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From digitisation to innovation, as well as shifts in buying, selling, developing and managing property, real estate is evolving. We look at some of the key concepts, changes and innovations shaking up the global and South African property sectors.
In their introduction to the 2021 World Economic Forum (WEF) insights report, A Framework for the Future of Real Estate, Coen van Oostrom and Christian Ulbrich, Co-Chairs of the World Economic Forum Real Estate Industry, wrote, “For years now, many of us in the global real estate field have recognised the pressing need for change. By the time our group – the real estate industry CEOs, deputies and other collaborators of the World Economic Forum – set out to prepare a comprehensive report on the field’s prospective future, we believed we understood the challenges ahead. A rapidly deteriorating environment, a frayed social fabric, rising inequality, problems of wellness and accessibility: all these required a concerted response from private-sector builders, designers and urban entrepreneurs. A year ago, we launched this endeavour with high hopes, beginning with a kick-off at the World Economic Forum Annual Meeting 2020 in Davos-Klosters and a rousing speech from Al Gore. The time, it seemed, was ripe for action. And then came the pandemic.”
The effects of COVID-19 and the deepening of related crises inspired the WEF’s global real estate CEO community to rethink real estate. The report sets out a new framework for the real estate sector that centres on four pillars: cities and buildings that are liveable, sustainable, affordable and resilient.
The need for transformation
The WEF report points out that real estate is a major investment asset class that accounts for 10% of global GDP, and the past decade has seen significant growth in the sector (+3% compound annual growth rate) and rising investment volumes (+14% compound annual growth rates). This growth is, however, tempered with several significant challenges: fragmented regulatory frameworks, high carbon emissions, a severe dearth of affordable housing, slow technology adoption, a lack of transparency and inadequate resilience.
“To thrive, the real estate industry needs to transform,” the report notes. “Buildings and cities are vital to societies and economies. They are the vehicles through which people live their lives: they bring people together, provide respite, shelter and inclusion, drive businesses, support or damage health, and nurture creativity. The imperative for better buildings is clear and the industry is mobilising in response.”
Source: BCG, based on discussions with World Economic Forum Partners
Digitalisation and innovation
In South Africa, there are several exciting developments on the digitalisation and innovation front. Sean Godoy, Co-Founder of Proptech Africa and of PropDD, an online platform focused on simplifying the property due diligence process, says that while the US leads the way in terms of proptech, there are many exciting developments in the South African sector too. These include:
- Evolution of listing platforms: harnessing big data and new tech-driven services in the property transaction value chain. Almost all of the time the agent-centric model remains crucial to these innovations.
- Digital estate agencies: agencies that aim to take some elements of estate agent services online. However, again, agents often play an integral role in a number of areas.
- Customer resource management (CRM): evolutions of estate agency CRM systems via integration and adopting new tech-enabled tools, for example communication channels, artificial intelligence, GIS mapping and much more.
Innovation in due diligence
PropDD came about when Godoy and cofounder Justin Leve met and tutored a successful online property course together, getting to know one another and seeing a gap in the market. “Justin’s property career originated in the commercial sector, where his client-facing roles have been focused primarily on investment property deal facilitation and due diligence advisory,” says Godoy. “My experience as a property market analyst evolved into providing a range of advisory and training solutions to the property industry. I am also a proptech enthusiast and commentator, having co-founded the SA Proptech and Proptech Africa Associations. With exciting innovation in the form of proptech rapidly gaining traction throughout the South African property market, we saw the opportunity to collaborate on an online solution that facilitates an often misunderstood and underutilised area of residential property – a thorough pre-transaction due diligence process for buyers and sellers.”
Godoy says they assembled a passionate and highly skilled team to bring the PropDD due diligence toolkit to fruition during a 12-month period of ideation, product development and problem-solving. “This was a fascinating learning curve for us too, as neither of us had prior experience in the world of tech application development, or the additional and crucial avenues of brand, web and user experience (UX) design.”
Milestones achieved in the first few months in the market include the first major product update pre-formal launch, first industry partnership (with the Enterprise Property Development Fund, EPDF), successful market outreach programme and successful stakeholder feedback campaign.
“Our product adds value to either side of a property transaction – buyers, sellers and estate agents,” says Godoy. “Purchasing a property is one of the most critical financial decisions a buyer will ever make in their lifetime. PropDD provides a solution that makes it possible for a buyer to thoroughly investigate and understand the important legal, technical and financial aspects of the property they are looking to purchase, so as to better inform that decision.”
The PropDD toolkit facilitates this process, allowing a user to upload relevant due diligence documents and record relevant information in their own secure toolkit vault. They can then generate a professional due diligence report which they can share with selected external parties, along with read-only access to their vault.
“For example, a buyer may wish to share their toolkit and its components with the financial institution where they apply for finance, or their conveyancer. Lastly, as an added resource, they are able to build a simplified cash flow based on their purchase strategy using our easy-to-use calculators,” says Godoy.
The toolkit was also developed for use by sellers, more specifically estate agents, enabling them to fast-track the due diligence process for prospective buyers by providing them with relevant property information upfront that is often not easily accessible by buyers.
“This is effectively where buyers are empowered to make quicker and more informed decisions. The sharing functionality of the toolkit mentioned makes this possible, establishing a greater level of trust with buyers,” says Godoy. “Our ultimate goal is to improve transparency and aid decision-making around residential property transactions. We are not aware of any product like this in the South African market, and our international competitor research yielded a limited number of similar products.”
Godoy says that they see effective property due diligence becoming an industry standard. “Over the next five years, our aim is for PropDD to become the primary facilitator in driving this process.”
Ilse French, Founder of @ExponentialBlue, a business partner to the real estate industry focused on unlocking growth opportunities by solving complex problems, says people don’t buy into buildings and land, they buy into the promise it brings.
“At its core, without the people, real estate is empty space; it is bricks and mortar,” she says. “We don’t buy a ‘house’ or an ‘office’. We buy a family home to raise our kids, a workplace to build our business and studios in which to create.”
With the way we use spaces having changed drastically over the past two years, she says we’re now in need of real estate that supports community, creativity and collaboration.
“Rebuilding the lost communities and creating flexibility in work and home living is becoming essential. This is where human-centred design is required. Designing and creating spaces based on the people within them. Gen Z and Millennials are prioritising their health, wellbeing and work-life balance, which isn’t surprising as we now spend on average 90 000 hours at work over our lifetime. Investments in real estate also now consider the multiple roles and flexibility both personal and corporate,” she says.
“Hybrid work cultures favour both those who thrive working remotely and employees that prefer an in-office environment. As companies grow, so does the number of preferences and work styles of its growing payroll recipients. Only 7% of people reported working best in a bustling cubicle-style office environment (according to LinkedIn in 2022), so we cannot provide this as the only option for working.”
She says a human-centred hybrid workspace might include café-style seating and co-working spaces, as well as focus pods as quiet, distraction-free zones.
“Open plan arrangements with floor-to-ceiling windows and sofas, shared seating areas and booths are becoming commonplace too,” she says. “Acoustic amendments are ever more popular to overcome the echoed silence of traditional offices and many employers play music or have the radio on for background noise – good news for over half of office workers, who say they prefer music for focusing.”
Out-of-office initiatives, such as team building, happy hours and outbound excursions are also being implemented widely.
On the residential side, French says many are still working from home 40% of the time with a three day in-office requirement. “We’re looking for homes that have workspaces that don’t also double as a dining table or vanity desk,” she says. “From beauticians converting garages into salons to photographers creating studio space, real estate in the residential sector needs to consider design solutions that merge work and leisure.”