Imagine a time when the first car was invented. What do you think mattered most then? Was it the car itself or a law or regulation guiding its use? Of course most would suggest the car as car regulations did not exist and clearly came after. Now, backtrack again to a time when there was no car. Were there existing transport rules or regulations that stimulated the need for the car? Or was it was just an individual’s vision to move away from traditional horse carriages to a more efficient mode of transportation? Either way, it is without dispute that man creates and will continue to innovate to make his life easier and less complex.
A good perspective to understand the impact of innovation is technology. Over time, technology innovation and its adoption has increased, particularly in the commercial real estate market. Corporate real estate professionals, for the most part, have spent their careers focusing on real estate as an asset and not on technology evolving around real estate. However, they are quickly becoming aware of consumer technology and trends, allowing them to comprehend and recognise how technology can be used strategically to better automate the business functions of a real estate operation.
Around the world, investors are demanding more information and greater transparency in the performance of their investments across all asset classes, including their real estate portfolios. With these three trends taking place, the ability to quickly assemble, analyse, and share information has become a key to success in today’s real estate market. This means real estate investment managers must be able to accurately assess trends and analyse their portfolios to ensure they make effective decisions that maximise investment returns and minimise risk. At the same time facing the pressure of diminishing profits in a contracting real estate market, companies are searching for ways to do more with less.
The good news is that technology again comes to the rescue. Firms have realised that for businesses to remain competitive, investment managers must implement a comprehensive business intelligence strategy that instils agile decision-making capabilities and removes costly manual processes. Implementing a business intelligence platform today is just as imperative to commercial real estate organisations as property management and accounting systems were a decade ago.
Business intelligence is all about enabling decision makers throughout the organisation to access all the information they need, when they need it, and how they need it in order to make better decisions. With a business intelligence solution in place, real estate investment managers are able to analyse information in a variety of ways that can lead to the improved performance of their portfolios.
Another great example of innovation in real estate is Airbnb. It has developed a business module that has become a phenomenon in the real estate sharing economy. It provides a platform for travellers to benefit from an authentic local experience by staying in a private home instead of a hotel. They can feel what it is like to live in a city, rather than just feeling what it is like to visit. Whether listing a rare historical property in the middle of the woods or an extra bunk bed, anyone can host on Airbnb. Some have even bought homes just to list them on Airbnb, creating an increasing number of Airbnb rental properties. The international platform makes it easy for people to post their listing and profile, welcome guests from all over the world, and then get feedback from reviews. The review system is not only helpful to hosts but also to travellers because reviews provide comfort when selecting a listing.
Today, companies are revolutionising the commercial real estate industry through technology that allows clients or corporates to manage their workflows, space optimisation and expansion strategies. Because these assets (properties) come at a cost to acquire and maintain, the value of shortening the time from vacancy to occupancy through improved data and information flow between owners and clients makes an investment in technology a no-brainer. At some point, companies may even be able to provide market comparisons by anonymising firm-level data and aggregating it into industry-level benchmarks by zip code to provide accurate predictions for real estate optimisation strategies.
In addition, a new innovative tool used by law enforcement, delivery companies, photographers, real estate agents, journalists, utility companies and a myriad of other industries has entered the airspace– the drone. Drones, once viewed as a product of science fiction are now mass-manufactured, commercially-used machines that challenge existing rules regarding airspace and property rights. As it is well known that location is the prime factor in selecting real estate, drone technology provides an avenue for agents to take aerial photographs of the property as well as nearby amenities. The main component for how much impact drone imaging would have on a property is more about location than a price tag. For instance, any property located along the water would definitely benefit from aerial photos because a ground view doesn’t always capture the entire essence of the natural environment. Also, agents could show interested buyers where a home is located in proximity to nearby facilities such as schools, hospitals and playgrounds. Commercial properties can also benefit from this technology by using indoor friendly drones to map out floor areas and provide online content for interactive viewing.
As drones have risen in popularity, complaints about drone activity have soared, and the question of how to integrate them into existing legal frameworks has become more pressing. What right does an individual or business have to exclude drones from the area above its land? At what point does excessive drone activity around a parcel of land or even a community amount to trespassing? This provides a complex security situation, especially for properties located in close proximity to public institutions such as prisons and airports.
Although academics and legislators have discussed drones at length in the context of privacy rights and modern warfare, until recently few had spoken about the effect of drones on modern property law. Part of the difficulty in answering this question is that drones challenge the conflicting (yet equally compelling) aims of real property and aviation law. The former protects the landowners’ interests by relying on firmly-drawn boundary lines and rules of exclusion, while the latter protects airspace as a regulated public area open for the benefit of the world.
Considering the pace at which businesses are looking to seek competitive advantage, it is important to echo the need for legislation in order to control the impact of innovation in a highly volatile world economy. However, it cannot be argued that in the world we live in innovation will continue to precede legislation. The legislation to protect both the user and owner of these products is yet to be perfected. The reason largely being that these are new innovative market products developed to ease processes and provide accurate data to make investment decisions. In some cases, consumers are yet to appreciate the complete potential of these new products and regulators are having to play catch-up with adequate legislation to protect the general public from exploitation.
This challenge will be further discussed in the next series of our publication in order to understand whether innovation precedes legislation or perhaps both concepts are mutually exclusive.