How digitalisation change commercial real estate

Digital technologies are everywhere around us. Using the Internet we read the news, check emails and update our calendars, review social networks and news feeds, and communicate with people via instant messengers. We visit banking branches less frequently, as we pay bills either online or through mobile applications. We order food and make purchases online. Online Maps show us how to get to our destination more quickly and online taxi services allow us to order a cab and will disrupt car ownership. Skype learning and distance educational programs are considered normal. Telemedicine is in our near future as are self-driving cars and as of yet unthought-of technologies.

Have you ever wondered how much time people spend online? The exact answer is difficult to find. Some of it is used for increasing our efficiency (example, delivery of a good) but it is also a distraction that can reduce productivity (e.g. the number of hours at work spent on social media). The quicker we solve our social and business needs online, the more we have for our personal life, with our relatives and friends.

Everything mentioned above are mainly the aspects of our everyday life. And we get used to them and have never thought of the technological effect on our life. But changes are happening in all spheres, including business. In this blog note, we look at the Internet of Things (IoT) technologies that will change the way the commercial real estate market operates, by decreasing the level of human involvement and by increasing their effectiveness.

Retail and logistics will actively use artificial intelligence (AI) technologies. These systems will be able to control the whole delivery chain, both to a store and a client. In particular, they use them to improve procurement systems and to ensure on-time delivery of goods into a store. The system automatically registers the reduction of stocks, and then re-orders them or their nearest equivalent. The AI platforms at warehouses will help to collect orders, partially replacing manual work. By connecting the truck to IoT tracking system, one will know where the truck is, and will get the data on any delivery deviations. This will allow quick reaction to these situations, increasing customer satisfaction. The AI systems can automatically manage shelf and inventory by checking the expiry dates and reducing loss from potential spoilage. Some of these technologies are already used by large global retailers, and their mainstream use requires time and further reduction in their costs.

Tenants and brokers usually need to visit properties, either retail or office, when they are considering new premises. With the 2D views of streets that are offered by GoogleMaps or Yandex Maps, the physical visit of a building and its neighborhood has been simplified, though it has not yet disappeared completely. In the nearest future, virtual reality (VR) instruments will replace the site visits. For example, with the help of VR headsets, also known as head mounted display, we will be able to go inside the buildings to look at the premises. This technology is already used in some countries, and it will widen the horizon soon.

Many retailers already use the augmented reality (AR) technology to promote their products and will widen its use. For example, IKEA has an application that allows to visualise goods before the purchase, so that one can see if the desired item fits with the existing interior. Decathlon in Russia is already testing a 3D-scanner of feet for choosing the ideal shape of shoes. The data is stored in the cloud and the customer can make a purchase at any time. Fashion retailers will use the opportunities for clients to interact with goods. For example, a shopper in a store using a phone may see what products are liked by his friends in social media. Product wise, the hangers can be equipped with ‘Facebook like’ counts of individual products, so the customers know its popularity. One could try a dress, and in an AR-mirror in a fitting room the customer will be able to see all available colors. Consumers want a more customized approach, and size scans and automated selection of clothes sets will help retailers in customisation.

All of these technologies may seem far-away, but they will become as commonplace as our everyday messengers and mobile applications. As they do they will increase the effectiveness of real estate market participants.

About the Author

Olesya is a well-known expert in real estate research with solid analytical background and a proven track record of accomplishments. She started her carrier at Renaissance Capital investment bank, where she was involved in Russian macro economy and fixed income market analysis. In 2009, she moved on to JLL where she grew from leading retail and capital markets research teams to the Head of Research position. Olesya also worked as Head of Research at Colliers and CBRE.

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