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In Focus: Technology and the Evolution of the Real Estate Industry

The marriage of physical and digital technologies is having a transformative effect on real estate markets — from industrial and distribution to office.

Q4 2018
Technology continues to be a catalyst for change in all areas of business and industry, and the real estate market is no exception. Unlike anything previously experienced, we are on the cusp of the Fourth Industrial Revolution, and it is blurring the lines between the physical and digital spheres.

The rapid advances in technology are shifting the way we communicate and work together. As more and more smart technologies enter our factories and workplaces, connected machines will interact on a heightened level, envision the production chain, and make decisions autonomously. So what decisions will be left for real estate professionals to make?

Given the complexity of the industry, most of us are participating in the revolution without realizing it. Understanding what this so-called reinvention is and how it is changing the market is crucial. The Fourth Industrial Revolution can be defined as the marriage of physical and digital technologies, such as analytics, artificial intelligence (AI), cognitive computing, and the Internet of things (IoT). Given the influence of technology on real estate, we must position ourselves to adapt and flourish in this new and ever-changing landscape.

A Permanent Turn for the Industry
Being able to decipher courses of change and integrating the lessons into our day-to-day business is a necessary first step. We must accept that this is not a trend, but a permanent turn for the industry. This October, the World Economic Forum issued a report that estimates half of all jobs we know today will be eliminated by technology by 2025. Machines and automation will take over nearly 52 percent of the division of labor, compared to the 29 percent that is currently in place.

Changing consumer and lifestyle trends — how we work, shop, and live — have all been the primary driver for this newest reinvention. There is not a single real estate market or sector that isn’t experiencing this firsthand. While each region has its own story, they all end in a transformative environment that is repositioning antiquated real estate, pushing building design, expenses, pricing, and real estate professionals in ways that we have not seen before.

Real estate experts must consider these new influences in order to make sound future planning decisions. Technology is accelerating everything, and the challenge for traditional industrial environments is finding ways to keep pace with cabling, power, and other infrastructure requirements. Good air quality will be required for optimal operating temperatures of AI robotics. Smart floors, hypervelocity loading docks, autonomous freight carriers, and modularity are now becoming the vocabulary of a forward-looking distribution industry.

Changing consumer and lifestyle trends — how we work, shop, and live — have been the primary driver for this newest reinvention of the real estate industry. In office design, a repurposing of space and shift in focus on how to minimize the floor area used by employees is already well under way. Space-sharing will increase for smaller companies, and shared services across companies will become the norm. Take for example flexible office space like WeWork, which optimizes scaled-down floor areas that still allow members to work harmoniously. This is especially true in large cities, where both demand for office space and price-per-square-foot rents are growing exponentially.

Commercial real estate has always been a business that heavily depends on interpersonal relationships. However, we must observe the landscape — things are changing at an accelerated pace. It’s impossible to ignore the influences of technology and the corresponding rapid rate of change. Further, we are only just getting started in terms of its overall impact on our lives both personally and professionally. The best way to maintain relevance in the backdrop of this transformation is to keep pace with today’s technology and the emerging trends that surround it.

While there may be no way to “future-proof” current distribution facilities or office space, professional associations like the Society of Industrial and Office Realtors (SIOR) continue to provide an environment where commercial real estate education and networking are focused on these discussions. Professional development through high-level organizations provide innovative solutions to tomorrow’s challenges.

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