The real estate industry is a traditional guild—brick by brick is laid by hand here, as it has been for centuries. But that is changing.
The ever-increasing building cost, the shortage of skilled construction workers and, most recently, the demands of decarbonizing the real estate sector have a disruptive effect on the industry, which is so conservative.
However, dominated by medium-sized companies, the construction industry simply does not have the time to implement digital processes, considering the current economic boom. Modular construction with parts manufactured by robots and even more so digital twins of existing and planned properties could trigger a quantum leap in terms of efficient collaboration between all the trades and service providers involved in construction and facility management. The technology is available, but what is lacking in the current boom is the will or capacity to implement it. This is particularly true for Germany, with its construction industry dominated by small and medium-sized enterprises, and it is also true for public administration—just think of the long overdue “digital building permit”. On the user side, “smart homes” are attractive for a society characterized by increasing isolation and aging. Intelligent, integrated home automation allows people to live in their own home even if their physical and/or mental capacity is limited: a smart home can monitor residents' vital functions, detect and report accidents such as falls, and compensate for safety-related negligence, such as turning off stovetops.
However, things could begin to stir now: the COVID-19 pandemic has shown how cumbersome paper-based processes are. Things that seemed unthinkable before, suddenly became possible and were no longer a luxury: the physical transport of documents was replaced by data rooms, disruptive digitalization became a matter of sheer survival.
Another long-term driver of digitalization is the goal of decarbonization. As one of the main contributors to the CO2 footprint of industrialized countries, the real estate industry can only face up to its responsibility if it swiftly creates the basis for attributing CO2 emissions to those producing them. Only a valid data collection makes it possible to control the behavior of tenants, users, and service providers in and around the property, which is a prerequisite for reducing CO2 emissions.
Smart metering, the digital recording of the consumption of energy and heat, is being rolled out by more and more portfolio holders. Other ESG-relevant data that need to be identified, collected, and managed include waste quality and volumes and water consumption. In terms of rentability of real estate on the one hand and in terms of the distribution of real estate investment products on the other, it becomes increasingly important to fulfill the ESG criteria. Hence, they are creating considerable innovation pressure in the industry.
However, with the growing trend toward digitalization, it must not be forgotten that data collection and processing induce a non-negligible demand of energy: from 2000 to 2020, the energy consumption of servers and data centers in Germany alone rose from 4 billion kWh to around 12 billion kWh! This makes it even more important to analyze data and information needs strategically instead of simply digitizing without much thought. After all, the old bon mot “If you digitize a shitty process, then you have a shitty digital process.” still holds true.