Digital transformation in the real estate industry
While digital transformation has disrupted almost every type of business, the real estate industry has been traditionally slow to move with the times – until now, according to participants at a recent 2nd Asia Pacific Leadership Symposium in Hong Kong organised by the Urban Land Institute (ULI) and by the World Economic Forum (WEF).
“We are nearing a global tipping point and digital transformation is an area that the real estate industry cannot ignore,” said Nicholas Brooke, Chairman of the ULI – WEF Symposium.
In areas ranging from computer-aided design, to development of new construction materials and technologies, to the use of augmented-reality marketing solutions, a long list of innovative new technologies is starting to gain traction, with potentially profound consequences for the industry.
Some examples highlighted by participants include fascinating and potentially transformative advances in materials technology, such as organic admixtures that uses mushroom-derived or calcium-secreting bacteria that allow buildings to be “grown” or repaired. However, while such advances are promising, they remain under development.
The rise of Building Information Modeling (BIM)
One area that developers are more certain about is the potential of new software design tools to manage construction work, with one participant saying: “That’s where the mojo is—it’s going to transform current practices.”
The system gaining most traction is Building Information Modeling (BIM), which replaces traditional hardcopy blueprints with 3-D computer modeling. The system, combined with the easy availability of handheld devices allowing the concept to be applied onsite, gives it an advantage over legacy paper-based systems, helping architects and contractors to collaborate more easily and make on-the-fly alterations to existing designs.
BIM-built New Karolinska Hospital
The symposium discussed the construction of Sweden’s newly opened 12,000-room New Karolinska Hospital, the world’s largest public-private partnership hospital project to date. Its entire, very complex, design was executed using a BIM platform.
Post-construction, BIM is also being used at New Karolinska for handling overall facility management. As the hospital’s BIM model contains all construction data in a single plan, managers know immediately which materials are used in any part of the building, where all components are located, and exactly what part will be needed to repair any given equipment breakdown.
In addition, sensors have been embedded throughout the hospital structure to guide a fleet of 29 automated vehicles deployed to deal with a total of 1,600 deliveries daily throughout the facility, using BIM as an address book.
Prefabrication is another well-established technology steadily growing in popularity. In Singapore, developers have been forced to accelerate adoption of prefab techniques because government policy requires builders to boost productivity in order to cut the number of foreign workers employed in the industry.
In Hong Kong, soaring labour costs have also made prefab an increasingly attractive option—although the relatively small size of the local market continues to pose challenges in terms of leveraging economies of scale.
Elsewhere, though, the low cost of labour in Asia’s emerging economies means that prefabrication is generally seen as uncompetitive.
“The art is to break down prefab into smaller pieces where you can mass manufacture across multiple building types and not just on a project-by-project basis,” said one participant.
“The current problem with prefab is that it’s one project at a time. So you have to make parts that can be used across multiple projects—it’s already happening with componets such as windows, but when you extend it to every component you get more variety in design because now the computer can sort through these different parts and create really flexible designs just in time,” he added.
Obstacles to digital transformation
The symposium noted that there are a number of reasons why the pace of change in the real estate industry is slow.
One participant pointed out that the useful life of buildings is long: “A 60-year-old building may not have the high-speed lifts and all the bells and whistles,” he said, “but it’s not unoccupiable. This means the useful life of buildings is extremely resilient, which in turn is one of the reasons why the pace of tech growth has been so slow.”
Another bigger obstacle to progress is resistance from the status quo. One developer pointed out that architects tasked with customizing individual units are often resistant to the idea because they prefer the ease of standardized design to the alternative which is dealing with so many individual players. Also, contractors are still reluctant to invest in new technology, even as tech costs continue to fall.
Regulation: The Biggest Roadblock
However, regulation remains the biggest roadblock to change. The high level of oversight in Asia’s construction industries is a result of a “need to ensure building safety, creating deep bureaucratic roots with a byproduct of this culture being that widespread adoption of new technologies requires wholesale changes in existing building codes and approval processes”.
This is a tall order in an environment where bureaucratic mind-sets remain generally backward-looking and have little reason to push through new rules. While in a few markets, notably Singapore, governments have encouraged the industry to embrace new tech, “bureaucratic inertia is the invisible hand inhibiting change.”
In Hong Kong for example, alterations are prohibited until an occupation permit is issued meaning that customization on the go is impossible, and the desire for buildings to be adaptable for mixed use purposes is also frustrated by a zoning system that controls buildings serving multiple functions.
While most participants were fairly pessimistic about the short-term prospects of persuading regulators to adapt the existing prescriptive framework, one person suggested, that consumer pressure could lead to a move from the current specifications-based mind-set “towards a more performance-based approach enabled by technology that can monitor building performance.”