Real Estate: Challenges of Digital Transformation
Real Estate, the World’s Oldest Industry: from Uruk to the Smart Cities of the Future
With a long history stretching from the ancient Mesopotamian city of Uruk to today’s smart metropolis projects, the real estate industry is one of the oldest in the world and at the same time one of the most promising in terms of future development.
Though having a roof over your head has been a human need since time immemorial, people through the centuries have constantly reshaped how real estate is built, purchased and used based on social, technological and financial changes.
Today, these changes are amplified by a myriad of factors. In the current global scenario, for example, high inflation has severely impacted construction costs and final housing prices, and the subsequent increase in interest rates has directly affected the credit accessibility and brick-and-mortar investment choices.
At the same time, the sweeping spread of digital technologies, albeit more slowly than in other industries, is transforming the entire sector by imposing new challenges and creating new opportunities for growth and development for real estate companies.
The Swiss Real Estate Market: State of the Art
As revealed in Credit Suisse’s Real Estate Study 2023, the Swiss real estate market is undergoing a period of significant change.
Tenants and property owners are facing rising costs, and for investors real estate has begun to lose its appeal.
This turnaround was triggered by the reversal of interest rates that put an end to the exceptional growth cycle often called the "supercycle".
- The interest rate on a five-year fixed mortgage, for example, rose from 1.0% at the end of 2021 to 2.7% by the end of 2022.
- Within a year, the Realmatch360 demand indices, which assess the volume of online residential property searches, decreased by 14% for owner-occupied apartments (APs) and 17% for single-family homes (CUs)
Despite these changes, it is important to note that the Swiss real estate market is going through a process of normalization, not a full-on reversal. We could talk about a "soft landing", although analysts are expecting some price corrections over the next few years.
Toward a Sustainable Future: Zero Emissions by 2050
Switzerland has set an ambitious goal of achieving climate neutrality (net zero) of its residential building stock by 2050, eliminating greenhouse gas emissions.
As buildings account for 24% of the country’s total emissions (the third largest source of greenhouse gas emissions behind transportation and manufacturing), a turnaround seems both necessary and inevitable.
More than two-thirds of building emissions come from housing, mainly from fossil fuel heating and hot water. Reducing building emissions is therefore essential for achieving a climate-neutral Switzerland. This goal can only be reached by a massive reduction in energy consumption and a shift away from fossil fuels by stepping up the pace in the transition to sustainable heating systems.
In light of the context just outlined, the near future of the real estate industry seems to be characterized by a great deal of uncertainty.
- What challenges await the industry players?
- What solutions could be devised to successfully overcome these pitfalls and ensure solid business growth and a quality relationship with a public (Retail and Business) that is increasingly connected and tech-savvy?
When uncertainty and crisis seem to be the new normal, digital transformation can be the key to ensuring strong business performance.
Real Estate and the Challenges of Digital Transformation
Real estate companies face an array of challenges as they embark on the digital transformation process.
The challenges may vary depending on the size of the company, the available resources, and the specific context in which it operates.
Here are some of the common challenges currently facing real estate professionals:
Meeting these challenges successfully requires taking a comprehensive and strategic approach to digital transformation, and this entails meticulous planning, inclusive engagement of all stakeholders, building specific skills, and a flexible attitude toward adopting emerging technologies.
MG Immobiliare Lugano
MG Immobiliare is a historic real estate agency in Lugano, with 30 years of activity behind it.
Ander Group followed the entire digital transformation process, revolutionizing daily operations and helping to consolidate the company's image.
With the integration between CasaOne and the website, operations have become smoother and processes have become more streamlined. Visual consistency, from the website to social, and the presence of a new design system introduced functionality and order-a new way of experiencing the day-to-day in the agency.
Tradition vs. Innovation: Embracing Change
As we have illustrated, digital transformation is becoming increasingly important in the world of real estate, helping to shape the way consumers, real estate firms, developers, construction companies, and professional investors address the market dynamics.
This process not only affects the dynamics strictly related to boosting sales, but also directly involves optimizing internal processes, from business opportunity generation to automated property management.
Despite a strong, deep-rooted tradition and the existence of established business processes, it becomes clear that real estate companies that keep in step with the times and embrace digital technologies, implementing a real digital ecosystem rather than just individual tools, will ultimately benefit from a substantial competitive edge in the marketplace.
- Research by McKinsey has shown how digital implementation can increase net operating income (NOI) by 10%, proving to be a clearly more effective lever than traditional methodologies.
- It is estimated that on average customers spend over six hours manually filling in different forms during the various stages of real estate transactions. Reducing this time via digital tools or automated processes will significantly enhance the customer experience and streamline business processes.
How to Integrate Digital Transformation into Business Strategy
By taking an integrated approach, real estate operators can maximize the potential of technology transformation.
Initially, you need to outline a clear and comprehensive digital strategy, making sure it is aligned with your mission and long-term goals. At this stage, business management must support digital efforts by allocating the necessary resources and fostering a culture of continuous learning and adaptation, staying abreast of emerging trends and technologies. Effective change management is crucial to foster an innovation mindset, recognizing innovation as a valuable tool for improving the quality of work and optimizing operations.
Selecting a strategic partner with comprehensive expertise and an extensive support network can provide end-to-end support, including change management, software development and strategic governance of all touchpoints, both digital and physical.
repeoplerepeople is a Real Estate network with an 8-year history, formerly known as Borsa Immobiliare Ticino. To meet the needs of a community that now extends beyond the geographical boundaries of the Canton of Ticino, they recognized the importance of undergoing a rebranding that would accurately reflect and facilitate their growth. This shift was conveyed in their new name and comprehensive digital ecosystem: a fresh HubSpot website developed in three languages, complemented by a digitized database with the workflows and automations necessary to manage a thriving network.
Opportunities Created by Digital Transformation in the Real Estate Industry
Digital transformation and the implementation of a digital ecosystem can go a long way toward enhancing the customer experience by, for example, enabling buyers, tenants, and investors to virtually explore properties, complete transactions online, and receive faster and more efficient customer service, disrupting what until a few years ago was an experience characterized by strong physicality (on-site appointments, in-person tours, etc.).
Automating business processes can not only reduce administrative costs and improve operational efficiency, but also contribute to the concentration of activities. For example, using property management software makes it possible to simplify lease management, billing, and property maintenance by concentrating all these aspects in one place by means of an integration process. Instead of using a number of separate digital platforms for different purposes, systems integration makes it possible to centralize control of your operations while achieving a better coordination and reducing human error.
An online presence, and specifically digital marketing campaigns, enable real estate companies to reach a wider and more targeted audience while increasing effectiveness in promoting their properties and services.
Having a digital ecosystem makes it possible to closely monitor user behavior at every stage of their journey and at all touchpoints. Such a detailed observation can provide in-depth understanding of your audience, facilitating your ability to tailor communication and offerings in a targeted manner, and thus responding to the specific needs and tastes of each type of user.
In conclusion, the real estate industry is undergoing a period of profound transformation. The current global landscape poses significant challenges for industry operators. However, it is essential to recognize that these challenges bring with them equally significant opportunities.
To fully embrace the opportunities afforded by digital transformation, real estate companies need to devise a clear digital strategy and invest in appropriate technology infrastructures.
Mercato immobiliare svizzero: i dati attuali, Credite Suisse, 2023
La domanda immobiliare svizzera, Realmatch360, 2023
Six new imperatives for real estate players, McKinsey, 2023
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