Bridging the Gap PDF
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Bridging the gap How the real estate sector can engage with PropTech to bring the built and digital environments together KPMG Global PropTech Survey November 2017 kpmg.com/uk/proptech17 “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten” Bill Gates, The Road Ahead © 2017 KPMG LLP, a UK limited liability partnership and a member frm of the KPMG network of independent member f2rms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Headline results 53% 92% 86% very significantly of respondents said Big Data think digital and technological see digital & technology & analytics is the emerging change will impact their innovation as an opportunity technological innovation their business business is most likely to adopt in the next 3 years 34% 53% 49% have an enterprise-wide rank their business 5 or below expect to collaborate with an digital strategy in terms of technological existing or new supplier to innovation maturity develop their technological innovation capability 74% 89% 62% feel that digital/technological agree with the statement feel that over the last 12 months innovation engagement from "Traditional real estate PropTech has increasingly been across the corporate real organisations need to engage viewed of an opportunity/enabler estate industry has with PropTech companies in increased over the last order to adapt to the changing 12 months global environment." © 2017 KPMG LLP, a UK limited liability partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 3 Foreword Embracing technology PropTech’s potential is undeniable. Is it time for real estate players to dive in? Every sector is facing the challenge of moving from The survey results demonstrated that there is an industrial past to a digital future. The property increasingly widespread recognition of PropTech’s industry is no exception. We are seeing signifcant potential within the industry, but that despite transformation as the fourth industrial revolution growing acceptance of PropTech, few organisations continually redefnes the relationship between the have entered the adoption phase. There has been digital and built environments. New technologies, much talk about PropTech in recent months and emerging businesses and alternative solutions are several organisations have taken steps to invest in entering the mainstream. However, it is unclear technology and innovation, but in many cases real what impact these changes will have on their engagement is often patchy and restricted to existing business models in reality. isolated business units. Real estate decision makers have noticed the While there is no one-size-fts-all strategy huge steps forward that other industries have to respond to the changes the industry is made with the adoption of technology, such as experiencing, it is evident that property FinTech in fnancial services, and are looking at organisations need to develop, implement how they might follow suit. Property frms are also and integrate a clear digital strategy now if being forced to respond to the disruption facing they are to stay ahead of the game in today’s occupiers in order to stay relevant to their rapidly changing environment. customers. Furthermore, as in other industries, We hope that this report is a useful resource for fast-growing businesses are emerging with new understanding how your international peers are solutions to industry pain-points and are coming up approaching PropTech, and the factors to consider with more effective and effcient ways of engaging when you defne your own path forward. If you with customers or transacting. Property frms now would like to discuss our fndings in more detail fnd themselves having to keep up with new or to learn more about what your organisation competitors, as well as with existing peers. can do to capture value from and respond to the All of this requires a different way of strategic challenges of PropTech, please contact the authors thinking. To understand the global real estate or your local KPMG contact. sector’s attitudes to PropTech and the steps that organisations are taking to adapt to the digital age, KPMG conducted a survey of more than 130 real estate decision makers from 36 countries across EMEA (46%), Americas (29%) and ASPAC (25%). Andrew Weir Andy Pyle Global Chair, Real Estate Head of Real Estate, and Construction KPMG in the UK © 2017 KPMG LLP, a UK limited liability partnership and a member frm of the KPMG network of independent member 4 frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Those in the sector have noticed the huge steps forward that other industries have made through the adoption of technology, for example FinTech in Financial Services. PropTech: The term for property and technology has many guises globally, with words such as PropTech, RealTech, CREtech, ConTech and Real EsTech often used interchangeably and with multiple meanings. For the purposes of this survey and report, we have used PropTech to cover all technological and digital innovations relating to property. © 2017 KPMG LLP, a UK limited liability partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 5 Denial to acceptance Property leaders can see where PropTech will make a difference: in better decisions and lower costs. How much do you think digital/ Overall, how does your company see technological innovation change digital/technological innovation? will impact your business? 7% 7% 1% 1% 4% 4% 10%10% 46%46% 46%46% 86%86% VeryV seigryn isfigcannifticlyantly An oApnp oorptupnoirttyunity SomSeowmheawt shigatn isfigcannifticlyantly A thrAe atht reat No fNunod faumndeanmtael nchtaaln cgheasnges NeithNeerither NoneN onf eth oef athbeo vaebove There is a general feeling among industry voted opportunity. In truth, it is both. Emerging commentators that the impact and potential technologies, and the changes that come with opportunites – and indeed threats – of PropTech them, certaintly pose a threat to existing business have become more widely accepted over the models if organisations are unable to adapt and past 12 to 18 months. This, our frst global survey capitalise on the opportunity. of the real estate sector’s attitudes to PropTech, The good news is that the vast majority of those confrms the perception. Asked whether they view surveyed acknowledge that PropTech will have a digital and technological innovation as a threat or very signifcant or somewhat signifcant impact on an opportunity, most respondents (86 percent) their business. © 2017 KPMG LLP, a UK limited liability partnership and a member frm of the KPMG network of independent member 6 frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. “There are some amazing Where would you rank your organisation opportunities for the with regards to digital/technological innovation maturity? (Zero is behind the sector, but also real curve, ten is cutting edge) challenges. While most 13% 12% respondents recognise 34% the impact of technology and case for change, half of the respondents give themselves a ‘fail’ when it comes to ‘technological innovation maturity’. This means it really is 41% time for the sector to act.” 0 – 2 3 – 5 Sander Grunewald, Global Real 6 – 8 9 – 10 Estate Advisory Network Lead, KPMG in the Netherlands But here is where the gap between acceptance and adoption creeps in. We asked how these real estate leaders would rank themselves on digital and innovation maturity – zero being well behind the curve, and 10 at the cutting edge. More than half (53 percent) ranked themselves at fve or less, with just 13 percent considering themselves to be at the cutting edge of PropTech. While reassuring that organisations are not over-confdent about their innovation maturity, businesses that can move themselves towards the upper end of the scale will be in a much more competitive position as we progress into the digital age of real estate. © 2017 KPMG LLP, a UK limited liability partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Al rights reserved. 7 What is the opportunity? to understand what data you have, how you can make sense of it, and what information you want One of the biggest opportunities at the moment is in it to provide. making smarter and faster decisions using the huge swathes of data to which real estate organisations Respondents also noted the impact of Internet of have access. This is clearly illustrated in the survey Things (IoT) and artifcial intelligence (AI). However, results (see chart below). The ability to digest, the immaturity of these technologies, and others analyse and use Big Data (or even just data) is one of such as autonomous vehicles, is illustrated in the the pain-points that many emerging technology frms survey results (see chart below). Arguably, these are targeting with innovative solutions. Data-driven technologies will make a more signifcant impact decisions allow real estate organisations to improve over a fve, 10 or 15-year period as they develop. in areas such as utilisation of space, investment Even though their impact appears to be some way decisions and competitor analysis. However, an off, organisations ought to consider them now to opportunity for enormous competitive advantage is avoid building obsolescence or expensive retroftting in using data to improve customer service to the end in future. users of property – the actual consumers of space. In terms of business improvements driven by With effcient and effective data analysis, landlords PropTech, respondents placed greatest emphasis on can respond quickly to their consumers’ rapidly building performance and costs; and decision-making changing needs and deliver superior service. and customer engagement. Interestingly given the Indeed, they can actually start to predict their amount of talk about Blockchain, only 13 percent felt consumers’ needs and respond to them before improved speed of transactions due to technological the consumer realises the need themselves. innovation will have the biggest impact on the sector. As property increasingly becomes more of a service Whether this is because the industry is yet to get than a product, this ability will be key to real estate to grips with Blockchain; or is underestimating its organisations’ survival. impact or feels it simply won’t live up to its hype, Critically, this doesn’t need to involve large-scale remains to be seen. expensive solutions – it’s about taking small steps Which technological innovations will have Which business improvements driven by the biggest impact on real estate over the digital/technological innovation will have next 5 years? the biggest impact on the real estate sector? 3% 5% 9% 6% 29% 6% 13% 5% 44% 15% 22% Lorem ipsum 27% 16% 3D printing Improved return on investment Blockchain Improved speed of completeing transactions Robotics (eg. in finance and other key processes) Improved customer engagement Virtual reality Improved decision making Driverless Cars (autonomous vehicles) Improved building performance or lower building costs Artificial intelligence Internet of things (IoT) Big Data and data analytics ©ne 2tw01o7r kK oPfM inGd eLpLeP,n ad eUnKt mlimeimtebde lri afbrimlitsy apfafrltinateerdsh wipi tahn KdP aM mGe Imntbeerrn aftrimon oafl Cthoeo pKePrMatGiv e 8 (“KPMG International”), a Swiss entity. All rights reserved. What do you see as being most disrupted by digital/technological innovation over the next three years? 16% 30% Regional differences There are two notable regional differences in the survey responses. 17% FAimrsetlryi,c oasn layn 3d0 A pseiarc Peanct ifocf f(ArmSPsA inC )t hseta te that PropTech’s impact on the sector 14% will be very signifcant, compared with 64 percent in Europe, Middle East and 23% Africa (EMEA). Real-time asset performance data This could be explained in one of Letting activity two ways. Either EMEA is behind the Customer data PropTech curve, while the Americas and Building optimasion ASPAC are further along and so do not have as much to gain from the future Transactions impact of digital innovation, or EMEA organisations are simply more aware of PropTech’s potential. And while only three percent of “PropTech is one small respondents in EMEA and two percent part of the wider digital in the ASPAC region feel that autonomous vehicles (AVs) will have transformation of the the biggest impact, the fgure rose property industry. to 12 percent of respondents in the It describes a movement Americas. Perhaps the fact that AV technology is more advanced in the US driving a mentality change makes respondents more cognisant of within the real estate its implications for real estate, or it could be that driving distances in the Americas industry and its consumers make the opportunities for driverless regarding technology- lorries more signifcant. driven innovation in the data assembly, transacting and design of buildings and cities” James Dearsley, Partner, PropTech Consult © 2017 KPMG LLP, a UK limited liability partnership and a member frm of the KPMG network of independent member frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 9 Collaboration Is Key Grow-your-own is rarely an option when it comes to deploying PropTech. Partnerships will be key. One of the problems for many real estate Speaking the same language businesses is that they are not naturally given Increasingly, there are signs that those within to rapid digital innovation – in truth, they have the technology world have increased their had little need to do so until now. Equally, while understanding of the real estate industry. They are many sectors have proven themselves particularly starting to explain their solutions in language that vulnerable to digital transformation – retail and real estate frms understand – and are articulating fnancial services, for instance – property is, by the ‘value-add’ in more accessible ways. its nature, less open to disruption. Bridging the gap between real estate and Despite relatively slow progress in adopting technology experts – an outcome that property PropTech, we have seen a noticeable increase in leaders seem overwhelmingly keen on – PropTech engagement with technological innovation across frms are starting to develop solutions to problems the industry. We have been through a period of that real estate frms want to solve, rather than acceptance, in the past 12 to 18 months (see providing solutions disconnected from their chart) – and this is an essential precursor to target market. wider adoption. How have the attitudes in the corporate real How do you feel digital/technological estate industry changed towards PropTech innovation engagement from across the over the last 12 months? corporate real estate industry has changed over the last 12 months? 5% 3% 0% 26% 74% 30% 62% PropTech increasingly now viewed Increased as an opportunity/enabler Stayed the same No change - PrepTech still viewed as an opportunity/enabler Decreased No change - PrepTech still viewed as a threat PrepTech increasingly still viewed as a threat © 2017 KPMG LLP, a UK limited liability partnership and a member frm of the KPMG network of independent member 10 frms affliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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