitization: it represents a valuable investment and involves complex processes. Digital technologies can optimize processes and achieve significant increases in value. If this is to succeed, the key role of information must be recognized.”
A sector traditionally based on tangible assets – land, building and money – is being transformed into a sector where information plays a major role. If you look at the real estate industry today, you will see an industry that has struggled to keep up with the speed technology forces many other sectors to change. The access to instant information has gradually taken over. More and more people are comfortable with the idea of using technology to engage with real estate.
What would be the three main elements of digital transformation? One can only think that real estate will soon adapt their market needs with digitization in key areas such as customer experience, operational processes and business models. Of course, there are different levels of maturity in terms of the digitization, and it varies according to the industry. A study done by MIT focusing on the levels of maturity in terms of the digitization of a variety of sectors positions real estate and construction at the bottom of the digitization scale.
The Digitization trend, sooner or later, will fully be embraced by the real estate industry. It will reach an inflection point driven by three key forces: technology push, economic benefits and consumer power.
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