For too long, the real estate industry has neglected to respond to the siren call of digitalization. It is only the restrictions imposed by the coronavirus lockdown that have now led to a new appreciation of the urgency of the issue – because many companies found themselves suddenly unable to work efficiently. At the same time, the mounting pressure to digitalize represents an opportunity for less well-capitalized companies. And new opportunities are also opening up for the real estate industry thanks to updated legal provisions.
No time, no budget or simply no need. When it came to the real estate industry’s key digital topics, for years many companies have chosen to debate rather than innovate. The need to meet the demands of the digitalization transformation in good times, despite the repeated advice at the time, seemed – with the pressures of everyday business in mind – to be negligible. After all, the industry was booming and even those companies that simply wanted to maintain the status quo in their workflows were generally able to post rising profits simply because of the market’s strong growth.
The downsides of failing to innovate at that time were relatively small. Whenever work was carried out using the last-but-one rather than the most recent version of the digital building model, this was regarded as an annoyance, a forgivable mistake. The same applied to the widespread use of Excel lists, which were looked down upon, but which were extremely resilient because they were cheap and seemingly simple – stored locally of course, not in the cloud. Or the much-vaunted visions of a thoroughly digitalized, automated future without intermediaries, where in reality the focus was on minimally invasive improvements in the current digital application landscape as opposed to taking tangible, strategic steps.
Today, however, the reality looks completely different. The pressure to digitalize was still perceived as nothing all that urgent just a few weeks ago. Now, there is no more time to prevaricate, no way to push back the digital hands of time. Any company that has failed to map their workflows digitally has been left unable to work (efficiently) during the corona lockdown and, for example, has been de facto shut out of large-scale multi-stakeholder projects in which they would otherwise have been involved. However, this situation should not only be seen as a challenge to overcome, but also as an opportunity to seize.
According to Darwin’s “survival of the fittest” theory of evolution, companies who remain flexible and adaptable in times of upheaval and looming recession will not only survive, they may even emerge stronger. At the same time, the pressure to digitalize is narrowing the gap between larger, better-capitalized companies and smaller players. What’s more, what has traditionally been a highly fragmented industry is moving ever closer together, and the more pronounced digital mindset of companies is creating a greater focus on application interoperability.
And there is another positive aspect to recent developments. The legal framework that governs the application of technologies is also currently being reviewed and expanded, as demonstrated by one extremely quick decision from Germany’s Federal Financial Supervisory Authority (BaFin) in late March: Due to travel and contact restrictions, BaFin decided to authorize remote property appraisals via video in order to make it easier for banks to determine the mortgage lending value of a property. And the new rules do not allow for any kind of automatic valuation discount. This gives rise to the hope that legislators will act in a similarly flexible manner on other related legal issues. Even if these measures are only temporary, they will still create the legal basis for the increased digitalization of the real estate industry and create the certainty and space required to test their practicability.
Head of Digital Innovation & Business Acceleration Continental Europe, CBRE