Real estate disruption
Technology + demographics + globalization
There are three primary forces behind disruption: technology, demographics and globalization. These forces are not new — they have been around for many years — but they evolve in successive waves, as well as interact with one another. These waves and interactions create new sources of disruption. Organizations of all types and across all industries find themselves facing disruption from these forces. Real estate is no exception.
The transformation of real estate
What’s important to keep in mind is that while disruption poses threats to traditional business models and value chains, there are also significant opportunities embedded in the changes taking place:
- Technology continues to have a tremendous impact on real estate. E-commerce has slowed in-store shopping, resulting in retail store closures. At the same time, new technologies such as virtual reality could transform physical stores into experiential showrooms, highlighting the continued need for retail real estate.
- Demographic shifts and preferences, coupled with technological advances, will also affect real estate. Many societies, particularly in the West but also in Japan and China, face rapidly aging populations. As people age, their real estate preferences and needs change.
- With globalization, capital for real estate has increasingly made its way across borders, reaching record levels in recent years. While this phenomenon has introduced some level of volatility as markets respond to local events and conditions, global diversification of real estate portfolios also has helped to provide stabilization through diversification on the financing side, while allowing developers and builders to help global clients achieve their expansion strategies.
The unique challenges of real estate
All industries face disruptive forces. The unique dynamics of real estate make the challenge of disruption particularly steep. The planning, delivery and management of real property requires a long-term vision, which is difficult to establish in a rapidly changing world.
The real estate sector is now in a position that will require its leaders to better anticipate the future state and consciously adopt new ideas, with success depending on the ability to proactively shape and drive future demand.
With all of these changes, players in the real estate space clearly need to think differently, assessing both the weak and strong signals in the market that spell change, as well as making bets on future opportunities.
As the world continues to evolve — driven by the waves and intersections of technology, demographics and globalization — business as usual is not an option.