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InsideNOW

Leveraging IoT in a smarter real estate industry

The Internet of Things (IoT) has become one of the most prominent topics of the 21st century, and with the rapid growth of smart devices in new constructions, it will have an impact on the real estate industry.

Authors

Authors

Thibault Chollet - Director - Operations Transformation - PERE - Deloitte

Nicolas Griedlich - Director - Analytics & Cognitive - Deloitte

Jordane Le Ponner - Manager - Analytics & Cognitive - Deloitte

Jean-Christophe Gillard - Senior Consultant - Operations Transformation - PERE - Deloitte

Hania Moudjari - Consultant - Operations Transformation - PERE - Deloitte

Published on 15 October 2020

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Over the past few years, the real estate industry has seen significant growth in the number of smart devices installed in new constructions, from residential areas to industrial warehouses and office buildings.

With the recent boom of smart buildings and homes and with the rapid evolution of cutting-edge technology in the Internet of Things (IoT) landscape, large volumes of data are being collected and represent a gold mine that can be harnessed at all levels of the investment management structure. This enables real-time and predictive analytics benefitting all actors in the industry, from property to asset managers.

What is the Internet of Things?

The Internet of Things has become one of the most prominent topics of the 21st century. With the rapid convergence of multiple technologies, ranging from real-time analytics to embedded systems, it is expected that the IoT will grow into a double-digit trillion-dollar market by 2025, one which will also impact the real estate industry.

It can be described as a network of inter-connected physical objects that collect and exchange data with other devices and systems over the Internet. Its main purpose is to link the physical world with the digital world by following a very simple process:

There are two main families of IoT devices: things (devices connected to a network that can behave autonomously and that communicate or receive information in a punctual or continuous manner) and sensors (devices that take behavioral or environmental measures).

These devices work together depending on the concept. For instance, a sensor will capture movements in a defined area. If no movement has been captured by the sensor for a certain period, the connected lights (the “thing”) will turn off automatically in that area.

How does IoT work?

Sensor networks feed data architecture which can then be processed and analyzed to reveal hidden insights that inform decisions and actions.

The IoT is concerned with both the physical devices, as well as the whole architecture that needs to be deployed in order for these concepts to work.

By focusing on improving the integration of IoT into an operating model, it could become a formidable transformative force for the real estate industry by enabling predictive monitoring, real-time analytics and allowing for greater differentiation and innovation on managed assets.

A new set of opportunities

The implementation of IoT technologies in the real estate industry is beneficial for each player in the value chain. Whether it is enhancing tenants’ experience or helping asset and property managers to broaden their portfolio of services. Numerous solutions from PropTechs are using IoT technology to assist players to create value. This section highlights IoT use cases and their related benefit and challenges.

IoT use case per asset type

Residential

The installation of sensors in residential units connected to energy optimization systems, allows tenants to monitor HVAC (Heating, Ventilation and Air-Conditioning) in order to adjust room temperatures, turn-off heating, ventilation and lightning when leaving for work. IoT based systems upgraded with artificial intelligence (AI) go a step further, in using predictive analytics to automatically adapt HVAC based on tenants patterns.

Retail

IoT technologies in retail properties (i.e. shopping centers) enable various use cases from heat maps tracking the flow of people and their behavior to the installation of beacons. A Bluetooth radio transmitter inside the shopping center that can send push notifications on discounts, real time offers, satisfaction surveys or even guide the customer based on its preferences collected from past visits.

Offices

Employee experience and well-being is at the heart of today’s HR business strategy. The implementation of IoT technology can provide employees with more efficient workplace. For example, as employees arrive in the morning, they would not have to waste time finding a parking spot. By installing sensors and connecting them to an application, employees can monitor free spaces and avoid having to physically look for spaces.

Warehouses

IoT represented a real shift in warehouses productivity. Taking the example of inventory management, this process was time-consuming but with the apparition of smart shelves, using RFID (Radio Frequency Identification) tags and readers connected to a cloud-based application. The process has been enhanced allowing automated audits of stocks, real-time notifications on goods restocking, automated orders placement and even alerting management when goods are displaced or stolen.

Benefits of IoT for Real Estate actors

Benefits for tenants

Tenants, regardless of their asset destination, benefit from an enhanced tenant experience enabled by a smarter energy consumption, which is both beneficial from an economic and environmental perspective while ensuring optimal comfort.

Benefit for asset managers

Real estate asset managers using analytics and IoT benefit from a competitive advantage in the market. Aside from the comfort it creates for their tenants, it also is an added value in asset managers’ business activities. Commercial real estate asset managers can use data from heat maps to derive indicators such as occupant behavior and space usage patterns, allowing for better pricing of units in the case of shopping centers. For residential assets, IoT enhances data collection on energy consumption used in CSR reporting. For commercial tenants, it is an opportunity for asset manager set ambitious ESG targets benefiting both parties.

Benefit for property managers

Property managers looking to future market demands rely on IoT to differentiate themselves from other players with the ability to manage state of the art technologies and capitalize on those competencies to collect consumption data, improving their monitoring and reporting capabilities.

Challenges regarding IoT adoption

While property managers are already mature in their adoption and integration of PropTechs, the same cannot be said for all actors in the industry who are still, for the most part, investing and focusing on their core systems transformation to enhance the management of their operation.

This heterogeneous ecosystem has created a technology and maturity gap between real estate actors that prevent lean exchanges of data and consequently impair the valorization of this goldmine of data collected via IoT devices. Integrating IoT also comes with its share of challenges:

  • Retro-fitting – Install IoT devices in older constructions
  • Security – Ensure that confidential data is not exposed on unprotected networks
  • Data privacy – Abide by current legislative requirement on the protection of personal data
  • Longevity – Forecast device obsolescence and upgrading processes
  • Integration – Standardize formats for exchanging data to enable integration between internal systems and exposure to third-parties
  • Technology gap – Resolve the asymmetry of IT capability and knowledge with third-parties

In order to overcome these challenges and enable its IoT integration, the real estate industry as a whole should invest in its transformation by following a structured approach, characterized by a layer-by-layer revision of Target Operating Models.

STRATEGY

For the moment, the IoT is perceived as a technological asset and not as a business driver as such. Therefore, the IoT is bringing value at all strategic levels, increasing the long-term value, and acting as a differentiator in the market – ensuring, for example, that energy costs are regulated or that operational and safety risks are lowered. An end-to-end homogenous ESG strategy to monitor the energy consumption of all managed assets could be marketed as a solution and as a valuable differentiator with competitors.

PROCESS

Defining robust processes (appropriate frequency, scope, depth of history, etc.) that guarantee the quality and integrity of the data will enable a proper integration with third parties, from the exploitation to the diffusion in real time of valuable information. This implies a re-engineering of existing processes with the appropriate governance, controls and metrics in place to ensure efficiency and address the new needs.

DATA

One characteristic of real estate players is the lack of standard data models in place and the requisite maturity to exploit this. This is especially true when it comes to incorporating IoT data in the Information System landscape. New metadata is appearing and data quality needs to be monitored to unlock analytics value and should be prioritized over quantity (e.g. to lower storage cost).

TECHNOLOGY

To acquire and exploit IoT data, a range of other technologies and components need to be deployed in terms of network, security, new hardware and software to address this variety and volume of information. New interfaces need to be implemented, bringing additional complexity.

STRATEGY

PROCESS

For the moment, the IoT is perceived as a technological asset and not as a business driver as such. Therefore, the IoT is bringing value at all strategic levels, increasing the long-term value, and acting as a differentiator in the market – ensuring, for example, that energy costs are regulated or that operational and safety risks are lowered. An end-to-end homogenous ESG strategy to monitor the energy consumption of all managed assets could be marketed as a solution and as a valuable differentiator with competitors.

Defining robust processes (appropriate frequency, scope, depth of history, etc.) that guarantee the quality and integrity of the data will enable a proper integration with third parties, from the exploitation to the diffusion in real time of valuable information. This implies a re-engineering of existing processes with the appropriate governance, controls and metrics in place to ensure efficiency and address the new needs.

DATA

TECHNOLOGY

One characteristic of real estate players is the lack of standard data models in place and the requisite maturity to exploit this. This is especially true when it comes to incorporating IoT data in the Information System landscape. New metadata is appearing and data quality needs to be monitored to unlock analytics value and should be prioritized over quantity (e.g. to lower storage cost).

To acquire and exploit IoT data, a range of other technologies and components need to be deployed in terms of network, security, new hardware and software to address this variety and volume of information. New interfaces need to be implemented, bringing additional complexity.

Conclusion

The IoT is an untapped goldmine for the real estate industry

  • All market segments (residential, commercial, offices or industrial) could benefit from a stronger IoT integration, from the simple concept of better monitoring of energy consumption to the most complex ones, for instance the predictive monitoring of circulation flows in up-and-coming areas
  • Sensors and Things are already present in all types of assets, but due to a lack of technological homogeneity of the market, or the IoT not being seen as a business driver by the industry, most actors fail at leveraging on this large volume of valuable information
  • A lack of maturity lies at all levels of the operating model, from the technology layer (no seamless exchange, centralization, integration or visualization of the information) to the global strategy of the various actors of the industry that could integrate the IoT into developing more collaborative processes
  • The IoT could be leveraged to support the process of Building Information Modelling (BIM), for instance by facilitating the collection of data to support decision making on certain assets
  • Assets’ attractiveness and valuation could be significantly impacted by the fascilitation of green incentives via the monitoring of key ESG criteria

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