When Is The Best Time To Invest In Technology?
Almost everyone in the property sector agrees that technology will, in one way or the other, affect the real estate space. However, resistance to change remains the biggest barrier to proptech adoption, outstripping cost, resources, time or confidence.
March 25, 2022 –
By Bernie Devine, Regional Director, Yardi
As the world’s largest asset class, real estate was ripe for reinvention, well before Covid-19 upended the world. Property companies were beginning to invest in technology across the entire development lifecycle – from dirt to disposal – to unearth new value and create better experiences for customers.
But since 2020, the investments have gained pace. Property companies poured billions into digital technology to maintain business continuity in an online environment, to enhance health and safety on sites and in buildings, and to forge new connections with customers.
Today, JLL estimates that nearly 8,000 companies are part of a growing and thriving proptech ecosystem. Meanwhile Metaprop, the world’s largest proptech venture capitalist, says 89% of investors expect proptech adoption to accelerate in the post-pandemic world.
As we emerge from the scathing effects of the pandemic, we ask this question: how do we pinpoint the areas of common ground in proptech to drive innovation and impact?
Yardi and Mingtiandi first teamed up to track changing attitudes to proptech in 2017. Since then, we’ve captured the accelerated adoption of technology to guide data-driven decision-making, transform business processes and enhance the experience for people who live, work and play in buildings.
In our studies in the field, we can see although there is a lot of develpment, there are still pockets of the real estate industry that remain stubbornly resistant to change. Some leaders continue to rely on ‘gut feel’ to make decisions. As one business leader told me recently: “I didn’t need data 20 years ago to make decisions, and I don’t need it today.”
Mind the digital gap
This ‘digital divide’ is very clear in the results of our survey. For instance, nearly a third (32%) of survey respondents expect big data analytics to have the biggest impact on Asia’s real estate sector over the next five years.
Conversely, 33% of property companies are still using spreadsheets for accounting, benchmarking and performance analysis, 26% for budgeting, 28% for valuations, and a massive 46% to manage their portfolio financing.
Consider the implications when, in the words of MSCI’s Head of Real Estate Client Coverage Asia Pacific Varun Malik, “deals are now being rooted in data.” Of course, there are some companies that are investing in technology and data at speed. But there is also a propensity for property players to throw around the ‘big data’ buzzword, when they should be focused on getting their simple back-office functions in order.
Why, when our research clearly shows a growing gap between the leaders and laggards, are some companies choosing not to invest?
The simple truth is that change is hard work. Resistance to change remains the biggest barrier to proptech adoption across the region, outstripping cost, resources, time or confidence.
But the world has changed and real estate is changing too.
Almost two-thirds (62%) of respondents to our survey noted a “significant” or “major” impact on plans for their workplaces following the pandemic, and 58% observed the same level of impact on their portfolios.
The overriding lesson from the Covid-19 crisis is that the world is now consistently inconsistent. Things can, and do, change overnight. Preparing for ongoing unpredictability requires new systems and processes.
So where do you start? Here are three ideas:
- Think big but start small: Big data will have a huge impact on real estate. But before we get to the big data, we need to start with the small data. That means fixing the data we already own. Bringing all building data into a single platform provides a portfolio-wide view, leading to deeper insights and more opportunities to innovate.
- Embrace an experimental mindset: Take a leaf out of Silicon Valley’s “move fast and break things” book.An experimental, curious mindset gives us permission to try, test and make the occasional mistake. Think progress, not perfection. As you build a business case for each technology, you will uncover indicators of where value really lies.
- Prioritise people: Forget the race to acquire the latest, greatest new technology. We invented technology to serve people, so always keep the end-user experience in mind. This makes communicating the long-term benefits of technology and data mission critical.
According to McKinsey, less than one per cent of revenue was invested in construction innovation in the years before the pandemic, while the aerospace and automotive sectors spent between 3.5% and 4.5% of their revenues on R&D.
A lot of companies are now playing catch-up with technology, as 60% of our survey respondents expect to invest in business process automation over the next five years, and 58% are financing big data analytics. These companies are now operating from a simple principle:
The best time to invest in technology may have been yesterday, but the next best time is today.
For the Mingtiandi-Yardi summary report: Innovation in Asian real estate, click here.
About the author
Bernie Devine has over 30 years of experience in real estate and technology, specialising in digital transformation in real estate, and using data to create a more competitive and collaborative environment. He supports real estate clients with Retail, Commercial, Industrial, Residential and Mixed-Use assets, helping them to grow their operations, create efficiencies, and gain better insight into their business. His expertise includes asset and investment management, private equity, operations improvement, program and project management, finance, technology implementation and compliance. Bernie has led large-scale technology projects, as well as led and supported Proptech start-ups, across Australia, the USA, Middle East, Asia and Europe. Currently responsible for the growth of Yardi Systems in Asia, Bernie lives in Hong Kong and is a qualified accountant and economist. He has over 60 publications to his name, and extensive public speaking experience.