It is a long held perception that, compared with other industries, the real estate sector is slow to adapt and innovate. But that view overlooks some nuances.
For most of its existence, the real estate industry has been perceived as being slow moving in terms of innovation. Real estate is a long-term, capital-intensive asset class, so it follows that some companies have a built-in bias toward conservatism when it comes to strategy. But that bias may no longer serve real estate companies well.
Technological and social disruption is transforming not just how we live, work, and play but also how we “consume” real estate, requiring industry leaders to respond with bold and innovative solutions.
The takeaways from PwC’s 2018 CEO survey suggest strongly, however, that the CEOs of most real estate businesses have a different view of these challenges than CEOs in other sectors. It’s time they asked whether they need to accelerate innovation to catch up.
Craig Hughes
Global Real Estate Leader, PwC UK
Q: How concerned are you about the following business threats to your organisation’s growth prospects?
Chart shows percentage of respondents who stated ‘Extremely concerned’
Real Estate CEOs are less concerned than global counterparts about business threats
An inflection point
The survey findings reveal that real estate CEOs are much less concerned than CEOs in other industries by the threats posed by rapid technological advances, radically changing consumer behavior, cyber threats, and new market entrants. Only 17% of real estate CEOs, for example, report being extremely concerned about cyber threats endangering their growth prospects, compared with 40% of all CEOs surveyed (see exhibit 1). Likewise, 10% of real estate CEOs view the speed of technological change as a threat they are extremely concerned about, compared with 38% of all CEOs. And only 7% of real estate CEOs consider both changing consumer behavior and new entrants to be threats to their growth, compared with 26% and 20%, respectively, of all CEOs.
From assets to outcomes
Complacency is a dangerous mindset. Technology and a scarcity of opportunities are driving the development of new business models. As huge amounts of capital continue to flow into alternative assets and real estate in particular, competition for returns will grow increasingly competitive, and those companies that are able to exploit technology and innovative business models will have an edge. As these processes play out, real estate is also evolving toward a business that is less about assets and more about outcomes – ‘space as a service’, if you will.
Q: To what extent is your organisation using the following strategies and tactics to attract or develop digital talent?
Chart shows percentage of respondents who stated ‘To a large extent’
Real Estate CEOs are implementing new flexible ways of working to attract digital talent
Need for digital skills
Technology alone, however, will not enable real estate companies to adapt to their new environment. The industry needs digital talent to understand the impact that technological advances will have on the business and bring to the table the customer-first focus that characterises successful and influential technology and service businesses. At present, only 20% of real estate CEOs said they clearly understood how robotics and AI can improve customer experience, compared with 47% of the global CEO sample.
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