Embracing the future

Real estate in the digital era

Digital Engineering - Arup
Digital Engineering - Arup
11 APR 2017
by

The Founder is an American movie first released in the United States at the end of 2016 and then distributed nationwide and abroad at the beginning of 2017. It portrays the rising fortune of an ambitious salesman, Mr Ray Kroc, who managed to create an economic empire well known under the name of McDonald’s.

The most interesting aspect of this biographical drama is the discovering of the real economic success behind this story: real estate. The McDonald brothers innovated the then concept of restaurant turning the standard drive-in into a self-service with no indoor seating. Customers were provided with a limited choice in the menu, but were served their meal within one minute thanks to an efficient production and assembly chain in the kitchen. However, when Mr Kroc opened his first twenty restaurant franchises, he was disappointed to find out that the McDonald’s method wasn’t as profitable as he had fought. As he was later suggested, the key issue wasn’t to just sell hamburgers, but to sell real estate. Mr Kroc set up a company that owned the land where McDonald’s restaurants were located and eventually he was able to make money by purchasing and leasing his properties.

This was back in the 1950s and 60s in the United States. Today, the advent of the sharing economy has changed the market of housing and real estate. AirBnB, as an example, doesn’t own any properties. It’s a peer-to-peer platform through which people rent their apartments. The same happens with Uber where people share their cars or WeWork that provide fully equipped workspaces for temporary use.

The impending changes taking place in our everyday life are holding great promises for the future, while posing some challenges on the way we will produce, consume and work in the years to come. As reported in The Future of Jobs released last year by the World Economic Forum, job growth is expected in several sectors while in others employment will drop further with skill instability as a common trend in every sector. The advent of new technologies is modifying the world we are living in and the property sector isn’t stranger to such a transformation.

According to Arup, the gap between companies embracing a digital strategy and those that don’t keep pace with the technology will widen further in the following years. In fact, the first ones will do disproportionately better than the latter. In a report recently released, the international firm specialized in engineering, design and planning, analyses the state-of-the-art of the property sector and its future evolution in the digital era. The property sector and the wealth that it generates is not disappearing, but moving to a new direction. Arup identified three stages to reimagine property.

The Run phase is the one that characterize many companies today. It occurs when firms use digital tools for specific projects and gain direct benefit from them.
The Grow phase is a step forward that goes beyond isolated digital solutions for defined problems to embrace entire asset lifecycle. From the initial strategies, through project planning, design and construction to operations and renewal.
The last one is the Transform phase that involves integrated digital masterplanning that pave the way for long term valuation and consequent performance improvements.

The rising of environmental regulation that require improved asset performances and the consequences of the sharing economy that is changing the role of ownership and usage are some of the triggering forces that Arup consider will fuel the digital change in the property market. Nowadays, the property sector is moving within the Run stage and only a few firms are crossing the Grow stage. The ability to apply digital tools and reach the third stage is the final goal that will eventually help companies saving time and money.