Digital transformation in the property industry

Where is the digi­tal­i­sa­tion of the real estate indus­try taking us? What chal­lenges and topics should managers prepare for? The digi­tal trans­for­ma­tion is constant­ly taking hold in new areas and is constant­ly evolv­ing. We have already addressed indi­vid­ual aspects such as appli­ca­tions in market­ing  or the network­ing of neigh­bour­hoods  in our Valdivia News­room. In this arti­cle, we now take a look at the over­all picture of the digi­tal trans­for­ma­tion of our indus­try from a decision-maker’s perspec­tive — and thus at factors that will keep compa­nies compet­i­tive in the long term.

Recog­nise & exploit opportunities

Digi­tal trans­for­ma­tion often appears to be a buzz­word, with a lot being said about its mean­ing but little about its content and imple­men­ta­tion. As an exam­ple, we have there­fore consult­ed three stud­ies that describe the medi­um-term topics and goals of digi­tal trans­for­ma­tion specif­i­cal­ly for the construc­tion and prop­er­ty industry:

(1) Build­ings learn to think

As early as 2021, a BVDW study¹ described the impor­tance of smart build­ings “for the sustain­ably planned city of today and tomor­row”. It also outlines devel­op­ment steps that are still in the future, even from today’s perspec­tive: indi­vid­ual build­ing systems will soon learn to inter­act with each other autonomous­ly, inter­pret data and create fore­casts. The final stage of matu­ri­ty will then be the inte­gra­tion of the build­ing into the over­ar­ch­ing system of a “smart city”.

The study also points to prac­ti­cal imple­men­ta­tion factors that should already be consid­ered today. For exam­ple, plan­ning and thus team compe­ten­cies — e.g. elec­tri­cal systems and cyber secu­ri­ty — often need to be organ­ised in a new, coor­di­nat­ed form.

(2) Prop Techs as the cutting edge

Prop Techs are focus­ing direct­ly on digi­tal appli­ca­tions for the prop­er­ty indus­try. In doing so, they are antic­i­pat­ing what will soon become broad­ly rele­vant for construc­tion, prop­er­ty manage­ment and the real estate finance sector. A recent Black­print study^{(2) at} describes, among other things, where PropTechs are gener­at­ing the great­est added value today. This also points to the best oppor­tu­ni­ties to achieve a worth­while return on invest­ment through digitalisation:

• Financ­ing, Valu­a­tion & Invest­ment (75 %)
• Plan­ning & BIM (74 %)
• Asset & Port­fo­lio Manage­ment (69 %)
• Project Devel­op­ment & Smart City (66 %)
• Construc­tion, refur­bish­ment, manage­ment, main­te­nance (64 %)

Anoth­er ques­tion in the study was which drivers of change will play a role for the prop­er­ty sector in the future. The top ten answers include not only famil­iar ones such as arti­fi­cial intel­li­gence and the networked smart city. Accord­ing to the study, new, tech­nol­o­gy-based busi­ness models, the Inter­net of Things and networked busi­ness ecosys­tems will also become more important.

(3) “Every­thing remains different”

Anoth­er study³ takes a look into the year 2033. It describes a broad spec­trum of gener­al devel­op­ment prospects, all of which presup­pose a high degree of digitalisation:

• plan­ning for circu­lar construc­tion accord­ing to cradle-to-cradle design principles,
• the trans­for­ma­tion of the ener­gy indus­try towards sustain­abil­i­ty and CO₂ neutral­i­ty
• smart mobil­i­ty in smart cities,
• versa­tile multi-use build­ings — also as a basis for new busi­ness models,
• networked, self-organ­is­ing smart buildings,
• the use of arti­fi­cial intel­li­gence for prop­er­ty and asset manage­ment, for the plan­ning and control of modu­lar construc­tion through to autonomous robots on the construc­tion site or the creation of virtu­al archi­tec­tures in the metaverse .

As food for thought, the last section of the study is enti­tled “Every­thing remains differ­ent”, because “devel­op­ments will occur that we cannot yet fore­see.” — This can also be read as an indi­ca­tion of the useful­ness of agile meth­ods to meet future challenges.

Using arti­fi­cial intel­li­gence competently

Since Chat­G­PT became publicly acces­si­ble at the end of 2022, arti­fi­cial intel­li­gence has been the driving force and Swiss army knife of digi­tal trans­for­ma­tion. But what aspects do compa­nies need to pay atten­tion to in order to navi­gate safe­ly and stay ahead of the game?

Busi­ness analyst Lünen­donk recent­ly surveyed 150 managers from compa­nies and public author­i­ties in German-speak­ing coun­tries⁴. As it turned out, there is no lack of aware­ness: 83% use Chat­G­PT. Howev­er, AI is already fully inte­grat­ed in only 3% of the compa­nies surveyed; 34% were still in the trial phase at the end of 2024. Of partic­u­lar inter­est to deci­sion-makers are the risks mentioned in the study that need to be addressed and avoided:

• Devel­op­ing your own AI solu­tions requires exper­tise and skills; 56% of respon­dents still lack these.
• Increas­ing compet­i­tive pres­sure is expect­ed in the near future: 77% of compa­nies want­ed to accel­er­ate their digi­tal trans­for­ma­tion with the help of AI by the end of 2024.
• Clar­i­ty about the EU AI Act and compli­ant imple­men­ta­tion are essen­tial for legal­ly compli­ant AI oper­a­tions. At the time of the survey, 71% were still unsure about imple­men­ta­tion and liabil­i­ty risks.
• Where employ­ees have unreg­u­lat­ed access to AI tools and systems, so-called “shad­ow AI” can easi­ly devel­op. This has become a legal and finan­cial risk, and not just because of the EU AI Act: Shad­ow AIs jeop­ar­dise data protec­tion and the integri­ty of the results.

Keep­ing pace through agility

Agile work­ing offers clear advan­tages for the devel­op­ment of digi­tal systems. It enables compa­nies to react quick­ly to changes. Managers set the goals and frame­work condi­tions; the teams decide inde­pen­dent­ly how to achieve these goals.

At first glance, the construc­tion and prop­er­ty indus­try hard­ly seems to be a good fit for agile project manage­ment. As recent­ly as 2019, a study conclud­ed⁵:  “The prop­er­ty indus­try is not real­ly suit­able for agile manage­ment.” Never­the­less, the authors believe that agile process­es are possi­ble and even advis­able when it comes to digi­tal­i­sa­tion, organ­i­sa­tion and manage­ment. We have already present­ed approach­es to this in the Valdivia News­room. Expe­ri­ence from the bank­ing sector, where the bene­fits of agile projects have been observed in the past, may speak in favour of the prospects for success⁶:

• up to 96 % faster time-to-market & response-to-change
• 69 % improved trans­paren­cy & business/IT alignment
• 62 % increased qual­i­ty of results
• 58 % improve­ment in employ­ee satisfaction
• 50 % more attrac­tive employ­er placement

The study empha­sis­es that the values achieved were also signif­i­cant­ly high­er than expect­ed. This is no coin­ci­dence: agile work­ing trig­gers a moti­va­tion boost among employ­ees, regard­less of indus­try or content, as they are “enthu­si­as­tic about the greater auton­o­my and the gain in deci­sion-making freedom”.

Acting agile even as a decision-maker

Whether for the plan­ning and real­i­sa­tion of smart build­ings, prop­er­ty and asset manage­ment or strength­en­ing employ­er attrac­tive­ness — there is no way around digi­tal­i­sa­tion in the real estate indus­try today. And this path can only be an increas­ing­ly agile one; devel­op­ments are too rapid and unpre­dictable for conven­tion­al, rigid plan­ning meth­ods to cope with.

Howev­er, the agile way of work­ing not only relieves you as a manag­er of detailed plan­ning and secondary manage­ment tasks. It also helps you direct­ly, as agile meth­ods are also partic­u­lar­ly effec­tive at deci­sion-maker level when it comes to devel­op­ing strate­gies, allo­cat­ing resources or opti­mis­ing collab­o­ra­tion with­in the company.

List of sources

• “Smart Build­ings — Success-crit­i­cal trends and use cases for build­ing plan­ning and oper­a­tion”, ed. Bundesver­band Digi­tale Wirtschaft (BVDW) e. V., 2021
• “Prop Tech Germany”, published by Black­print and TH Aschaf­fen­burg, Decem­ber 2024
• “10 future theses for the construc­tion & prop­er­ty indus­try”, publish­er Drees & Sommer, 2023
• “Gener­a­tive AI: From inno­va­tion to market matu­ri­ty”, published by Lünen­donk & Hossen­felder, 2024
• PMRE MONITOR Special “Process Manage­ment Real Estate Moni­tor — How much agili­ty can the prop­er­ty indus­try take?”, published by htw Univer­si­ty of Applied Sciences Berlin and CCTM Consult­ing, 2019
• “Agili­ty in banks”, published by Der Bank Blog, 2020

(Image source: istockphotos)