by Brianna Crandall — February 3, 2016—The “fourth industrial revolution,” involving machines communicating with each other, is imminent and will be as hugely impactful on the global economy and real estate industry as the three preceding industrial revolutions marked by the advent of steam-powered manufacturing, electricity, and information technology, according to participants at a recent symposium held in Hong Kong by the Urban Land Institute (ULI) and the World Economic Forum.
A new white paper, Disruption — Buzzword or Reality, summarizes the symposium discussions, noting that the rapid adoption of new technology such as machine-to machine (M2M) communications is just as influential as the technology itself.
“For the real estate industry, the implications of this ongoing torrent of disruptive technology are as daunting as they are welcome, and especially so given that we now stand on the brink of a further wave of innovation — dubbed the fourth industrial revolution — that promises to jump-start another round of evolutionary change,” the report says.
“From new construction materials to autonomous vehicles, three-dimensional (3-D) printing to virtual-reality software, ever-faster wireless communications to ‘smart’ interactive machines, new types of technology are going to have a profound impact across a whole spectrum of activities that will change the way real estate is built, sold, managed and occupied.”
The report, produced by ULI Asia Pacific, cites observations from symposium participant Nicholas Holt, Asia Pacific head of research for Knight Frank, a global residential and commercial property consulting firm. According to Holt, the M2M communications era has the potential for major disruptions, including:
- Fewer workers needed in factories but more in logistics and technology sectors;
- A reversal of manufacturing industries migrating from developed markets to emerging ones, as lower labor costs negate the need to do so;
- Changes in the logistics industry to accommodate demand for more customized products and new delivery systems, including the use of autonomous vehicles and drones for delivery services; and
- Increasing use of sensors in cities to improve services ranging from parking availability to waste management.
The report also includes comments on changes in the retail industry from symposium participant Kirill Popov, a business intelligence manager at Fung Global Institute in Hong Kong. Popov pointed to the trend by retailers toward greater blending of online and in-store shopping to meet consumer demand for convenience, greater personalization, and an enjoyable experience.
The future of commercial real estate technology is discussed, with an emphasis on the need for quicker and more widespread adaptation of innovative technology by the industry as a whole. The report notes that virtual reality software is a particularly promising tool, in terms of its ability to help potential users visualize the space they will be occupying.
The report cites discussions about changes in office space, noting that the rapid adoption of shared space, or “co-working” spaces is quickly changing the leasing model from one that traditionally has been more long-term and rigid to a much more flexible approach that accommodates the proliferation of quick turnover and the needs of short-term users.
The report also looks at innovations in building materials as game-changers in the construction industry, including such technologies as “self-healing” concrete that repairs its own cracks, and the use of three-dimensional printing of building materials and modular pre-built components to substantially reduce construction time and lower building costs. The future of urban mobility is also discussed, in terms of the potential of driverless automobiles to change not just how people get around cities, but how urban spaces are redesigned and reused as a result.
The top takeaways from the symposium:
- The speed at which technological innovation is arriving continues to increase, as does the speed of adoption. New tech is therefore affecting the real estate industry on an unprecedented scale.
- The Internet of Things (IoT) will disrupt the status quo in both small ways (ordering groceries) and big (managing citywide traffic flows). Interactivity will be key.
- As an industry, real estate remains generally conservative and behind the curve in responding to innovation.
- The Millennial generation is an increasingly important part of the equation, partly because Millennials are increasingly prominent demographically, and partly because they have an instinctive grasp of the potential of new technology.
- The mobile phone has become the main platform by which this innovation is being adopted by the consumer.
- We should focus on services rather than on hardware — apps are more important than tools.
- Shared workspaces will be big, transforming workspace use.
“Taken in combination, the impact of this wave of incoming innovation will only grow in force in coming years, forcing real estate practitioners to adapt or go the way of the dinosaur,” the report concludes. “This is not only because new technology will likely create opportunities for greater efficiencies that will provide significantly better products or services, but also because the next generation of industry leaders is already steeped in the cyber-world dynamic.”
