Members of ULI’s new Technology and Real Estate Council discuss the disruptive effects of technologies on the real estate industry, the opportunities and uncertainties related to the advent of autonomous vehicles, the challenges of using “big data” effectively, and the technological applications under development for the real estate industry.

What technological innovations for the real estate industry are you most excited about?

Owen Thomas: New automated building controls that factor in building temperature and occupancy, as well as weather conditions, to manage building systems and optimize power usage. Also, increased use of ride hailing and the ultimate adoption of autonomous vehicles will have impacts on commuter patterns, urban land use, and how parking is used and sold, as well as building design.

Dave Bragg: Green Street believes that the single biggest game-changer for real estate over the next several decades will be the advent of driverless technology, in combination with ride hailing, which is already omnipresent in most major cities in the United States and around the world. We expect these to lead to a decline in car ownership. That unleashes a lot of opportunity, because in the United States, we have four parking spots for every car. That equates to about 1 billion parking spaces. Every parking space takes up about 150 square feet [14 sq m], so that’s 150 billion square feet [14 billion sq m] of parking. Over the next several decades, we could see a 50 percent decline in parking demand. That creates a lot of opportunity for owners of real estate with surface parking lots. If you own a high-quality mall, for example, surrounded by surface lot parking, you’ll find opportunities to add more restaurants, hotels, condos, or apartments.

Randy Rowe: The technology that will have the most dramatic impact on real estate is the autonomous vehicle. It’s going to change the way we design cities, it’s going to affect mass transit systems, and it’s going to impact the way we design buildings and curb space. In the more immediate future, significant improvements are being made to construction methods that can help bring down costs. These range from product innovations to software that coordinates all the parties involved much more effectively to solutions from construction companies like Prescient, which offers a standardized light-gauge structural system. The company fabricates all the pieces in the factory, and they’re assembled on site. There’s no waste, because any scrap metal generated during fabrication gets recycled. Companies like Katerra are squeezing all the inefficiencies out of the logistics chain and delivering buildings on a much more efficient basis.

Shaw Lupton: I’m most excited about innovations leading to smarter risk-taking and better societal outcomes. For instance, developers who apply big data to their investment decisions can build that product the market actually needs, and more efficient building techniques like modular construction could help close the workforce housing gap that many cities face. From designing healthier workplaces to addressing climate change, I see the technology and real estate communities empowering each other to do well by doing good.

What technologies do you think the industry is overlooking or underusing?

Bragg: Developers are not expending enough effort identifying and executing ways to build buildings and parking structures differently, given the transportation revolution. One can explore opportunities today to build a parking garage that can provide more optionality, more flexibility, to convert it into other uses—in part or in full—in the future. But I’m not aware of many developers who are building parking differently. One reason is that it costs more to build a parking garage that offers long-term flexibility. Also, consider two assets that are identical, except that one has more land surrounding it that’s currently used for surface lot parking, and the other has a structured parking garage. Although those two assets would currently be priced the same, the one that has more surface lot parking should be worth more because it offers a long-term densification opportunity. Because the transportation revolution is inevitable, developers and investors should be factoring that opportunity into the pricing today.

Lupton: Many of the successful real estate technology startups we’ve seen to date have focused on leasing or building operations, which makes sense because these drive revenue and expenses. There’s also a real estate adage that the deal is made on the buy. There are a handful of investors taking their analytics games to the next level. For example, applying competitive set matching and predictive analytics to all the properties in a portfolio used to be cumbersome and somewhat arbitrary; we have made it effortless and systematic. It’s so important to measure and anticipate the market forces that impact building-level performance, because only then can you craft an effective asset management strategy.

Thomas: I am surprised there has not been more automation of leasing and capital transactions, particularly for smaller and less complex transactions. Also, blockchain could provide important innovation to the recordation of title and transactions as well as the title insurance industry.

What are some of the biggest challenges of the new technologies affecting the industry?

Rowe: A lot of these technologies create transitional issues. The challenge with autonomous vehicles is you don’t reach real efficiency until you get humans out from behind the wheel. In fact, initially, when you introduce autonomous vehicles into a human-dominated landscape, efficiency decreases. Humans are unpredictable, often not following traffic laws and speeding faster than the permitted speed limit. Now add autonomous vehicles that are playing by the book. So the autonomous vehicles have to leave a wider safety zone between them and the human-driven vehicles.

Bragg: With the advent of driverless technology, there are some negative impacts on specific real estate sectors, namely self-storage. There are only about 3 billion square feet [279,000 sq m] of self-storage space in the country. But that pales in comparison to the amount of space that could open up as we see parking demand decline. It will be natural for some households to shift to one car instead of two to use some part of their garage for the storage of goods. Also, public transit ridership is declining nationwide, partly because of the advent of ride hailing, but renters are currently paying premiums to live in transit-oriented developments. As commuters increasingly utilize ride hailing and then, in the future, driverless ride hailing, there is risk to the magnitude of the rent premium paid to live at or near a transit station.

Thomas: [The biggest challenge is] probably communication between the property and technology worlds. Many talented entrepreneurs are trying to develop applications for real estate without sufficient knowledge of the nuances of how the industry works. And likewise, given fragmented ownership, more owners should become more familiar with opportunities for cost savings and client service available from new technology.

Lupton: Startups often have experience building products and scaling companies but need help understanding the real estate industry and connecting with advisers, customers, and investors. ULI is the largest network of cross-disciplinary real estate and land use experts in the world. So we are in a unique position to engage with the startup community, advise on best practices in a way that delivers the mission, and accelerate adoption of the most promising technologies.

How can real estate professionals most effectively use big data?

Bragg: Any time a real estate professional is utilizing data, it’s very important to focus on the quality and accuracy of that data. One potential pitfall is that one becomes enamored of the increased availability of data and doesn’t prioritize the quality and accuracy of the data.

Lupton: Investors who leverage data to gain a competitive edge get at least three things right. First, the C-suite has committed to investing in custom analytics. Second, the business units making the daily tactical decisions that drive operating results are empowered to use their analytics toolkits. Third, the business units apply their toolkits consistently, across every fundraise, deal, or asset.

Rowe: The challenge with big data is that there is so much data out there. It’s a science and an art form to identify which streams of information are truly the most valuable, to sort them, and to create the algorithms that explain the relationships between them so you can track the relationships in a way that gives you insight into what’s changing. The science part is doing the quantitative work. The art form is knowing what types of questions you’re trying to answer and the best way to assemble data to give you those answers. Almost no day goes by when we don’t come up with a new question and ask our analysts, “Do you have ideas about how we can pull together actionable information to answer this question?” They start thinking about what databases are available in the world, or what information we have in house, where they can look for relationships that might give us the answer we’re looking for.

What other trends do you see in the interface of tech and real estate?

Lupton: There’s so much institutional interest and capital pointed at real estate technology startups, it’s both exciting and a little scary. Exciting because the world has woken up to the possibilities around real estate technology, and scary because there are so many competitors and so much capital driving investment up that not everyone can possibly be a winner. It is not sufficient to have a killer app with an awesome user experience. Startups that want to make an impact need to figure out creative ways to partner with industry leaders.

Rowe: Technology is impacting even the senior living community. Some senior living facilities are now marketing advanced virtual-reality systems that let residents travel to destinations around the world. If you never made that trip to Italy, now you can go. Another technology, in the early stages of development, is the robot companion for people with Alzheimer’s or other elders who need assistance in the home. That will change how long people can stay in their own homes. Robotics also will be part of new construction methods, as will 3-D printing. A number of people think we will eventually 3-D print whole real estate structures.

Thomas: The biggest impact that technology has had on the office business since the Great Recession is the elevated space demand from technology companies. An important long-term question is the impact of automation on space demand, and more specifically on the locations and industries where jobs will be disrupted [by automation] as well as the locations of the jobs that will be created by the disrupters.

Contributing Their Insights:

  • Dave Bragg, managing director, Green Street Advisors, Newport Beach, California; assistant chair, Technology and Real Estate Council.
  • Shaw Lupton, director of global analytics, CoStar Group, Boston; member, Technology and Real Estate Council.
  • Randy Rowe, chairman, Green Courte Partners, Chicago; chair, Technology and Real Estate Council.
  • Owen Thomas, chief executive officer, Boston Properties, New York City; member, Technology and Real Estate Council.