01 A constructive view on real estate Real Estate Predictions 201 902 03 Industrial property ugly duckling no more 10 - 11 12 - 15 3 7 28 - 29 30 - 33 Fintechs Complementing the real estate ecosystem Robotic and cognitive automation part 1 Robotic and cognitive automation part 2 Transing real estate operations The future of commercial real estate Blockchain Contact \ Introduction Have a glimpse into the future of real estate 04 - 05 Data driven business models 06 - 07 Digital twins in real estate 08 - 09 Welcome to the 2019 edition of Deloitte’s predictions for the real estate industry. Curious to see which changes lie ahead Discover the Real Estate trends for 2019 that will impact your business. Read about circularity , blockchain, cybersecurity, and more. 02 03 Have a glimpse into the future of real estate 04–05 Data driven business models 06–07 Digital twins in real estate 08–09 Industrial property ugly duckling no more 10–11 Circularity in real estate 12–13 Cybersecurity issue 1 Securing the enterprise 14–1 7 Cybersecurity issue 2 Cyber risk in the building lifecycle 18-1 9 Blockchain in real estate matures 20–2 1 Building flexibility into real estate management 22–2 3 The Future of Work is changing 24–25 Proptechs Propelling digital real estate 26–29 The future of urbanization and transit-oriented development 30–33 Contact Authors 34 3504 05 04 05 Have a glimpse into the future of real estate The Real Estate and Construction market has been changing over the past few years. With all these changes going on, Deloitte Real Estate is releasing the Real Estate Predictions 2019. We hope the predictions enhance your understanding of the opportunities within the real estate industry. Have an interesting read 1 Wellness, work and real estate A rise in the recognition and understanding of the relationship between the wellbeing of the workforce and productivity is leading businesses and developers to explore ways in which the physical building can promote wellness. Factors that can improve wellness range from natural light, air quality, noise, and offi ce design. The introduction of new standards should encourage more businesses to participate. 2 The rise of co-working space and the need for smart buildings Co-working spaces continue to gain popularity and the Internet of Things is critical to competitive advantage in this field. Therefore cyber risk and privacy protection must be on top of mind of the real estate investor. 3 Real estate decision makers of the future Corporate organization design is evolving with the faster pace of technology, a greater level of workforce agility, and the changing nature of job roles, all of which are impacting the way in which we interact with the physical workplace. The need to in�uence property decisions comes from various parts of a business and ultimately the decision makers are changing to include CTO, CIO, CEO and HR. 4 Fintechs Complementing the real estate ecosystem Fintechs have made rapid inroads into the real estate industry. The general notion is often that startups are a threat to incumbent real estate companies as they are o�ering innovative solutions and enhanced user experiences at a relatively lower cost and faster pace. However, traditional real estate companies can leverage fi ntechs to drive operational effici ency, create powerful tenant experiences or even diversify existing business and generate new revenue sources. Real estate companies can consider various approaches to tap into the fi ntech space. 5 Robotic and cognitive automation part 1 What is robotic and cognitive automation, and how is it transing the real estate industry In the fi rst of two articles we will share our thoughts of this technology. 6 Robotic and cognitive automation part 2 Part 2 of our look at robotic and cognitive automation. 7 Transing real estate operations Public sector real property organizations have an opportunity to fully embrace digital disruption, trans their property operations and portfolios, and bene�t from lessons learned in the private sector. Today’s traditional public sector property organizations typically serve multiple clients that span across many programs of which deliver a wide-range of bene�ts for the local population. 8 The future of commercial real estate Social, economic, ecological, political, and technological disruptions will change the way we work, live and shop. These developments will have a signi�cant impact on today’s established market players in the commercial real estate sector and their share of the value chain. Who will be successful and who will become obsolete in our future real estate world 9 Blockchain Blockchain technology has been adopted in the real estate industry over the past few years, however, the pace in which the adoption is taking place is rapidly increasing and traditional roles are being fragmented. What are the lessons learnt so far 05 04 1. Data driven business models As technology keeps developing and becomes more affordablefor both new and existing structuresand collaboration plats, sensors, and smart devices continue to advance, the amount of data produced by buildings is increasing exponentially. This data can give real estate market participants investors, asset managers, property managers, and tenants a competitive advantage and help them avoid disruption if they use it effectively to develop data-driven services and new business models focused on the specific needs of users, owners, or the property itself. But only a joint effort among all real estate stakeholders constructors, investors, owners, tenants, and service providers can optimize data to create insights that improve perance and profitability.2. Digital twins in real estate As technology becomes more pervasive and smart buildings and precincts are being developed, real estate companies will look to create digital versions of their physical assets. The potential benefits include the ability to run and manage buildings centrally, obtain real-time data as to how tenants are using the building and provide value-add services, per predictive maintenance based on data from sensors to reduce cost and downtime, and enhance the overall tenant experience. 3. Industrial property ugly duckling no more Not long ago, the industrial property market was considered the “ugly duckling” of the real estate industry. In the last couple of years, however, industrial warehouses and distribution centers, have emerged as the most desirable assets within commercial property, generating higher rental growth and returns than other main commercial sectors – all thanks to the rise of e-commerce.4. Circularity in real estate All around the world, governments, companies, and NGOs have committed to minimizing raw material usage in the real estate and construction industry. In the Netherlands, for example, it was recently agreed that by 2030 a 50 percent reduction of raw materials usage needed to be realized. Read about the barriers in creating a circular economy, and what opportunities pave the way towards it. 5.1 Cybersecurity issue 1 Securing the enterprise As extensive technology advancements reshape the traditional commercial real estate CRE business model, owners and operators must contend with new s of risk, including cyberattacks ination security, and data privacy. For example, the growing use of IoT technologies such as sensor-enabled building management systems could broaden the attack surface for CRE firms, increasing access to sensitive data that can cause financial and reputational damage to owners/operators and tenants. The question is, then, are CRE companies ready to handle cyber risks 5.2 Cybersecurity issue 2 Cyber risk in the building lifecycle With modern buildings depending more and more on technology and becoming more and more interconnected, numerous questions are arising about their resistance to cyber risk. Real estate companies need to understand their business risk profile and threat landscape.6. Blockchain in real estate matures We are now encountering a push toward a more practical blockchain approach. This approach is fueled by the significant work that still needs to be done in the fields of privacy, data ownership, exchange of data based on internationally agreed standards, and improvements in the quality of data for the adoption of blockchain technology in the real estate industry. 7. Building flexibility into real estate management The real estate business is currently experiencing a shift in demand away from the traditional business operating model to more flexible solutions. Technological advancements and digitization, the quest for sustainability, and changes in user lifestyles are all factors that are demanding a greater level of adaptability in real estate strategic management and value creation. 8. The Future of Work is changing The world of work is changing. Clients in every industry are now facing the challenges and opportunities presented by this disruption, with much thought going into how work will be completed and by whom in the years to come. The real estate industry is no different, with a significant impact on the physical workplace anticipated that occupiers, developers, and investors will need to carefully consider. Drawing on major disruptors identified by Deloitte – ranging from automation and replacement of jobs to diversity and generational change – we have identified four key trends we predict the industry will need to respond to in 2019 .9. Proptechs Propelling digital real estate Commercial real estate CRE companies haven’t yet figured out how to deal with the relatively recent emergence of real estate technology startups, known as “proptechs.” While most of the broader financial services field have made the shift to a partnership mentality, CREs continue to view proptechs as a disruptor rather than as a potential source of collaboration.10. The future of urbanization and transit- oriented development The next generation of urban mobility presents unique opportunities for cities around the globe. Autonomous vehicles, ride-sharing services, and wide-ranging technology adoption are set to change the transportation ecosystem and with it, the urban landscape. Tomorrow’s smart cities will operate with increasing levels of connectivity, creative collaboration, and networked communities along with intricate and substantially enhanced transportation ecosystems.06 07 In the day-to-day business of asset and property management, the increasing amount of data avail-able offers a range of opportu-nities. For example, big data can help automate due diligence as the technical records and current conditions of building components can now be generated real-time and reliably with such technolo-gies as building ination mod- eling BIM and blockchain playing a role. Predictive analytics is also be-coming the standard sooner than many might have expected. This includes activities such as using in-ation from the past to predict when technical components might need maintenance or repairs. Service providers that tackle these opportunities faster will become more efficient and provide better services. Business models based on success fees will be more com-mon for those digital servicers, which will increase their margins. This development can change the landscape of service providers and consequently lead to market elimination and/or consolidation in that sector. Predictive analytics for the tenan-cy-side of the building will proba-bly take more time to develop but offers additional potential and will be even more relevant in the light of co-working spaces. If investors and asset managers can assess the optimal usage of a rental space for tenants based on data collected e.g., utilization and services used, a perfect win-win-win situation can emerge for all three parties. Looking ahead, the emergence of artificial intelligence and machine learning can also have an impact. For example, these technologies can address some of today’s ques-tions in regards to cybersecurity and enable additional analytics and benefits which will be used in many aspects. To generate these digital benefits, real estate stakeholders will need to find different ways to collabo-rate. Instead of discussing who has to pay for technical enablement and what data belongs to whom, real estate players should recog- nize that digitization means inte-gration and networking. Success in big data will come with breaking up existing data silos. Decision making based on com-bined data from inside and out-side the building technical, ten-ancy, service, and market level provided by different stakeholders will create the competitive edge. In particular, a “digital twin” of the real estate asset that encompass-es all the benefits outlined above and more has to use a collabora-tive plat to ensure acceptance of the data, transparency, and mu-tual involvement. In short, tenants, investors, and servicers have to be strategic partners in the future. Given the huge business potential, new market entries from the tech-nology sector will most likely try to take their share of this real estate data market. Drawing on their own business models for the profitable use of data, those financially and well-equipped technology leaders can offer standardized global ser-vice strategies that could disrupt real estate investment managers and service providers. To avoid this competition, real estate stake-holders will need to move quickly and make themselves familiar with the potential of big data and how to convert it into smart datano matter if investor, asset manager, or property manager. Similarly, for a tenant, big data can help define future target real estate locations, required space, and needed technology. This not only enables tenants to compete in the war for talent but also generate the benefits from cost efficient future real estate assets. And just as with other real estate stakeholders, tenants must em- brace collaboration with landlords and servicers. Written by Hendrik Aholt Jrg von Ditfurth Volker Wrmann DE Data driven business models will change the real estate industry As technology keeps developing and be-comes more affordablefor both new and existing structuresand collaboration plat-s, sensors, and smart devices continue to advance, the amount of data produced by buildings is increasing exponentially. This data can give real estate market par-ticipants investors, asset managers, prop-erty managers, and tenants a competitive advantage and help them avoid disruption if they use it effectively to develop da- ta-driven services and new business models focused on the specific needs of users, own-ers, or the property itself. But only a joint effort among all real estate stakeholders constructors, investors, owners, tenants, and service providers can optimize data to create insights that improve perance and prof