How property can learn from other sectors

COMMENT The fact real estate is not as fast at adopting technology as some other sectors is often the cause of much frustration. Recently, Dame Judith Hackitt, responsible for the review into building safety and for advising the government on the implementation of the Building Safety Bill, aired frustration that the sector was “behind the curve with getting up to date with technology”. While the Building Safety Bill clearly covers a much wider scope than tech alone, having a “golden thread of data” and encouraging system thinking is at the heart of it. There can be no higher priority for the property sector than ensuring that the buildings we create and manage are safe. So why the apparent reluctance to embrace new digital ways? We can certainly learn lessons from other sectors but there are some characteristics of real estate that do mean our mountain is a little steeper than many others’. Fragmented infrastructure Real estate is one of the largest sectors in the economy, whether measured by number of employees, contribution to GDP or impact on the planet. But we are also highly fragmented, we are a sector typically made up of SMEs. Like other sectors, real estate is varied and complex, but because of the fragmentation of companies, we have the fragmented industry infrastructure to match. Take industry representative bodies as an example – according to Designing Buildings, “a construction wiki”, there are 389 industry organisations in the construction sector alone, with a further 46 associated organisations also listed. This fragmentation is in stark contrast with other sectors considered a little further ahead on the digital journey – how many industry organisations are there in banking or pharmaceuticals, for example? However, this is not a reason for us to be any slower nor an excuse for us to be behind, just a reason for us to learn lessons from other sectors and to apply them smartly to ours. So if our digital mountain is a little steeper to climb, we need to focus on three approaches to make sure we take the journey – the push, the pull and making the path a little less steep. The push – there has to be a push to encourage digitalisation and it needs to largely come from legislation and regulation. It is often much less effort to stick with the status quo, and small companies can sometimes fly below the radar, but compliance has to be a bedrock for change. The pull – there must be an incentive to change. One of the main challenges we face is the ROI of tech in a building. Companies are often so specialist and small that the company that needs to invest in the tech solution does not reap the rewards. At a time when costs are rising rapidly, irrespective of the long-term benefits of a certain building tech, why invest money that comes straight off the bottom line to benefit someone else? The best way around this is for data and tech to be more visibly included within the value of a building.  Take two otherwise identical office buildings, one with a full, detailed and up-to-date digital model and tech infrastructure and the other without. There is evidence and indication that the digital building can be run more efficiently, at lower risk, with lower vacancies and at higher rents. The value of the digital building should therefore be higher. But how often does the valuation process take account of this? And this is before we consider the potential commercial incomes that might become available from the data the building collects. More easily making the business case for everyone to benefit is essential and the valuation process is at the heart of this. Easing the climb – we can make the mountain a little less steep by taking lessons from other sectors. We need to be much better at sharing data, which requires new skills and standards and working together at a sector level around the digital agenda. Research and development is an area we are notoriously light on, as individual companies often cannot afford the investment needed to ride out the constant failures to find the successes. However, if we collaborate better as a sector – sharing funding, data and learning – we can help each other ease the journey to digitalisation. We may be set up differently from other sectors but that is in no way an excuse for us not to embrace data and technology. We just need to apply lessons from elsewhere a little differently. For us to make material and rapid change, we have to provide strong push and pull incentives while lessening the incline of the mountain and all of these need to be done in parallel. Dan Hughes is chief executive at Alpha Property Insight Image © Telling Photography