Summary: Real Estate is going digital and implementing new technologies. It includes everything from NFT’s to Artificial Intelligence, Digital Twins, 3D Printing, Internet of Things and Extended Reality leading to the ultimate digitalisation: Real estate in the Metaverse.
There is nothing as conservative as a real estate investment.
But real estate is also challenging. Even though it’s the world’s biggest asset class (it’s more than the combined size of bonds and stocks!), it’s an inefficient asset class with less digitisation and adoption of new technologies. You cannot trade real estate the same way as bonds and stocks, the paperwork is massive, it’s an illiquid asset.
Well, that’s about to change.
The Real Estate (R)evolution
New exponential technologies are defined on how they double their capability or performance over a short period of time. These technologies are disrupting real estate like never before, including the way we buy, rent, sell, design, construct and manage residential and commercial property.
The new tech includes everything from NFT’s to Artificial Intelligence, Digital Twins, 3D Printing, Internet of Things and Extended Reality leading to the ultimate digitalisation:
Real estate in the Metaverse.
Proof of Concept
The transition is happening right now, just look at the following examples:
St. Regis Aspen Resort, a 179-room luxury hotel in Colorado, is now combining a REIT structure with blockchain technology, providing fractional ownership to multiple investors via digital tokens. Each token operates like a smart contract, it represents the underlying fractional ownership of the real estate and is easy to transfer and manage.
Mexico is now home to the worlds first 3-D printed neighborhood. Each of the 500-square-foot homes took about 24 hours of print time.
Dubai has set an ambitious goal of 3-D printing 25% of all new buildings by 2030.
Dubai’s Burj Khalifa incorporates several smart building technologies, including real-time data to an analytics platform that analyzes the data for potential maintenance issues. Thanks to this system, facility managers have been able to improve building maintenance while reducing total maintenance hours by 40%.
Uber Elevate has entered a partnership with NASA to launch a flying taxi service by 2024. Real estate developers are now designing smart real estate to facilitate urban “skyports” to load and unload passengers and for vehicles to take off and land.
Microsoft’s headquarters in Amsterdam adapted a data-driven approach when renovating their buildings. They used sensors to monitor how desks, meeting rooms and communal areas were used. With this data, Microsoft was able to reduce the amount of space it needed, freeing up one-and-a-half floors.
Let’s take a quick dive into the underlying technologies.
NFTs and Real Estate
The first real estate NFT representing an apartment was sold in 2017 and has since been re-sold digitally through a blockchain-based real estate platform.
NFTs can be coded as smart digital contracts and/or digital keys. They can be self-executing, fully automated, and they can be coded to be upgradeable with unlimited functions and opportunities.
Smart contracts: NFTs coded as smart digital contracts minimise paperwork. They provide increased transparency and an irrefutable history of ownership, they can secure high-speed transfers between the seller and the buyer, and they can facilitate a fractional ownership between multiple buyers, administer voting rights etc.
Digital keys: NFTs can act as digital keys providing a digital gateway to any smart building and community. Such solutions improve the user experience and makes everything smarter, including touchless entry with facial recognition, digital payments, and automated sanitisation measures. Business intelligence (big data) derived from such smart applications is one of the biggest trends in property management.
AI and Real Estate
The potential use of Artificial Intelligence (AI) within real estate is endless.
Machine Learning is a subset of AI that streamlines pattern recognition and generates actionable insights with predictive analytics. With the use of machine learning within real estate we can make decisions, carry out tasks, and even predict future outcomes based on what we learn from harvested data. It can be everything from an investor analyzing the performance of a property’s past performance, tenant patterns, rent growth to predictive maintenance.
Deep learning is a subset of machine learning and makes it possible for a machine to become more smarter the more data it gets. Even the smallest data can be part of a deep pattern and provide valuable insights, and small data harvesting is on the rise with the Internet of Things (IoT).
IoT and Real Estate
Our physical spaces are getting smarter.
Internet of Things (IoT) connects everything in a digital symbiosis, including smart thermostats, smart refrigerators, smart desks, and even smart toilets. Such products operate with real-time data, and this data turns any object into a valuable AI source of information.
Examples can be found within energy and property resource optimization (like Dubai’s Burj Khalifa and Microsoft’s headquarters in Amsterdam), but examples can also be found within ordinary but smart homes.
Amazon just bought the Roomba vacuum maker iRobot, but why?
Pundits speculates that the acquisition is a strategic move for Amazon to strengthen its position in the smart home market. The vacuums are now equipped with cameras, and they can operate by voice command, exactly like Amazons smart speaker Echo and the intelligent assistant Alexa.
“Don’t worry about your smartphone and TV spying on you. Your vacuum has been gathering dirt on you for years”.
With products like these it’s easy for Amazon to map out how we live. Amazon can now harvest data from our floor plans and the contents of the spaces in which the vacuum, the speaker and the assistant operates. This is valuable data for Amazon, who provides AI-as-a-Service via AWS, it’s strongest revenue driver.
So, who is interested in such kind of data?
Well, any data can be analyzed together with other small data derived from smart home applications, and in this way even the smallest data can become valuable big data to be sold on-demand. In combination with the Internet of Things (IoT), this is big business.
In the first quarter of 2022, revenues of Amazon Web Services (AWS) grew 37% compared to the preceding quarter.
Blockchain and Real Estate
Data management within real estate is crucial and distributed ledgers like blockchain may play an increasing role in IoT security.
Blockchain can verify data, increase transparency, protect data, increase privacy, remove paperwork with smart contracts and excludes numerous third parties. The rapid development of blockchain solutions has already had a significant impact on how independent parties carry out financial transactions. The solutions allow parties to send, receive and record any value or information in a tamper- and revision- proof way.
Tokenization and fractional ownership of real estate (like the St. Regis Aspen Resort) is the next big thing.
With fractional ownership, it’s possible to bring the sharing economy to real estate investing. It allows investors with limited budgets to enter prime real estate with a fractional ownership of smaller units, that makes it possible for them to diversify their portfolios. It’s not as expensive as investing in a Real Estate Investment Trust (REIT), it’s more transparent, and it’s more accessible.
3D Printing and Real Estate
3D printing is transforming the speed and cost at which houses are being developed and sold.
As mentioned previously, Mexico is now home to the worlds first 3D printed neighbourhood. Each of the 500-square-foot homes took about 24 hours of print time.
In Germany, a three-story apartment building was 3D printed on-site, meaning no shipping of individual pieces to be assembled. The building was released in August 2021.
In Virginia, 3D printed homes for low-income families were released in December 2021. The two-bedroom homes were printed in only 12 hours.
Dubai has set an ambitious goal of 3D printing 25% of all new buildings by 2030.
But why print 3D when you can 4D print a house?
4D printing is still in the experimental stage, but the idea is, that any printed property can be programmed to change its shape when prompted by certain conditions like water, heat, snow etc. With 4D printing we can create truly smart buildings, that can be programmed to transform themselves if certain conditions are met.
Digital Twins and Real Estate
When you can 3D print a physical home, you can also create a virtual digital twin.
Digital twins present a wealth of digital opportunities for the real estate sector.
A digital twin can be a real-time virtual representation of any real estate property. It connects the real and digital world, it can feed information to a virtual environment, it can process information from IoT devices, and it can be a bridge to represent real estate in the Metaverse.
With digital twins we can:
capture and analyse data to make real estate operations more efficient,
create a sandbox environment to optimize a buildings performance,
improve user experiences,
enable better visibility how tenants use a building, and
identify (potential) maintenance issues
In combination with Extended Reality, a digital twin can be the perfect gateway to launch real estate in the Metaverse.
Extended Reality (XR) and Real Estate
The border between the virtual and real world continues to break down, and the same is happening with “virtual real estate” and “traditional real estate”.
The driving force is the following technologies:
Virtual Reality (VR)
Augmented Reality (AR)
Mixed Reality (MR)
that all leads to the ultimate virtual experience: Extended Reality (XR) and the Metaverse.
Virtual Reality (VR) is a computer-generated environment with scenes and objects that appear to be real. It makes the users feel they are immersed in their surroundings via realistic sounds and images engaging all five senses. This technology is known from console computer games like PlayStation where the user is wearing a VR headset to enter a virtual environment.
Augmented Reality (AR) is adding virtual stuff to the real world, so it’s not a new reality but a digital layer on top of our existing reality. AR is known from games like Pokémon Go, where the players control an avatar chasing digital creatures in “the real world”. It’s also known from Instagram and Snapchat filters, where you can add digital objects to any picture from the physical world. Examples of AR headsets are the Microsoft Hololens, Google Glass, and Meta 2 headset.
Mixed Reality (MR) is a mix of VR and AR where reality and imagination co-exists and is intermingled. Here you can grab your real-world physical key and open a virtual door in your virtual real estate.
Extended Reality (XR) is an umbrella term referring to all VR, AR and MR interactions generated by computer technology and wearables.
In real estate a perfect use case is a remote “walk through” a new building.
In combination with digital twin data and artificial intelligence, a 360-degree XR tour can boost the user experience of any property with predictive analytics and virtual recommendations. Property managers can show the buyer around without being on location. Maybe the buyer wants to see a virtual presentation of potential design opportunities?
Architects and interior designers can leverage XR to bring their designs to life, the advisers can do their due diligence virtually, and everything can be settled instantly with a NFT governing the real estate in both the real world and the “digital twin” in the Metaverse.
Tear Down This Wall
Not even the most conservative market, the real estate sector, is unaffected from new developments.
About a hundred years ago, Joseph Schumpeter called the phenomena on changing business cycles and the rise and fall of economic players for creative destruction. Schumpeters point was, that entrepreneurial innovation and new developments are aimed to destruct the weakest link in the market. “Creative destruction” is necessary to build up new economic players to make the free market stronger and less fragile.
The same is true for the real estate market.
It’s time to tear down existing structures and built new foundations.