Examining technology as a real estate disruptor
In our final article of a three-part proptech series, we examine technological advancements driving change throughout the sector.
Having considered how changes in consumer behaviors and efficiency enablers have altered the real estate market, we turn to how technological advances have disrupted the market.
Technological advancements often take decades to mature into platforms that scale across industries. When these breakthroughs advance, they tend to scale rapidly and create completely new industries in unforeseen ways. Nuveen is monitoring several breakthrough technologies to ensure we are abreast of potential advancements that stand to upend the ways in which we interact with the built environment today.
Figure 1 maps standout proptech themes that fall into three distinct drivers – consumer behaviors, efficiency enablers and technological advancements. At Nuveen, our sector-specialized investment teams monitor and incorporate these themes into their strategic plans to determine how soon we might anticipate their impact on real estate.
In the following, we explore each theme outlined in figure 1 further.
In 2022, electric vehicle (EV) sales topped 5% in the U.S. for the first time and are expected to land above 13% globally1. Despite the accelerated adoption, range anxiety and limited availability of EV charging infrastructure remain a concern for many (figure 2).
EVs offer consumers the ability to fuel their vehicles in increments at home, workplaces and shopping centers. Real estate firms are now beginning to deploy EV charging solutions across their portfolios to ensure tenants have the necessary infrastructure to carry out their activities and potentially capture outsized value at their assets.
5G is designed to be faster and more efficient than previous cellular network technologies (3G, 4G and LTE), transmit more data over longer distances and support more devices at once due to the use of a wider range of frequencies. While 5G is early in its adoption cycle (only ~25% of the global population is projected to be able to access 5G by 20302), at scale, the technology stands to impact real estate in several ways:
- Increased reliability in electric vehicle supply equipment (EVSE): A recent University of California Berkeley study shows EVSE does not properly function approximately 28% of the time, with nearly 23% of outage attributed to unresponsive screens, payment system failures, charge initiation failures, network failures or broken connectors3. 5G’s ability to support a larger number of internet connected devices stands to help address this issue.
- Smart cities: One commonly discussed application of 5G networks is the deployment of smart traffic systems that leverage a suite of connected sensors and vehicles to improve the flow of traffic, reduce congestion, and improve safety. Commercial real estate has the potential to act as an underlying connection point that supports the 5G infrastructure needed for deployment.
Blockchain and tokenization
Blockchain remains under scrutiny due to continued speculation in cryptocurrency and bad actors in the space. Despite recent challenges, technologists continue to innovate on the blockchain. When analyzing potential long-term applications for blockchain technology and tokenization in real estate, it is important to differentiate them from cryptocurrencies.
Blockchain technology is a decentralized, digital ledger that records transactions on multiple computers so that the record cannot be altered retroactively. Tokenization is the process of converting the ownership rights of an asset, like real estate, into a digital token that can be traded on a blockchain. In contrast, cryptocurrency is a digital currency that operates independently of central banks, using peer-to-peer networks to facilitate the creation and transfer of the currency.
Tokenization has the potential to revolutionize the way that properties are bought and sold. Entrepreneurs and real estate professionals alike have long sought the ability to fractionalize the ownership of properties into smaller units that can be purchased by many investors. Crowdfunding platforms are the first version of this concept, but as the blockchain technology matures, there is potential to democratize access to real estate for investors with even smaller sums of capital while also creating liquidity in ways we have not seen historically.
Given the nascency of the space and regulatory uncertainty, blockchain technology should be thoroughly examined before advancing a project on the blockchain.
Augmented reality (AR) allows users to see and interact with digital content and information in the context of the physical world. It is often achieved using a device that displays a live video feed of the real world with digital content overlaid on top.
Several entrepreneurs have been applying this technology to various real estate applications as of late, and a variety of solutions show early promise, including:
- Virtual staging: Prospective tenants view a space with virtual furniture in place and alter the positioning/type of furniture displayed
- Digital maintenance tags: Technicians virtually tag on-site equipment with maintenance logs for record-keeping
- Virtual tools: Users measure the distance from one end of the room to another with the convenience of their phone cameras
Widespread adoption of fully autonomous vehicles (AVs) is likely more than a decade away. However, as companies like Waymo and Tesla continue to make advances in the space, real estate owners and developers are taking note.
Full autonomy presents a potential seismic shift in the way we use cars to transport goods and people. AVs could present an opportunity for people to lease vehicles for commercial use while they are at work, enabling the owner to earn additional income, and it is possible that individuals may not need to own vehicles in the future at all due to autonomy.
In this reality, commercial real estate could operate differently than it does today. Parking lots may be upgraded to higher use cases if cars are not sitting idle all day long, and industrial real estate may see increased demand should AVs make the delivery of goods more prevalent than they already are today.
The metaverse, much like the blockchain, has been the subject of speculation over the past several years. The technology remains promising but is likely to need several years of iteration before applications are ready for the mainstage. Once matured, the concept has the potential to present consumers with a virtual shared space at the center of the physical world and the internet.
There are several metaverse applications related to real estate that have potential to significantly impact the industry, most notable the possibility to buy and sell real estate in virtual worlds.
While these technological advancements are in their infancy, each has the potential to significantly alter how we interact with real estate in the future. The digital revolution in real estate is well under way, and owners, investors, and consumers alike are taking note as they look toward the coming decade.