Under the “Black Swan” Influence, Prop Tech pattern Changes Silently

The pandemic accelerated the integration of real estate and technology, ushering in a new real estate paradigm

March 26, 2020

Technology has been instrumental in China’s war against the pandemic. Its important role in preventing the spread of the virus has garnered strong support from the government. On February 4th, the Ministry of Industry and Information Technology issued a proposal advocating for artificial intelligence. On March 2nd, President Xi Jinping emphasized the importance of technology in defeating the pandemic. Unexpectedly, the “Black Swan” pandemic accelerated the change of Prop Tech.

The pandemic accelerated the integration of real estate and technology, ushering in a new real estate paradigm.

With the onset of the pandemic, real estate companies that already incorporated the latest technology in their operations have the advantage in minimizing viral transmission and lowering risks. The pandemic also solidified the implementation and importance of technology in real estate. The entire industry is now gearing up to innovate and update its entire operation and business model.

JLL’s recent investigation indicates that the number of real estate projects that utilized technology products or solutions has increased significantly in the last two years. Concurrently, real estate companies are now investing more in their technology budgets. (See the figure below)

Let’s take the application of robots in commercial real estate as an example. With the dawn of next-generation artificial intelligence, the robotics industry is entering its golden age. In particular, service robots take up 25% of the entire robotics market in China. Service robots have extensive applications in education, medical realm, public service, and many other fields. That is why the growth in service robots has been impressive when compared to industrial or special service robots. In recent years, the service robot industry grew at an average annual rate of 30% (see the figure below). Since the outbreak of the pandemic, due to the rise of "non-contact service" and its advertising on various media, the market demand for service robots has surged. Service robot companies are getting drastically increased orders, with a large number coming from the real estate industry.

The business buildings that already procure and use service robots before the pandemic naturally became the focal point for testing these technological benefits. Mobile robot companies added updates in light of the needs of property management companies. These new functions include mask inspection, warning, and speech capabilities. The prevention of viral transmission in these buildings represents great added value in these mobile robots.

The pandemic undoubtedly drove commercial real estate and technology to intertwine closer together. On the one hand, real estate companies are incentivized to be more open to technology. On the other hand, tech companies now look for new opportunities and innovations to meet the needs of the rapidly changing market.

Some “new models” empowered by technologies also developed rapidly during this epidemic, and the remote work is the first to come to mind. After Chinese New Year, company needs for remote work increased drastically. Tech companies promoted free trials for remote work to try to reshape consumer behavior. Remote work grew in prominence during the pandemic since it was an obvious way to cut costs, maintain productivity and flexibility, as well as prevent viral transmission. Many companies turned to remote work as a solution, including media tech companies.

Does the global shift from centralized office work to remote work during the pandemic spell doom for the office building market? Not really. Remote work is an inevitable byproduct of corporate digitalization process. Earlier in 2018, JLL already indicated in the report “Future of Work” that no matter what the future brings, corporate workplaces need to remain flexible and be able to adapt at all times. In the last two years, many Chinese and international companies attempted this concept in their offices.

The future work model that companies choose will be even more versatile (see the figure below). We suggest that companies from different industries should adapt suitable work and communication models for their respective fields. Companies should prepare appropriate hardware and software, and align management and workflow with technology. As for office building landlords, they should proactively adapt their leasing strategy and provide flexible space options, since companies are increasingly looking for flexibility and versatility in their solutions for office needs.

The pandemic is also accelerating the digitalization of real estate company sales operations. Many shopping malls are using technology to provide integrated online and offline services. The latest market research indicates that in the next few months, shopping malls will increase their needs for the membership marketing system, especially the mini programs (see the figure below).

For retailer real estate developers, they missed the golden shopping periods of Chinese New Year and Valentine’s Day. However, when the pandemic ends, consumption may bounce back with a vengeance. Consumers are looking to more channels for consumption experience and needs, and this will push companies to digitalize their sales and operations sooner.

Interestingly, the new digital business model trend is now crossing industry boundaries. During the pandemic, residential and commercial real estate products were advertised on online platforms of several real estate companies. They used live broadcast, virtual reality, and other technologies to promote sales. Every time when the real estate business model changed, real estate value has risen. However, changing the existing business model requires a system overhaul, imposing higher requirements for customer relations, channel management, business strategy and operations.

After the pandemic, compliance and lowering risk may force technology in real estate to go to the next level.

Technology was initially used for cutting costs. However, after going through the pandemic, compliance and risk aversion will become primary reason for real estate companies in China to embrace technology.

It is anticipated that building management and delivery standards related to wellness and safety will be improved. Developers and landlords will elevate the quality of amenities and property management, thus increasing directly or indirectly the needs of real estate companies to purchase and deploy technology products.

During the pandemic, local governments used the cidades inteligentes network platform to connect with commercial buildings and gather updates both on return-to-work office trends and wellness data. This was instrumental to governments’ work in preventing viral transmission. As cidades inteligentes construction continues, smart building trends and technology incorporation will only increase to achieve a seamless docking with these service management platforms.

And what’s more, we also see how technology helps us adapt to and lower risks in sudden unforeseen events. This is evident in building technology standards, which have correlated directly with the building’s efficiency in implementing epidemic control measures. For example, buildings with VAV systems were able to change indoor air circulation to fresh air circulation during the pandemic. Buildings with guest management systems can maintain safety by efficiently inspecting the people entering and leaving the building.

Looking into the future, we believe more and more new technologies will mature and find suitable applications in the real estate industry. To date, we have seen cloud computing, Internet of things, artificial intelligence, and other technologies finding their swift applications in real estate operations and management. We anticipate that new technologies like 5G, drones and blockchain will also make a future impact in the real estate industry.


Pandemic Topic

The Covid Influence on China’s Real Estate

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