Real Estate Woes in the Digital Age

Why spend time and money to travel to places to do something that can be done in the comfort of home? Many find themselves asking this question as they acclimate to staying and working from home with the virus outbreak, by both employees and business owners. Internet connectivity has allowed the comfort of residential to compete with other sectors of real estate. For technology companies, the Coronavirus may even be a blessing in disguise in the long term, allowing them to eliminate most of their office space needs and overhead costs.

Real Estate’s historical performance has perhaps enabled landlord’s complacency.

As the internet becomes increasingly accessible, the rate of digitization and technological integration across companies and industries becomes exponential. Yet real estate remains very much a lagger. Partly due to QE stemming from the previous crisis, real estate has generally enjoyed decent ROI regardless of their level of technological adoption. As a result, landlords are not incentivized to invest in technology as much as they should. The situation brought on by Covid-19 shines a harsh light on real estate’s inadequacy in connectivity. Sectors like retail are among the worst hit, whose cannibalization by e-commerce is further exacerbated by the virus. Like many industries, real estate needs to reposition itself in the “Next Normal”, and technological integration could be the key in unlocking its dormant values.

 

 

 

 

Telemedicine, among a host of various digital service, is decreasing doctors’ demand for physical space.

Over the years, numerous technologies were employed to enhance real estate’s connectivity and value, such as VR for inspection, shared economy platform in the form of Airbnb, IoT sensors for development and maintenance, monitors for customer analytics, to name a few. Nevertheless, the real challenge lies in its connectivity with the online world. Numerous online services are now replacing our traditional way of life; Zoom replacing the need for office, telemedicine replacing clinics, etc. While these online services do not completely remove the need for real estate, they are more than capable of significantly dampening demand and therefore crippling valuation.

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