Earlier this year Inc. Magazine published a story highlighting how the real estate industry is ripe for disruption in 2017.
If you’re a real estate agent or a consumer looking to buy or rent property, the way you achieve your goal is set to change and you need to know.
The real estate industry hasn’t changed very much in the past 50 years. We have smartphones and the Internet to make searching easier, but that’s about it. The actual home buying and renting process has not changed.
“The downright glacial pace real estate is evolving at has left the industry ripe for disruption,” the article summarised.
Investments in real estate tech startups reached an all-time high during 2016 and it’s apparent that while real estate agents may not want the change, consumers are certainly ready for it. To gain a better perspective on what real estate disruption might look like here are some statistics that paint a portrait of opportunity.
Remove the middle man
Last year, 51 percent of global homebuyers found the property they ended up buying online. However, 88 percent of buyers still used a real estate agent to handle the purchasing process – a number that has steadily increased from 69 percent in 2001.
Many people will see that as a sign of trust that people have in real estate agents, or an indication that people generally prefer using one. What do you think?
If you ask any property buyer “would you like to avoid paying commission on your purchase?” the answer will be a resounding “yes”. The reason people still pay the commission and hire a real estate agent isn’t because they want to hire one, it’s because they’re afraid that something will go horribly wrong if they don’t.
Look at websites such as www.rentals.sg in Singapore which cuts real estate agents out of rental transactions, and their commission, totally and allows landlords to do-it-themselves by providing all the necessary tools. This website is not alone in its business model. It is a good example of real estate disruption.
In 2013 a study by Oxford University proposed that artificial intelligence has a 98 percent chance of replacing real estate agents in the future. With the pace that artificial intelligence has been advancing recently, it’s poised to replace real estate agents within the next 10 or 20 years.
Any company that can simplify the real estate purchasing process and help buyers handle the paperwork themselves can and will cause massive real estate disruption.
Reduce, Reduce, Reduce
According to the World Economic Forum, the real estate sector consumes more than 40 percent of the energy produced globally and buildings use 40 percent of raw materials we produce. That makes the real estate industry the largest global consumer of resources by a fair margin. Businesses that can work to reduce those numbers will see major success in future years.
Any business that can find ways of reducing the amount of energy and other resources consumed by the real estate industry will be a game changer.
Wasted space, lost revenue
The traditional office workplace is becoming increasingly outdated thanks to modern technology. The rise in remote workers and freelancers is reducing the need for large, dedicated offices. As time goes by that trend will only increase.
Currently, 40 percent (in some cases up to 70 percent) of office real estate sits empty during the work day according to Deloitte. Factor in the night time hours and those numbers can exceed 90 percent. The same report estimates that businesses could save up to 30 percent of their revenue by downsizing. Repurposing that wasted space won’t be easy but it will be profitable both for the business that finds the solution and the companies who repurpose or downsize their space.
Disruption has started
By Q3 2016, investors had already spent US$1.8 billion for real estate tech startups, which was an 85 percent increase from the previous year. Listing websites like Zillow offer a mountain of data for potential buyers to comb through, and are already changing the way we search for property however, it’s still not a complete solution.
The largest single factor in real estate disruption will be AI that can replace a real estate agent. The funds and the desire are there; it’s just a matter of technology catching up. The ‘Uber’ of the real estate industry is en-route and it’s just a question of who gets there first.