Real Estate Predictions 2021

From Location, location, location to Location, insights and experience

The COVID-19 pandemic has
accelerated a number of trends in the
world of real estate. What is the value
of real estate in an increasingly digital
world? And how can we prepare for
an even more data-based, digital –
and preferably sustainable – future?
Deloitte can help. Our real estate
professionals have deep industry
experience and knowledge to help
you achieve your business goals.
Real Estate Predictions 2021 |
 Executive Summary

Executive Summary
Welcome to the 2021 edition of the Real Estate Predictions. Deloitte firms from around
the world have collaborated to analyze the latest developments that are impacting the
future of real estate. For an inspiring outlook on 2021 and beyond, please read our
predictions and find out more about the future of work, sustainability, digitalization,
and innovation in the real estate sector.

5G as an enabler for new and smarter Innovation & construction in the shade The impact of social good on real
ways of working of global crisis estate
2020 has been a tumultuous year full The COVID-19 crisis has shed light on “ESG”, the generally used acronym for
of seismic shifts. It is easy to forget that another well-known crisis that has the “Environmental, Social and Governance”,
another impactful infrastructure change potential of exponentially harming has become an important business
is quietly taking place. The next wave of humanity to a point of no return - global consideration all around the world. For
digital disruption is on course and 5G will warming. If we want to avoid the many instance, real estate investors have an
be the ”glue” that will tie all of our devices, consequences of global warming, we increasing focus on sustainability. However,
buildings, and cities together, enabling new should accelerate our efforts, starting ESG in real estate can be so much more
and smarter ways of working. now. How can digitalization and innovation impactful. How can it become an important
enable the industry to prepare for a value driver?
Gaming the commercial real estate sustainable future?
talent conundrum Understanding Private Rented
COVID-19 has disrupted human The virtual office for Corporate Sector property
connections, which are at the heart of the Real Estate One of the megatrends in real estate is
commercial real estate (CRE) business. The widespread adoption of remote the need for rented housing in the main
Last year, leaders in all industries were working in 2020 has greatly shifted the role capitals. COVID-19 has accelerated this
challenged to digitalize many aspects of the workplace within organizations. All trend. However, there is an insufficient
of work while shifting and engaging indications point to a future where hybrid and inadequate stock of rental housing,
employees in a virtualized environment. working is here to stay. So how do real so a specifically designed product must
Looking ahead, what does this tell us about estate owners respond as the virtual office be developed to match demand and offer
the future of work in real estate? becomes a key component of working in new real estate opportunities. Enter Private
the ”new normal”? Rented Sector (PRS) property.
Gaining a competitive edge in real
estate with AI-driven geospatial Real Estate-as-a-Service: From Optimizing your use of office space and
analytics “product and space” to “system and real estate footprint
Data analysis can significantly improve service” COVID-19 has accelerated new ways of
decision-making in real estate. From Real estate is undergoing a fundamental working, which in turn will impact the use
valuation, sale/purchase of properties and business model redesign enabled by of office space. What are the implications
contracting to negotiations, risk analysis digitalization and a growing market of for the real estate industry and corporates?
and planning. In 2021, all eyes will be on AI- smart buildings. What business model will What opportunities will arise? How to
driven geospatial analytics. Why? Because be successful in the future? What can the prepare the property portfolio for a more
it is a quick, lean and affordable way to real estate industry learn from tech? What agile future of work? The urgency is clear:
provide address-specific rental predictions is Real Estate-as-a-Service? And what is the time to act is now.
and explainable transparency. the impact on strategy and organizational
performance?

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Real Estate Predictions 2021 |
 Executive Summary

Protecting your identity in the Digitalization is here to stay How to support strategic decision-
digital world The real estate industry is currently making in real estate
Protecting (proof of) our identity is adapting to evolving market conditions, Urban planning, asset management and
extremely important in our society. a changing regulatory environment, and investment decision-making require a
Particularly in the digital world, identity a fast-growing technological landscape. thorough understanding of the current
theft or misuse is a serious risk, and This is described in detail in our 2019 and future supply-demand dynamics and
interactions and transactions in the digital European Operations and Technology underlying macro-economic factors. The
world have a serious impact for us in the Survey for Real Estate Investment integration of Artificial Intelligence (AI) with
real world. Self-sovereign identity is all Managers. A survey that was completed by real estate and financial planning expertise
about control over our digital identity. a range of European real estate investment can help support new ways of analyzing
and asset managers. What can we learn historic data in an attempt to improve
Improvise. Adapt. Overcome. How to from their replies? How to achieve an future decisions.
cope with the impact of climate change effective digital transformation in our
Climate change has consequences for industry?
nature, people, and therefore also real
estate. Mitigation and adaptation are
strategies to deal with the potential risks
of climate change. What is the impact of
climate change strategies on the future of
real estate, in terms of markets, planning,
construction, and renovation?

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Real Estate Predictions 2021 |
 Table of contents

Table of contents

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 03
5G as an enabler for new and smarter ways of working . . . . . . . . . . . . . . . . . . 06
Gaming the commercial real estate talent conundrum . . . . . . . . . . . . . . . . . . . 09
Knowing what others don’t: gaining a competitive edge
in real estate with AI-driven geospatial analytics . . . . . . . . . . . . . . . . . . . . . . . . . 14
Innovation & Construction in the Shade of Global Crisis . . . . . . . . . . . . . . . . . . 17
The virtual office for Corporate Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Real Estate-as-a-Service: From “product and space” to
“system and service” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
The impact of social good on real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Understanding Private Rented Sector property . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Optimizing your use of office space and real estate footprint . . . . . . . . . . . . . 34
Protecting your identity in the digital world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Improvise. Adapt. Overcome. How to cope with the impact

of climate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Digitalization is here to stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
How to support strategic decision-making in real estate . . . . . . . . . . . . . . . 49
Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

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Real Estate Predictions 2021 |
 5G as an enabler for new and smarter ways of working

5G as an enabler for
new and smarter ways
of working
Implications for real
estate and construction
2020 has been a tumultuous year full of seismic shifts in everyday norms. In a year
marked with greater public scrutiny of embedded social structures and behaviors, it is
easy to forget that another impactful infrastructure change is quietly taking place. The
next wave of digital disruption is on course and the 5G rollout will be the enabler. 5G
will be the ”glue” that will tie all of our devices, buildings, and cities together, enabling
new and smarter ways of working for all of us.

The need for speed, latency, reliability, More to come Implications for real estate and
and capacity The first 5G networks were launched in construction
For the last several years, 4G – which was 2019 and were largely deployed from Numerous industries have made
itself revolutionary at its introduction existing 4G base stations. Since then, significant digital transformation strides
around 2010 – has served our society well. various major network organizations with 4G capability. What are the benefits
However, our demand for accurate and fast have also launched 5G mobile network of 5G? How can real estate leverage this
data is growing exponentially, and inherent capability in a limited number of cities new technology to accelerate digital
limitations relating to speed, latency, and towns. There is much more to come transformation within an industry that
reliability, and capacity are becoming – 5G could solidify the business case for is well behind others? Let’s explore the
more and more apparent. 5G mobile transformational technologies such as the answers to these key questions further.
internet is a major leap forward from 4G. Internet of Things (IoT), Artificial Intelligence
If its full potential is realized, it will not only (AI), Augmented & Virtual Reality (AR & VR) Greater network speeds
address 4G’s limitations, but will transform and Digital Twins all of which could have Standard 4G provides a maximum
the way we live, work, travel and play. a significant impact in digitalizing various potential real world speed of around
sectors – the sky is ”virtually” the limit. 80Mbps whereas 5G could reach peak
5G operates over much higher radio speeds of 10-20Gbps1. In combination
frequencies than 4G, which requires the Unsurprisingly, the rollout has been with increased bandwidth, improved
substantial upgrade, and addition of, cell impacted by trade and tech disputes network speeds could greatly enhance
towers. Higher frequencies require the regarding certain 5G equipment and by construction processes. For instance,
closer proximity of cells, meaning that the outbreak of COVID-19 for reasons the remote use of VR could support
”small cell sites” will need to be added to including a reduced consumer demand communicating ideas to project teams in
buildings, light poles and other structures (due to the increased Wi-Fi usage working an agile setting. Also, 5G could increase the
across the country. Network providers are from home), allegations linking 5G rollout use of off-site manufacturing, unlocking
building this high speed infrastructure at with the COVID-19 spread, and lack of AI to optimize quality control and risk
pace though, to date, the initial commercial understanding concerning the benefits escalation processes, and increase the use
application for the 5G rollout has centered of 5G. of 3D printing to create standard building
upon mobile broadband. components. It could improve information

1 House of Commons Library, 5G Briefing Paper 2019, September 6, 2019, page 4.

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Real Estate Predictions 2021 |
 5G as an enabler for new and smarter ways of working

07
Real Estate Predictions 2021 |
 5G as an enabler for new and smarter ways of working

storage, progress tracking and automated development appraisals to enhance value 5G as an enabler for workplace
project controls. And track and trace supply and marketability. transformation
chain logistics could support ”just in time” As pre-existing working patterns continue
delivery and minimize corruption. High capacity to shift, 5G could further consolidate the
More bandwidth and data capacity would workplace transformation. Fully integrated
The most significant benefit for the reduce competition for connection and 5G offices could create enhanced revenue
construction industry will most likely be would allow the support of up to one million opportunities for landlords through
5G’s ability to take Building Information devices per square kilometer. 5G combined different types of leasing models. Business
Modelling (BIM) to the next level, which with big data applications and cloud storage models of flexible office operators, booking
will enhance the potential for fully capabilities could increase data on space desks and meeting rooms with specific
confederated 6D Models and enable utilization, power and energy consumption. digital capability, may become more
the creation of a cloud-based ”digital A much-needed retail revolution could start common as 5G networks expand.
twin”. This will support more efficient with VR and AR to create experiential retail
delivery, integration and better decision environments and be further developed by Key observations
making throughout the building lifecycle in-store analytics to personalize shoppers’ 2020 may have slowed down the 5G
from concept design through to experiences. Big data applications could technology revolution, but it has also
decommissioning. Further, the creation also support the continued effort to enforce further highlighted the need for improved
of these models will allow clients to ”look social distancing as more offices and retail connectivity, greater network speeds,
and feel” their projects earlier in the outlets open. reduced latency and wider bandwidth
delivery process. capacity to support digital transformation.
In time, collecting and interpretation of Although there are challenges in
Low latency data produced by real estate assets will implementing 5G and no doubt greater
5G is expected to reduce latency2 in the become a defensive strategy for most real speeds will soon exceed it, the economic
order of 1 millisecond3. In other words, 5G estate stakeholders. It will help them to and social benefits will outweigh the costs.
response times will feel instantaneous4. maintain an edge over their competitors. The real estate sector has the ”bandwidth”
The implementation of IoT in real estate Also, more regulatory requirements are to reap some of the greatest benefits from
is progressing at a rapid pace, with imposed by governments to encourage its implementation.
more and more new buildings being the use of 5G technology, as it will increase
specified with sensors inside and out. 5G productivity and efficiency and improve Authors
will enable instantaneous connectivity sustainability performance. Scott Dudley
to real time building usage data and Director | Financial Advisory | UK
infrastructure, providing scope for accurate Challenges sdudley@deloitte.co.uk
tenant occupancy data and optimized It is important to factor into any business
maintenance regimes on assets. In the case the challenges involved with optimizing Peter Adeleye
future, landlords may take advantage of 5G and the various technologies it enables. Consultant | Financial Advisory | UK
private 5G splicing (i.e. pay for what you These include but are not limited to: peteradeleye@deloitte.co.uk
use, down to the device) to increase yields
by offering bespoke services to their • shorter frequency waves requiring small Contact
tenants. The potential for building assets cell site technology with antennas as Andrew Carey
with wire-free connections instead of Wi-Fi close as 500 feet apart Partner | Financial Advisory | UK
could radically reduce the implementation ancarey@deloitte.co.uk
complexity of core building management • higher risk of obstacles (including building
systems (including fire, security, lighting, materials) blocking or disrupting high
HVAC and energy/utilities). frequency 5G signals

Faster response times between devices will • many devices that will need to be 5G
also allow for the more widespread use of enabled, e.g. better battery technology
autonomous vehicles and the associated
transport infrastructure. With more people • GDPR legislation and privacy laws that
working from home, 5G connections may limit 5G optimization.
may soon replace the need for Wi-Fi.
Valuation of 5G technology infrastructure
will have to be considered within future

2 Latency is the time taken for devices to respond to each other over the wireless network.
3 4G is around 30 milliseconds
4 Ofcom, What is 5G, March 9, 2018; [accessed November 28, 2020]

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Real Estate Predictions 2021 |
 Gaming the commercial real estate talent conundrum

Gaming the
commercial real estate
talent conundrum
Talent strategy in a post-
pandemic world
The COVID-19 pandemic has disrupted human connections, which are at the heart of
the commercial real estate (CRE) business. Leaders in all industries were challenged
to digitalize many aspects of work while shifting and engaging employees in that now-
virtualized environment. Companies had to provide the infrastructure that would
enable employees to work effectively from home, while prioritizing health and safety.
Looking ahead, what does this tell us about the future of work? How can we prepare
for the challenges of talent strategy in real estate?

One implication is that the ability to development, and cloud computing (see agree that their company has accelerated
succeed in the post-pandemic world will be Figure 1). Additionally, our analysis of job efforts to use technology and tools
hampered in the near term by employee openings for 500+ roles showed that in redefining business processes, job
concerns about returning to work. This traditional skills were highlighted as “must roles, and skill requirements (Figure 2).
was acknowledged by more than 50% haves” across all construction and general Regionally, a higher proportion of European
of respondents to the Deloitte Center management job openings. Only risk respondents (47%) are likely to do this,
for Financial Services’ Global Outlook management, and marketing and CRM- as compared to those in APAC (44%)
Survey 2020. related job postings required advanced and North America (32%). And only 36%
tech skills in more than 10% of job postings. of the respondents acknowledge that
Traditional skills or advanced their organization is refreshing its talent/
technology skills? The focus on traditional skills was pervasive recruitment strategy to shift to future
The pandemic also highlighted challenges across different CRE subsectors as well. For technology and skills needs.
in a highly manual business model instance, REITs looked for traditional sales
dominated by traditional job roles and and marketing skills in more than 60% of job CRE companies should consider the
skills in critical business areas including openings. More than 50% of brokers’ job following actions to envision the future
accounting, building maintenance, and listings sought finance and accounting (F&A) work and skill matrix and to facilitate the
customer service. Pre-pandemic, some skills. However, advanced data analytics recruitment of right-skilled talent:
CRE companies were continuing to lag skills were sought by REITs and brokers in
other industries in their adoption of certain only 1% and 3% of job listings, respectively. 01. Redefining roles and skills
technologies and recruitment of tech-savvy 02. Modernizing recruiting approach
talent. To support this, our analysis of Refreshing talent strategy is a growing 03. Creating alternate talent marketplaces
skills demand in the United States during imperative 04. Strengthening talent analytics
the 2014-2019 period revealed a higher It is a growing imperative for CRE
and sustained demand for traditional companies to digitalize business processes
skills. In contrast, there was muted growth and refresh their talent strategy so as to
in demand for advanced technology not lag further behind. Of note, 41% of
skills such as data analytics, software survey respondents agree or strongly

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Real Estate Predictions 2021 |
 Gaming the commercial real estate talent conundrum

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Real Estate Predictions 2021 |
 Gaming the commercial real estate talent conundrum

Figure 1: CRE companies continue to demand traditional skills

Proportion of job openings demanding traditional and advanced tech skills

40%

35%
35%

30% 30%
30%
26% 27%
24% 25%
25% 24%
25% 22%
21% 24%
20% 19%
18%
17% 17%
15%
15%

10% Growing ‘skills demand gap’

10%

5% 4% 4% 4%
3% 3% 3%
1% 1% 1% 1% 1% 1%
0.3% 0.4%
0%
2014 2015 2016 2017 2018 2019

Traditional skill areas Finance & accounting Sales and marketing Property management
Advanced tech skill areas Data analytics and AI Software development Cloud computing

Source: LinkUp jobs data of US real estate companies; Deloitte Center for Financial Services analysis.

Figure 2: CRE companies’ urgency to redefine talent

My company has accelerated redefining business processes, job roles, and skill requirements to include use of technology and tools

Europe 2% 5% 17% 30% 29% 18%

APAC 20% 18% 18% 35% 9%

North
America 7% 26% 34% 24% 9%

Note: Responses might not add up to 100 Strongly disagree Disagree Neither agree nor disagree Agree
due to rounding-off.
Source: Deloitte Center for Financial Services’ Somewhat disagree Somewhat agree Strongly agree
Global Outlook Survey 2020.

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Real Estate Predictions 2021 |
 Gaming the commercial real estate talent conundrum

Redefining roles and skills For job postings, CRE organizations should improve their use of digital tools and
To illustrate future work and job roles, we use shorter descriptions and enable a absorb the business impact of digitalization.
have envisioned how modernizing work more mobile-friendly application process,
could transform three positions: leasing which would help candidates apply easily. Strengthening talent analytics
manager, valuation advisor, and accounting For shortlisted candidates, organizations CRE leaders are more likely to make sound
specialist. (See figure 3). Analysis of three could use automated interview scheduling talent decisions if they are backed by data
main job components – the automation of solutions that are synced with interviewers’ and analytics. Workforce analytics programs
certain tasks, emphasis on analyses and calendars, allowing candidates to find an can also help CRE organizations attract and
insight generation, and tenant engagement interview slot in real time2. retain the right talent. For example, data
– reveals how CRE roles would likely need analytics can be used to improve resumé
to evolve to meet future needs. Workers Creating alternate talent marketplaces sourcing and screening to get candidates
in these roles will probably spend more To get access to these new skill sets with the right fit, while avoiding any selection
time using technology while devoting their and increase workforce agility, CRE bias. Data mining and pattern recognition
expertise to conducting analyses and organizations should consider recruiting can help talent leaders to shortlist
strengthening tenant engagement. For through a variety of channels and not appropriate candidates, after matching their
instance, leasing managers could have rely on the traditional approach alone. skills, experience, and background with job
more time to focus on enhancing tenant or For example, the alternate workforce, requirements4. As shortlisted candidates
client engagement if they used predictive consisting of e.g. contractors, freelancers, go through the interview process, more
analytics to help develop different lease and gig workers, is expanding rapidly structured and unstructured data would
optimization strategies. And other tasks, and could offer CRE organizations wider be generated based on their responses
such as invoicing, would be automated, access to talent with advanced tech skills. and behaviors. CRE organizations can then
freeing up even more time. For instance, the estimated number of combine this data and select candidates
self-employed workers in the United by predicting their success in a role
As responsibilities shift, the skills and States in 2020 is 42 million3. Therefore, CRE through machine learning models, which
qualifications needed for each role are companies should consider developing leverage past data on hiring and success
expected to evolve as well. At a minimum, a talent marketplace to include alternate of candidates5. Essentially, digital HR
each role would require technology or workforce, and offer rotation programs, systems can help firms collect and manage
analytics coursework such as a bachelor’s stretch or voluntary assignments to data better which, in turn, would enable
degree or certification in big data or real existing employees. predictive analytics to help leaders make
estate analytics. Employees will also more informed talent decisions.
need to excel at soft skills such as critical For an internal talent marketplace,
thinking, problem solving, communication, companies would need to look at job Gaming the talent gap
presentation, and relationship building. processes and identify intersection The need to quickly change and adapt has
opportunities where employees in one never been so high for the CRE industry.
Modernizing recruiting approach department could work in another. They Right-skilled talent can play an important
CRE organizations could use different may have to upskill or reskill existing role in determining whether a company
technologies during the recruitment process employees, which could include revamping stays ahead of the competition or plays
to attract the right-skilled talent. Talent of existing training curricula, redefining catch-up as the business environment
leaders can create digital content and use expectations and skills, and developing evolves over time. CRE leaders should
an array of social media channels and job effective measurement criteria. consider redesigning talent – rethinking
platforms to promote open positions. and adapting the way their employees
For instance, Intuit uses virtual reality CRE organizations could consider work, embedding technology into their
technology to provide candidates with a developing internal knowledge-sharing decision-making, and redefining skills,
real-time experience of what it would be like and mentoring programs. Experienced talent processes, and practices to help
to work at its campus, and to gain a deeper professionals could then teach younger them prepare for the future of work.
understanding of the organization’s culture employees core sector and soft skills that
and ethos and its use of technology in day- are related to leadership and relationship- Author
to-day activities1. This is likely intended to not building. At the same time, younger Surabhi Kejriwal
only enhance a candidate’s understanding of employees can provide informal learning Real Estate Research Leader | US
the company, but also its brand. sessions with older employees to help sukejriwal@deloitte.com

1 Mohammed Faraz Khan and Richa Kejriwal, “Digital Workspaces – A Talent Management Strategy,” Zinnov, May 31, 2019.
2 Ruma Batheja, “Recruitment technology tools that every recruiter must know,” People Matters, May 23, 2019.
3 Erica Volini, Jeff Schwartz, and Brad Denny, “2020 Human Capital Trends Ethics and the future of work: From “could we” to “how should we”,” Deloitte
Insights, May 15, 2020.
4 “Talent acquisition analytics Driving smarter sourcing and hiring decisions with data,” Deloitte, 2018.
5 Ibid.

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Real Estate Predictions 2021 |
 Gaming the commercial real estate talent conundrum

Figure 3: Evolution of CRE roles

Automation of Emphasis on analyses Strengthening

Key components of the role
certain tasks and insight generation tenant/client engagement

Leasing Manager • Conduct predictive analytics and

identify opportunities for lease
Current tasks

• Prepare and maintain physical lease optimization

contracts and invoices • Be the single point of contact for
(2020)

• Draw insights from sensor data to

• Manually enter and extract lease tenants and enhance engagement
improve building management
data and manage on disparate and service
systems • Work with sales team to promote
properties and with legal team to vet
lease documents

• Create and maintain digital lease

Future tasks

contracts • Interpret and share lease

information and analysis on
(2023)

• Manage integrated digital lease data spreadsheets • Follow-up on rent payments with
using cloud-based software tenants
• Share lease and market information
• Manage automated invoicing and with internal departments
lease data abstraction
Current tasks (2020)

CRE Valuation • Conduct physical property

Advisor inspection and manually document • Gather data on traditional variables
the details from internal or third-party • Provide valuation report to clients, as
• Prepare valuation reports on paper databases per the agreed timeline
or spreadsheets • Perform competitive analysis • Manage regular communication with
• Fill back-up data like demographics, of rents, market value of similar clients and resolve queries
comparable properties etc. into properties etc.
report

• Conduct virtual inspection using

geospatial platforms and use mobile
Future tasks

apps for physical visits to centrally • Advise clients on asset strategy

• Utilize Al-assisted valuation models based on valuation forecasts
(2023)

store the data that combine and analyze sensor

• Automate generation of valuation and other alternative forms of • Perform risk modelling and advise
reports and autofill background data property and market data clients on wider risks associated with
a property
• Provide more reliable and real-time
valuation

• Collect and sort actual bills and

Accounting checks
Current tasks

Specialists • Enter daily ledger entries into the

• Provide relevant accounting
(2020)

system • Manually compare and analyze work

information to internal clients and
• Reconcile accounts and bank orders, invoices, and payments
stakeholders
statements
• Create recurring and ad-hoc reports
on standard timelines
Future tasks

• Enter digitized source documents of

bills and checks • Partner with internal clients and
• Leverage AI and data analytics to
(2023)

stakeholders on accounting
• Automate ledger entries, identify irregular expenses and raise
treatment and help forecasts
reconciliation, reporting, and flags for review
income, expenses, and budgets
compliance checks

• Enhanced efficiency and productivity

• Deeper and forward looking insights • Learning and exposure for
• Simplification of tasks employees
• Risk mitigation
Key benefits across roles • Improved data accuracy • Increased synergy within teams
• More nuanced, informed, and faster
• Additional time to perform higher decision-making • Stronger relationship with clients
order tasks

Source: Deloitte Center for Financial Services analysis.

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Real Estate Predictions 2021 |
 Knowing what others don’t: gaining a competitive edge in real estate with AI-driven geospatial analytics

Knowing what
others don’t: gaining
a competitive edge
in real estate with
AI-driven geospatial
analytics
Micro-analysis on address level
Data analysis can significantly improve decision-making in real estate. From valuation,
sale/purchase of properties and contracting to negotiations, risk analysis and planning.
In 2021, all eyes will be on AI-driven geospatial analytics. Why? Because it is a quick,
lean and affordable way to provide address-specific rental predictions and explainable
transparency.

Micro-analysis on address level Major challenges However, once all of these barriers have
The availability and interpretation of the However, when it comes to data been cleared, the insights, which can be
right information is crucial in any sector, management in the real estate sector, there derived, will usually pay off well.
including real estate. After all, data analysis are still a number of major challenges.
can significantly improve decision-making, Often the required data are simply Reaping the benefits
from valuation, sale/purchase of properties not available, not granular enough, or Real estate companies that are able to
and contracting to negotiations, risk outdated. If they are available, they might gain a lead in mastering their own and
analysis and planning. Obviously, there is not yet be harmonized across geographic acquired data by means of advanced
an abundance of data about the world’s areas. So even before the start of a simple data analytics, will reap the greatest
biggest cities. This makes macro-analysis analysis, a lot of effort is required. This also benefits. Enhancing your own datasets
for these places straightforward and pertains to other manual data corrections, with additional geographic features will
relatively easy for skilled data scientists. such as missing values or incorrect master justify the application of powerful analytics
However, the smaller the place, the harder data. While for master data the case is techniques such as deep learning. This in
it gets to create a good understanding of clear-cut (a value is either correct or not), turn will lead to much better insights into
locations – even on the aggregated view other data issues might require expert previously not well-understood market
provided by zip code areas. For single judgement. In other words, there is a risk developments, sub-markets, locations and
addresses (micro level) this is even more of ending up with expensive but worthless interdependencies.
difficult. The same is true for data-rich or even misleading analysis results, due to,
hotspots, if the required skills are lacking. for instance, personal bias by the expert Digitalization: digital location twins
For instance, the rental value of two “correcting” the data issues. The alternative can bridge the knowledge gap
properties that are only a couple of meters is buying data on social demographics, A combination of various approaches
apart, can already differ significantly due rents, purchase prices and geographic to ”digital twins” can be of great value in
to the presence of e.g. railway lines, noisy points-of-interest (POIs), but good data real estate. Whereas the sensor-based
streets or polluted waters. always comes at a (potentially steep) price. approach (i.e. Internet of Things, or IoT)

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Real Estate Predictions 2021 |
 Knowing what others don’t: gaining a competitive edge in real estate with AI-driven geospatial analytics

15
Real Estate Predictions 2021 |
 Knowing what others don’t: gaining a competitive edge in real estate with AI-driven geospatial analytics

The AI learns geospatial patterns from data rich samples, allowing it to identify locations with a similar fingerprint and making
predictions for those data poor ‘digital twins’.

offers insight into the inner workings of Explainable AI is trustworthy AI users in order to make a real impact in the
a building, the concept of the learned Of course, replacing any blind spots with market. This will unleash its full potential
”digital twin” focuses on the environment predictions from a black box AI is never a for the first time. For those who have
of a building. Here, the goal is to use good idea. With so much at stake, investors invested early, time- and cost-intensive
information from data-rich areas to gain will always ask why they should have faith data gathering, and cleansing efforts will
an understanding of relevant drivers in a machine prediction, especially if it is eventually become a thing of the past.
and forces behind interesting market purchased externally as a service. Once
developments. This knowledge can then be again, technology comes to the rescue with Authors
applied to somewhat similar but data-poor a conceptual approach called “Explainable Tobias Piegeler
areas. Based on the right data and on a AI”. In short, Explainable AI means that AI Director | Real Estate Consulting | DE
machine learning algorithm, the computer is applied in such a way that the results of tpiegeler@deloitte.de
will build a model. Afterwards, when the solution are easy to understand, as
provided with some basic information opposed to the predictions from a black Sascha Bauer
such as an address, the construction year box, as mentioned above, where the results Senior Manager | Insight Driven
and the condition of an object, the model cannot even be explained by its designers. Insurance | DE
will render valuable answers. Precise Explainability is not just a regulatory sasbauer@deloitte.de
predictions of current and future rental obligation but can also provide trust and
values or recommendations for the highest valuable business insights to businesses Contacts
yielding refurbishment options are just and end users. For instance, it will provide Stefan Ondrusch
some of the potential use cases. To ensure clarity on why one property is worth 15% Senior Manager | Real Estate
efficient and effective processes, these more than a similar one nearby. Consulting | DE
prediction models will be integrated via API sondrusch@deloitte.de
(often in the form of ‘AI as a Service’) into 2021: the year of maturity
the workflows of real estate management The year 2021 will initiate an era in which Joerg von Ditfurth
software, feed planning or risk models. enhanced AI-driven location analytics for Partner | Real Estate Consulting | DE
They will enrich reports and provide real estate will reach maturity and become jvonditfurth@deloitte.de
meaningful visualizations to human suitable for the masses. It will become
decision makers. mature enough to be adopted by enough

16
Real Estate Predictions 2021 |
 Innovation & Construction in the Shade of Global Crisis

Innovation &
Construction in the
Shade of Global Crisis
Two technology trends
that will move the real estate
construction industry forward
The COVID-19 crisis has shed light on another well-known crisis that has the potential
of exponentially harming humanity to a point of no return - global warming. If we want
to avoid the many consequences of global warming, we should accelerate our efforts,
starting now. How can digitalization and innovation enable the industry to prepare for
a sustainable future?

Global warming and operates, and momentum to implement operate under extreme and frequently
construction waste new approaches to manage long-time changing conditions. It is still a labor-
The real estate construction industry practices. Disruptive technologies have intensive industry, where implementing
is one of the biggest contributors to the potential to provide the efficiency, automation is deemed essential. The
global warming. It is responsible for 40% productivity, waste control, and more industry’s low productivity, specifically
of all global carbon emissions1. With a that the industry has been seeking for low labor productivity, is one of its biggest
percentage that high (compared to other decades. In this article we will focus showstoppers, effectively putting a brake
industries), the Paris Agreement’s2 push on two technology trends – Robotics on further internally driven innovation
to limit total emissions to 1.5 °C / 34.7 °F is & Automation, and Management Tools and digitalization, and so it has become
particularly essential for this sector. Also, for the Construction Site – and how increasingly difficult to meet the growing
according to a report from Transparency the implementation of these trends will demand in the market.
Market Research, the volume of worldwide move construction forward into a more
construction waste is predicted to double sustainable future.
to 2.2B tons by 2025.
Robotics and Automation
Crisis: a catalyst for change The 1960s saw the launch of the first
The good news is that in a reality where Industrial Robot – ”Unimate”3. It was the
construction is riddled with inefficiencies, first step towards progress, transformation,
such as wasted energy, high costs, lower and foresight that brought us to where
profit, and material waste, there is room for we are today. Still, despite advancements
significant improvement. Moreover, crises like Unimate, automation in the real estate
can be profound catalysts for change. construction industry is often challenging.
They can create opportunities to gain a Construction sites are full of surprises
new understanding of how the industry and uncertainty, and workers continue to

1 https://www.worldgbc.org/news-media/WorldGBC-embodied-carbon-report-published
2 https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement
3 https://www.invent.org/blog/inventors/George-Devol-Industrial-Robot

17
Real Estate Predictions 2021 |
 Innovation & Construction in the Shade of Global Crisis

18
Real Estate Predictions 2021 |
 Innovation & Construction in the Shade of Global Crisis

A few examples More examples Authors

Therefore, technologies that can replace For instance, software has been developed Doron Gibor
these traditionally physical tasks are on that creates a “digital twin” of the Partner| Audit Services| IL
the rise. A number of companies develop construction site using hardhat-mounted dgibor@deloitte.co.il
intelligent, mobile, multi-purpose, and 360-degree cameras. These allow project
autonomous robots for use in construction managers at construction sites to get an Amit Harel
sites. Some focus on wall rendering (e.g. overview of the state of a project and Partner |Financial Advisory | IL
stucco, exterior insulation and finish whether it remains on schedule. Another Aharel@deloitte.co.il
systems, concrete, primer, and adhesives), helpful innovation is an automated cloud
others automate the construction site platform that was designed and built Contact
layout process with a mobile robot. for infrastructure construction projects. Maya Trajtenberg
Drones are another pivotal trend, e.g. for It enables real estate construction Consultant | Financial Advisory | IL
the collection of high-resolution data to companies to monitor project progress, mtrajtenbergmadar@deloitte.co.il
generate field intelligence, or to improve ensure quality, and control budgets based
land surveying services (especially in on actionable project execution metrics
infrastructure). AI and Machine Learning extracted from field data.
will automate many construction tasks in
unprecedented ways. For instance, there Moving forward
are startups that use AI and an IoT platform Though these technologies are impressive,
on cranes to transform any site into a they will end up being wasted if they are
smart, data-collecting field, automating not accepted and ultimately utilized by
decision-making tasks on-site. the people in charge. They will not simply
catch on. Innovation has led real estate to
Management Tools for the new heights before, and we must be open,
Construction Site receptive, and critical (when necessary)
A large amount of construction waste to technology that could further improve
is due to poor management. 38% of the industry. COVID-19 will probably end
construction management professionals like other pandemics before. However,
consider poor processes and procedures global warming is quite another story.
to be a vital cause of technology failures4. When it will hit, it will hit hard, and with long
45% report that they spend more time lasting consequences. Innovation and the
than expected on non-optimal activities5. implementation of new technologies could
Adopting many of the emerging digital be our ”vaccine” to help us prepare for the
technologies on-site could enhance the next crisis to come, and enable the real
rise of smart project management. These estate construction industry to thrive.
technologies, combined with real-time
data, could enable ground field managers
to make better informed decisions around
scheduling labor and materials for a
particular project.

4 https://jbknowledge.com/2019-construction-technology-report-survey
5 https://www.plangrid.com/ebook/construction-disconnected/

19
Real Estate Predictions 2021 |
 The virtual office for Corporate Real Estate

The virtual office for

Corporate Real Estate
Where right sized
workforce meets
best fit workplace
The widespread adoption of remote working in 2020 has greatly shifted the role of the
workplace within organizations. All indications point to a future where hybrid working
is here to stay, as employees reap the benefits of greater choice in their working week
and employers re-examine their real estate requirements. So how do real estate
owners respond as the virtual office becomes a key component of working in the
”new normal”?

Remote working is nothing new shorter commuting times and the chance building spaces equipped with a multitude
Although the transition into remote to spend more time connected to their of sensors are providing organizations with
working during 2020 has been tough for local area and its people and businesses. increasingly large volumes of real-time data
individuals, teams and organizations, it’s Organizations will look to a distributed on their workspaces. The more data-rich
nothing new. Since at least the peak oil real estate model, diversifying their office our spaces become, the greater value
crises of the 1970s organizations have space mix across both a central CBD hub we can extract from them, driving up the
been grappling with the idea of both and co-working spaces or smaller offices in cost per square meter of premium smart
geographically distributed and remote suburban and regional areas. This will allow offices. Organizations will need strategies
working. Advancements in personal staff to leave their homes to experience to effectively utilize this data to extract
computing and the internet have meant a greater separation between home maximum value, resulting in a shift from
there have been few technological and work life and connect socially with a ‘set and forget’ approach to workplace
barriers to this phenomenon. COVID-19 colleagues, while avoiding long commutes. design of the past to make spaces hyper-
has ultimately been the trigger for a This makes a lot of sense as people also flexible and responsive to real-time needs.
widespread shift to take place, as an become increasingly aware of climate Concurrently, cyber will play an increasingly
enforced critical mass of remote working change and make conscious decisions to important role in organizational data
to prioritize worker safety has forced us to reduce their carbon footprint. Office spaces security across the virtual office, enabling
overcome the perceived cultural barriers must be smart and flexible enough to an efficient, hybrid workforce to work
towards it. Now that remote working has facilitate these changes, as data becomes a securely.
become largely normalized, the traditional critical component of workplace innovation.
notion of a workplace could be changed Best practice: Australia’s Virtual Office
forever. Data is crucial Our own thinking in this space comes as a
Data has a crucial role to play in the result of the success of Deloitte Australia’s
Reimagining the role of the office emerging workplace, driving the success Virtual Office. A small, dedicated team was
Mass adoption of remote working offers of spaces, just as it does for the digital created during mid-2019 with a human-
organizations the chance to reimagine world. Workers will need to be equipped centered approach to first understand
the role of the office in a new real estate to seamlessly transfer between physical and then deliver solutions for the remote
operating model. 2020 has witnessed and virtual settings to work effectively working needs of the firm’s staff. Providing
the rise of the local community: a trend with colleagues regardless of whether or greater optionality to the staff was a key
which looks set to stay, as people enjoy not they’re physically co-located. Smart driver for the team’s work, providing key

20
Real Estate Predictions 2021 |
 The virtual office for Corporate Real Estate

21
Real Estate Predictions 2021 |
 The virtual office for Corporate Real Estate

resources, training and information to uplift

our staff’s remote working experience,
regardless of where they choose to work
from, including the new Melbourne and
Pyrmont office spaces.

The time to embrace change is now

As the dust settles on a tumultuous year,
the one factor that’s emerging loud and
clear is the groundswell of support for
hybrid working to continue into a post-
pandemic future. With remote working
experience under the belts of nearly every
organization globally, the time to embrace
change is now. Real Estate operators can
get ahead of the curve, adapting traditional
approaches by reimagining the role of
the office and their operating models by
keeping employee choice, community
and data front of mind. Hybrid working is
here to stay, and those that embrace the
resulting changes will reap the rewards.

Authors
Robbie Robertson
Partner | Customer Strategy &
Experience Design | AU
rorobertson@deloitte.com.au

Rowan Muller
Consultant | Customer Strategy &
Experience Design | AU
romuller@deloitte.com.au

Contact
Alex Collinson
Partner | Assurance & Advisory | AU
acollinson@deloitte.com.au

22
Real Estate Predictions 2021 |
 Real Estate-as-a-Service: From “product and space” to “system and service”

Real Estate-as-a-Service:
From “product and
space” to “system
and service”
A new business model for
commercial real estate
Real estate is undergoing a fundamental business model redesign enabled by
digitalization and a growing market of smart buildings. A redesign that is important in
a (post) pandemic era when so many businesses are evaluating what their property
brings to the company by providing on-demand, customizable and scalable access to
space, amenities and services. What business model will be successful in the future?
What can the real estate industry learn from tech? What is Real Estate-as-a-Service?
And what is the impact on strategy and organizational performance?

In a world of bits and bytes, the value of The evolved Real Estate value as opposed to monetizing the product.
Real Estate for businesses is increasingly proposition REaaS generates revenue based on the
determined by a different yardstick. Square In the era of the ”new normal”, work outcome of improved experience and
footage is being replaced by data, and doesn’t strictly depend on office space. productivity. These improvements are
services that enable work are taking the The function of corporate real estate has provided to the occupants working in the
place of the traditional space to work. therefore evolved from somewhere to connected building, where each digital
Where the adage for property value once work, to a workplace that enables users service to support outcomes is charged for
declared: location, location, location, the to perform better than they would do on demand.
reality of today’s real estate is location, anywhere else. It is a place of high impact
insights, experience. To unpack this further, and superior experience, offering a curated Lessons from the tech industry
property owners need to consider how the and scalable ”homefield advantage” To understand the evolved business
space is being used, not whether it is being to businesses, and transforming real model, the real estate industry can learn
occupied. Real Estate-as-a-Service (REaaS) estate from a ”space to work” into a new ways to generate revenue from the
creates the conditions for property owners ”business tool”. tech industry. Internet-based and physical
to ask themselves what the real value of ”sites” have similar requirements: people
their property is. REaaS, an innovation Updating the business model: amassed in a single location in need of
that is being enabled through smart and becoming a service provider a personal outcome with predictable
connected buildings, augments bottom line Enter “Real Estate-as-a-Service”, or frequency. ”Locality” is leveraged to
benefits from savings to new revenue and ReaaS. The term “As-a-Service” became support experience, productizing the
shifts the value focus from offering space mainstream through high-speed user rather than the infrastructure. Value
to offering digital and physical services connectivity whereby technology emphasizes rendering services to support
to users. companies leveraged their infrastructure what people do and how they do it, instead
and software, offering an alternative model of just where they do it. Real estate is
for use by targeting consumer behavior, therefore transformed from ”fixed product”

23
Real Estate Predictions 2021 |
 Real Estate-as-a-Service: From “product and space” to “system and service”

24
Real Estate Predictions 2021 |
 Real Estate-as-a-Service: From “product and space” to “system and service”

(space and infrastructure) to ”connected to take direct control of provisioning the Author
system” (information and services). infrastructure that is typically fulfilled by Marco Macagnano, Ph.D.
a tenant as a part of their initial fit-out. Senior Manager | Smart Real Estate
Smart building: connecting users and This creates a technological backbone Leader | ZA
occupants to services that not only renders basic connectivity mmacagnano@deloitte.co.za
The location where people work is de- and functionality (e.g. lighting and Wi-Fi),
prioritized, whereas the smart building but also helps tenants to improve their
connects users and occupants to services, organizational performance – by means
so that work becomes more advanced and of data about how the space is being used
connected to benefit the business. User and by whom.
output is monetized through services that
leverage the physical infrastructure as an Digital Masterplan and
enabler. This fundamentally changes the Platform Strategy
business model of property owners who To exploit the potential offered by REaaS,
are now in the position to become service a Digital Masterplan and Platform Strategy
providers as custodians of physical and is required. This masterplan can act as the
digital infrastructure. architectural design for smart buildings,
avoiding the pitfalls of capitalizing separate
Understanding digital services point-solutions that provide limited
in real estate benefits outside of core functionality.
The smart building creates conditions to
aggregate and contain all building data. A masterplan will:
These are used for targeted analytics
to inform decision-making. The data is • align the connected building to the
contained within a digital platform and enterprise architecture of the tenant or
can therefore be leveraged to provide occupant
customizable features and services.
A service is defined as the provision • define and design what data is required,
of information that is contextual or how it is generated and analyzed
personalized to any customer or user. A
digital service is one that is commoditized • support the revenue model, and
and provided electronically across multiple
platforms such as internet or mobile • determine the infrastructure required
devices. Digital services include e.g. insights to support the digital agenda and the
through analytics, features and facilities features that support the digitally
rights management, location-based augmented Real Estate.
services, and a digital marketplace for
third parties. They can be monetized in REaaS combines and cross-leverages
various ways, offering additional revenue capabilities across systems to enable
to property owners and tenants – e.g. by platform-based features and analytics that
means of subscriptions, consumption- were not possible before. This platform
based models, data monetization, API unlocks the potential to sell these features
monetization, digital marketplace, and and services to end-users. This will enable
marketing & advertising. businesses to quantifiably improve their
experience, productivity, and space usage,
Improving organizational performance and it will help property owners transform
In order to deliver a digital service, the from their “product and space” offering to a
provider must be in control of the flow of new value-adding and future-proof role as
data to the end device that benefits the a service provider.
user (e.g. a mobile device, lighting, or audio
visual equipment). In real estate terms,
this will incentivize the property owner

25
Real Estate Predictions 2021 |
 The impact of social good on real estate

The impact of social

good on real estate
ESG as a value driver for
real estate
“ESG”, the generally used acronym for “Environmental, Social and Governance”, has
become an important business consideration all around the world. For instance, real
estate investors have an increasing focus on sustainability. However, ESG in real estate
can be so much more impactful. How can it become an important value driver?

ESG and real estate to also adhere to investors’ needs. Another ESG and infrastructure
Once upon a time, real estate embodied indication is the increased participation in Obviously, real estate and infrastructure
the epitome of capitalism. The trend, the 2020 GRESB real estate assessment. are closely related. For example, the real
however, is growing quite the opposite This is the investor-driven global ESG estate industry is a major consumer of
way. The application of ESG standards on benchmark and reporting framework energy. Therefore, the construction of
real estate (notably by governments and for listed property companies, private more sustainable buildings, e.g. by means
developers in many developed countries) property funds, developers and investors of new eco-friendly materials or smart
has shown that this asset class is also that invest directly in real estate2. ESG is technological heating or ventilation, not
relevant when these guiding principles therefore here to stay and will increasingly only helps the environment, but it also
are being applied. Awareness is growing shape and influence real estate valuation, boosts the return of the respective real
that real estate can have a significant and therefore real estate investment, estate investment, improving investment
social impact either through the form of as investors wish to allocate their performance. Governments around the
rehabilitation of public spaces (indirectly commitments under this banner. world are increasingly fostering these
attributing value to existing real estate), new construction methods to improve
affordable housing, social housing, and Impact on the community the carbon print of cities and emissions
care centers, or through an environmental However, the impact of ESG on the mitigation. As such, it is also relevant to
focus investment on new buildings such as real estate industry goes beyond what take a quick look at the impact of ESG
green buildings. is mentioned above. ESG, aside from in infrastructure.
fostering eco-friendly buildings, also
Vital for investors allows space to include considerations
The correlative appetite that investors
have for ESG, closes the loophole where
about the impact of properties on the
community, covering aspects like diversity. “Sustainability is
more (long term) value is attributed to The real estate industry must respond to
real estate assets. Medium-to-long term
profit is therefore considered and kept
this challenge by creating opportunities
through social impact investing, like multi-
here to stay or
with the usual lower risk volatility of a real
estate asset. Sustainability has become
tenant shared spaces or the transformation
of underutilized buildings into enthusiastic we may not be”
increasingly vital to real estate investors. venues. In practice, the major obstacle is
This is evident from the development that investors will need to reinvent their Niall FitzGerald
of the Sustainability guidelines of the traditional investment models to match the
European Association for Investors in needs of the local community.
Non-Listed Real Estate Vehicles (“INREV”)1

1 https://www.inrev.org/guidelines/module/sustainability#inrev-guidelines
2 https://gresb.com/2020-real-estate-results/

26
Real Estate Predictions 2021 |
 The impact of social good on real estate

27
Real Estate Predictions 2021 |
 The impact of social good on real estate

Overcoming new infrastructural  tourism: project Oasis Eco Resort the lockdown, site visits were hampered.
challenges which aims to build a sustainable At the same time, many transactions were
Implementing an efficient ESG-focused complex in the middle of the put on hold as this pandemic seems to be
infrastructure system is vital for desert shifting people’s demands for use of real
undeveloped countries – it provides access assets, such as an increase in the search
to the most basic services like energy  housing: project Martian city for bigger houses with gardens outside the
and water for the community. Also, for aimed at building houses in urban areas, due to working from home.
developed countries, it may help to face the desert for 600,000 people As much as the pandemic has slowed
new challenges, such as the increase as a start for a 100-year Mars down economies and the real estate
of population in urban areas and the colonization plan industry activity, the positive side of it is
environmental concerns. Additionally, the wake-up call for investors to prioritize
ESG standards are already proving to be  energy: a mega solar park with sustainable investments.
decisive in infrastructure closings. This is the aim of making Dubai an eco-
because investments are beginning to face friendly powerhouse The environmental factor
community oppositions, which is often In particular, COVID-19 has brought out
due to the lack of ESG considerations,  security: development of self- the environmental factor by enhancing the
resulting in costly delays or changes to the driving police cars. urgent global need to decrease pollution
initial project. and improve precarious sanitation
systems. In fact, the initial slow start of the
Smart cities Singapore is also a pioneer in this field. adoption of ESG standards was probably
Another expression of the ESG impact It has introduced the broader concept built on the erroneous perception that
on infrastructure is the so-called “Smart of smart nation4. Some examples of focusing on positive social impact would
cities” initiative, which refers to urban ESG tech innovations in Singapore are reduce financial return. It is becoming
areas for which different innovative the development of a cashless public evident that it is indeed the opposite.
technological methods are designed. The transport, the digital engagement and
output generated by such methods (e.g. in transformation of healthcare (“Telehealth”), The social factor
the form of data or statistics) can assure the development of a platform used as However, the major spotlight is on the
that city infrastructure is managed and a channel between schools and parents social factor: COVID-19 seems to be
organized more efficiently. Most of these (“Parents Gateway”), and the development reshaping how the community should
methods are nowadays designed to allow of “Lamppost as a Platform”, i.e. a project interact and behave from now on,
ESG guidelines to span across the life of a which aims at maximizing the use of street which also calls for a revaluation of the
city, in the respective assets, community lampposts to monitor changes related current transport, technology and health
services and resources, including better to environmental conditions, installation infrastructures. This said, more than ever,
(and greener!) transportation, improved of cameras to analyze crowd build-ups it is key that millennial investors - as well as
communication networks, optimization of and better monitor to increase safety in governments - not only focus on traditional
energy consumption, water supply, crime public spaces. financial metrics but also on their ESG
detection and waste. performance in order to create a positive
Finally, Luxembourg is also moving towards long-term impact.
Some examples: Dubai, Singapore, the concept of a smart nation. For a more
and Luxembourg specific analysis on the digital innovations Recent global developments
A successful example of a smart city is on our jurisdiction, please see Deloitte’s This reality brings us also to the
Dubai3, which is tech-innovative in various article on this topic5. consequent topic of a global increase of
sectors. A few examples: guidelines and regulations related to ESG
The backlash from COVID-19 investments. The United Nations have
 transportation: development It is relevant to understand how these outlined 17 sustainable development
of the first hyperloop between concepts will develop in the midst of a goals in the UN 2030 Agenda for
Dubai and Abu Dhabi and of worldwide pandemic. There is no doubt Sustainable Development, which must be
autonomous air taxis that the current pandemic has so far achieved for a more global sustainable
affected how stakeholders look at vested future. Also, these goals represent the
assets and has slowed down further (real current challenges worldwide: poverty,
assets) investing. COVID-19 has severely inequality, climate change, environmental
impacted real estate valuations. Due to degradation, peace and justice6.

3 https://scgn.smartdubai.ae/
4 https://www.smartnation.gov.sg/
5 https://www2.deloitte.com/lu/en/pages/public-sector/articles/luxembourg-towards-smart-nation.html
6 https://sustainabledevelopment.un.org/post2015/transformingourworld

28
Real Estate Predictions 2021 |
 The impact of social good on real estate

By adopting the Paris Agreement on how they operate and manage social and should ensure that the fund management
climate change7 and the UN 2030 Agenda environmental challenges.14 is aligned with their intended positive
for Sustainable Development, the social impact. At Deloitte we are looking
European Commission developed an Action More developments forward on embarking on this journey
Plan in March 2018 on different measures Another recent development is the fact with our clients to achieve a successful
regarding financing sustainable growth8. that there are countries that already “sustainability-proof” business.
officially recognize that climate change
Transparency represents economic uncertainty and risk. Authors
As part of the Action Plan, Regulation One of them is the US, where the Federal Francisco Da Cunha
(EU) 2019/2088 on sustainable Finance Reserve included climate change in their Partner | Tax M&A | LU
Disclosure regulation (SFDR) was published, list of financial stability risks (including real fdacunha@deloitte.lu
which aims to provide more transparency estate) in the Financial Stability Report
on the degree of sustainability of financial of November 2020.15 Some countries Filipa Belchior Coimbra
products, to channel private investment are exploring the green bonds market, Assistant Manager | Tax M&A | LU
towards sustainable investments while such as Luxembourg and Germany. In fbelchiorcoimbra@deloitte.lu
preventing green washing9. Its phase-in this respect also note that the European
implementation will start on March 10, Green Deal Investment Plan of January
2021. As a complement of this Regulation, 14, 2020 announced that the Commission
the European Supervisory Authorities will establish an EU Green Bond Standard
have developed a Joint Committee (GBS).16 Finally, the European Union is
draft Regulatory Technical Standards currently reviewing the regulation for
(RTS) on ESG disclosures, for which a the collective investment vehicle, the
Consultation Paper was published in April European Long Term Investments Funds
2020, seeking input on proposed ESG (“ELTIFs”). ELTIFs are funds that attract
disclosure standards for financial market institutional and private funding to channel
participants, advisers and products.10 their investments into long-term assets,
Luxembourg is already taking relevant including real estate assets such as nursing
steps in this respect, such as the recent homes, schools, prisons, and social
CSSF communication issued on December housing. As such, ELTIFs can be a vehicle
16, 2020 on regulatory requirements and to enhance the access to ESG-focused
fast track procedure in relation to the SFDR investment.17
Regulation.11
A successful “sustainability-proof”
European Commission business
Also as part of the Action Plan, last This said, it is expected that the regulation
November the European Commission around ESG should continue to increase in
launched a public consultation12 on some detail. Investors will probably be impacted
of the criteria for determining which by ESG-related legal and regulatory
economic activities can qualify for the disclosures, for which proper advising from
classification system for sustainable experts may be needed. Also, there is no
economic activities under the European doubt that the global real estate market
Taxonomy Regulation13 that focus on is already aware that ESG principles are
climate change mitigation. Furthermore, key for sustainable investments. In fact,
the European Union published a Directive sustainable investing could soon become
back in 2014, which requires big companies the standard way of investing. In order
to disclose certain information about to achieve this, real estate investors

7 https://unfccc.int/sites/default/files/english_paris_agreement.pdf
8 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52018DC0097
9 https://eur-lex.europa.eu/eli/reg/2019/2088/oj
10 https://www.esma.europa.eu/sites/default/files/jc_2020_16_-_joint_consultation_paper_on_esg_disclosures.pdf
11 https://www.cssf.lu/en/2020/12/communication-on-regulatory-requirements-and-fast-track-procedure-in-relation-to-regulation-eu-2019-2088-on-the-
sustainability-related-disclosures-in-the-financial-services-sector/
12 https://ec.europa.eu/commission/presscorner/detail/en/mex_20_2176#3
13 https://eur-lex.europa.eu/legal-content/EN/TXT/?toc=OJ%3AL%3A2020%3A198%3ATOC&uri=uriserv%3AOJ.L_.2020.198.01.0013.01.ENG
14 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32014L0095
15 https://www.federalreserve.gov/publications/files/financial-stability-report-20201109.pdf
16 https://ec.europa.eu/commission/presscorner/detail/en/fs_20_48
17 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32015R0760

29
Real Estate Predictions 2021 |
 Understanding Private Rented Sector property

Understanding Private
Rented Sector property
Solving the structural
need for rented housing
in the main capitals
One of the megatrends in real estate is the need for rented housing in the main
capitals. COVID-19 has accelerated this trend. The reasons behind the increased
demand are the rising population, the fall in the average number of people per
household, restrictions on financing combined with decreasing savings ratio and
changes in habits. However, there is an insufficient and inadequate stock of rental
housing, so a specifically designed product must be developed to match demand and
offer new real estate opportunities.

Housing is a fundamental right that is Graph 1. Population trend of the main cities and the EU-28 (Y-o-Y)
included in the constitution of the EU and
1.8%
in those of its member states. Over the
last few years, the demand in the rental 1.6%
market has increased dramatically, not only 1.4%
in Europe but also in the rest of the world. 1.2%
This is a result of population increases in
1.0%
the main urban areas and the rise in the
0.8%
number of households due to the decrease
in their average size. 0.6%

0.4%
Another contributing factor is the greater 0.2%
difficulty of access to the housing market 0.0%
due to financial restrictions and increasing 2016 2017 2018 2019
prices and changes in life habits, especially
among the new generations. EU-28 Berlin Madrid Milan London (greater city)

Source: Eurostat
As a consequence of the structural
lack of balance in supply and demand,
the PRS (Private Rented Sector) market Megatrend: Household growth in main 01. the megatrend of population growth in
is expanding. In particular, there is capitals the main capitals (see graph 1),
an imbalance (shortfall) in social and By 2050, 70% of the world population will 02. a continuous household creation in the
affordable housing. The market requires be living in cities. The increasing demand main countries of the EU (see graph 2)
new solutions to respond to these for housing in these cities will be driven by and,
urgent needs. There will be a significant three main factors: 03. a declining number of average persons
capital allocation to this asset class in the per household (see graph 3).
coming years.

30
Real Estate Predictions 2021 |
 Understanding Private Rented Sector property

31
Real Estate Predictions 2021 |
 Understanding Private Rented Sector property

This is triggering the need for additional Graph 2. Number of households variation (2009 =100)
housing units that are smaller in size and
115
adjusted to current needs.
110
The trend towards rental
Disposable income and effort rates are key 105
in the shift towards the PRS market, driven
by macroeconomic variables such as GDP 100
per capita, employment and the savings
rate. The increasing property prices in city 95
centers, as well as restrictions on financing,
mobility and changes in consumer habits 90
have structurally enhanced the rental 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
demand in Europe (see graphs 4 and 5).
EU-28 Germany Spain
Affordable housing: accelerated by
France Italy United Kingdom
the crisis
The rental market across Europe is Source: Eurostat
concentrated around young and low-mid
income tenants. The global financial crisis
has eroded economic growth, impacted Graph 3. Average household size of the main countries and the EU-28
employment and led to containment in
salary growth, which has increased the Spain 2.5
2.7
demand from these tenants. Salaries in
the EU countries rose with an average of 2.3
United Kingdom
1.9% per year between 2014 and 2019, 2.4

while the price of housing rose by 3.8% on 2.3

Italy
average during the same period. This trend, 2.4

combined with a decreasing savings ratio, is 2.1

France
shifting demand from purchasing towards 2.2
rental. The recession and economic
Germany 2.0
uncertainty caused by the COVID-19 2.0
pandemic has accelerated this trend.
EU-28* 2.3
2.4
“Build To Rent” as a need
The need to develop an adequate housing 2019 2009
stock that is specifically designed to meet Source: Eurostat
rental market demand needs has led
developers to use a significant portion of
their stock of land to “Build To Rent” (BTR). Graph 4. % households renting in EU-28
Turnkey and forward purchase agreements
have become an emerging trend. In Spain 31 30.8 30.8
30.7
alone, the investment pipeline for rental
platforms exceeds 30,000 units. BTR will 30.5
continue to be a real estate trend through
2021 and beyond.
30

29.5
29.4
29.5

29

28.5
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: Eurostat

32
Real Estate Predictions 2021 |
 Understanding Private Rented Sector property

Opportunities for investors Graph 5. % households renting in EU (2019)

PRS offers an attractive risk-return profile
60
based on the yield premium compared to
48.9
risk-free (at maximum levels in the present 50
context of interest rates). It has proven to
be a more resilient asset class in times of 40 35.9 34.8
31.1 30.8
crisis, with a lower performance volatility 27.6
30 26.1
due to granularity. In certain markets, 41.1 23.8
19.5
limited institutional competition presents
20 29.7 22.2 13.2
a clear opportunity for the development 19.0
30.2 15.8
and consolidation of platforms. If BTR is 10
16.4
going to be structural, the key for investors 8.6 8.7
12.9
7.8 5.1 8.0
0.8
is to ensure the operational capabilities 0
(end to end) for the successful execution Germany France United Netherlands EU-28 Italy Portugal Spain
Kingdom
of the investment strategy - sourcing,
development and operation. Rent at reduced price or free Rent at market price Total rent

Source: Eurostat
Large investors, such as large investment
managers, insurance companies and
sovereign funds, are already taking
advantage of key strategic markets,
confirming the megatrend and converting
PRS to the main asset class in the future.

Authors
Alberto Valls
Partner | Real Estate | ES
avalls@deloitte.es

Contacts
Joaquín Linares
Partner | Real Estate | ES
jlinares@deloitte.es

Pedro Fuster
Director | Real Estate | ES
pfuster@deloitte.es

33
Real Estate Predictions 2021 |
 Optimizing your use of office space and real estate footprint

Optimizing your use

of office space and
real estate footprint
The time to prepare for
the future of work is now
COVID-19 has accelerated new ways of working, which in turn will impact the use of
office space. What are the implications for the real estate industry and corporates?
What opportunities will arise? How to prepare the property portfolio for a more agile
future of work? The urgency is clear: the time to act is now.

New ways of working corporates, it is an opportunity to reduce 04. Agility also requires the implementation
Within only a few months, the pandemic their operating costs and overall property of digital tools, such as Integrated
has disruptively anchored new ways of costs (e.g. rent, service charges, taxes, and Workspace Management System, desk
working around the world. The glass CAPEX), as well as business travel, energy booking, and digital concierge services.
ceiling of telework has been pierced in consumption, and carbon footprint. This This will enhance the user-experience
all organizations. From now on, each is also an opportunity for the property for employees, who will be able to book
corporate is seeking its own standards in industry, including local authorities, as to meeting spaces, workstations, parking
terms of work organization. The matrix the redevelopment of obsolete buildings. spaces, or meal delivery.
approach is one of the most effective
standards. It offers a combination Agility and flexibility Enhancing the property portfolio
of several factors: the evolution of Several consequences are now foreseeable, This momentum represents an opportunity
avocations, the adaptability of resources with companies seeking greater flexibility: to enhance corporates’ property portfolio.
and skills, the configuration of places For instance, a switch to “flex office”
and spaces according to uses and needs. 01. During negotiations with real estate (with unallocated workstations, fewer
This unprecedented context strongly owners, tenants will aim to reduce the than the number of employees), with a
encourages corporates and their teams, fixed commitments, increasing break rate of 30 to 50%, can save up to 40% of
to forge themselves convictions about options and the possibility of subletting, space, crystalizing material savings (e.g.
the motivations for commuting to the in spite of potentially less attractive rent, charges, taxes, CAPEX, and OPEX).
office every day. Each employee, visitor, or financial conditions. For example, a shift to flex office could
partner will seek an experience through 02. Third spaces, including co-working reduce an initial surface area of 10,000 m2
adapted digital tools and facilities, which spaces, will fulfill several aspects of the to 5,900 m2 in the Paris business district
will allow an immersion in a dedicated needs, e.g. the agility to consume or of la Défense. This would generate an
work ecosystem. reduce workspaces with the possibility annual saving of about € 2 million. In the
of very rapid adaptation, and welcoming case of a French standard 9-year lease
A reduction of real estate footprint and adapted spaces for employees (including the subscription to co-working),
Inevitably, companies are moving towards close to their homes or a client. this would amount to roughly € 18 million.
a reduction of their real estate footprint, 03. The birth of “corpoworking”, based On the scale of a property portfolio,
for instance by sharing work positions and on the sharing economy and a more this optimization of operating costs can
through the reconfiguration of premises dynamic HR management strategy, be substantial.
to promote collaborative, informal spaces which allows employees to access
and the reception of visitors. The effects workspaces with no restriction enabling
could be beneficial from several angles. For the access of other companies.

34
Real Estate Predictions 2021 |
 Optimizing your use of office space and real estate footprint

35
Real Estate Predictions 2021 |
 Optimizing your use of office space and real estate footprint

Starting off from work situations, quality of the employee’s experience and requirements of the business...

Client
Home
office

Meeting Production Meeting Production

Cowork-
ing

Innovation & Informal Informal Creation &

Third
collective exchanges exchanges places
individual
intelligence thinking

CONVENTIONAL REMOTE WORK

OFFICE Trip

Finding the right balance

New spaces several questions, such as: what are the scenario), or considering a potential search
Combined with a reduced footprint, reasons for going to this workplace? How for new premises, leaving one or more
corporates are facing market momentum can I keep my employees committed? What historical premises (the “move” scenario).
to take on new space. Record construction flexibility do we require in the organization
activity in office buildings together with of work? What will be the impact on Anticipation is key
a slowdown in take-up has put pressure the performance of my teams? This will For such a structuring project for a
on rent (both headlines and economic) enhance the right balance between face- corporate the key word is “anticipation”.
in a number of submarkets. This puts to-face and distance and help to optimize Deadlines may seem far away, especially
corporates in some submarkets in a strong occupation ratios. A set of specifications the milestone dates for lease maturities,
position to negotiate for new spaces and covering all the parameters will constitute but such an optimization project, that will
for amending existing lease terms. the priorities that must be respected impact working methods, requires iterative
during the following steps. and collaborative exchanges with all
How to set up an action plan stakeholders. The world has seen a glimpse
01. Diagnosis 03. Strategy of the future of work in this COVID-19 era.
First of all, a comprehensive knowledge of The cross-referencing of all these data, What does this mean for the real estate
real estate occupation in all its dimensions combined with the objectives and industry? Real estate owners and their
is vital. For instance, insight into the terms constraints linked to the corporate’s tenants who want to thrive in the near
of the leases (to detect the negotiations strategy, will enable various options. future, know what to do. It’s time to act.
levers, break option and expiry dates), The construction of the scenarios or
occupancy ratios (workstation/m2), business plans and the corresponding Author
workforce, building efficiency ratios, total financial modelling will enhance Bruno Amsellem MRICS
annual cost (per workstation and per m2), performance management. These business Partner | Real Estate Advisory | FR
technical due diligence (CAPEX plans), fit plans will also enable the inclusion of bamsellem@deloitte.fr
out charter, and teleworking charter. market trends on a dynamic basis.
Contact
02. New reference system In this way, it will be possible to identify Olivier Gerarduzzi MRICS
The change to new ways of working must a priority path: either renegotiation of Director | Real Estate Advisory | FR
respond to concrete needs. Each person the current conditions with a potential olgerarduzzi@deloitte.fr
has their own set of rules, which will answer surrendering of extra space (the “stay”

36
Real Estate Predictions 2021 |
 Protecting your identity in the digital world

Protecting your
identity in the
digital world
Self-Sovereign Identity
and Real Estate
Identity is the essence of every individual. It defines who we are and differentiates us
from others. In our societies, governments register our identities and issue proof of
them in the shape of passports and drivers licences. If we were not able to prove our
identity, this would impact almost everything we do, from going to the doctor, opening
a bank account or renting a car to buying real estate property.

Protecting (proof of) our identity is 03. Access. Users must have access to their bank or buyer and seller, due to potential
extremely important in our society. own data. conflicting interests between parties in a
However, we all rely on our government 04. Transparency. Systems and algorithms real estate transaction.
institutions to do so, without having control must be transparent.
over our identity ourselves. But if we are 05. Persistence. Identities must be Example
in a sense the subject of our identity, why long-lived. For example, the buyer wants to make
shouldn’t we be in charge? Particularly in 06. Portability. Information and services sure that the seller is indeed who he says
the digital world, identity theft or misuse about identity must be transportable. he is, that he is indeed the owner of the
is a serious risk, and interactions and 07. Interoperability. Identities should be as real estate object and that he is entitled
transactions in the digital world have a widely usable as possible. to sell the real estate object. Similarly, the
serious impact for us in the real world. Self- 08. Consent. Users must agree to the use seller wants to make sure that the buyer
sovereign identity is all about control over of their identity. is indeed who he says he is, that he has
our digital identity. 09. Minimalization. Disclosure of claims the funds to buy the real estate object
must be minimized. and that the funds come from a legitimate
The concept of self-sovereign identity 10. Protection. The rights of users must source. Today, these assessments require
Self-sovereign identity could be defined be protected. statements and proofs from governments,
as a model for managing digital identities notaries or lawyers, land registries and
in which an individual or business has Relevance for the real estate industry banks. Issuing, collecting, sharing and
sole ownership over the ability to control What are current challenges and concerns verifying these proofs and statements,
their accounts and personal data. The ten with respect to the use of digital identities make these processes often inefficient for
principles of Christopher Allen1 are widely in real estate transactions? First of all, all parties involved.
adopted as the basis of the self-sovereign interactions with individuals around
identity concept: real estate are often very complex and Concern about personal data
time-consuming, with a large amount of Secondly, individuals are increasingly
01. Existence. Users must have an paperwork. These processes are designed concerned about their personal data.
independent existence. the way they are because of trust issues For instance, 58% of Dutch citizens is
02. Control. Users must control between landlord and tenant, owner and concerned about privacy in general and
their identities.

1 http://www.lifewithalacrity.com/2016/04/the-path-to-self-soverereign-identity.html

37
Real Estate Predictions 2021 |
 Protecting your identity in the digital world

38
Real Estate Predictions 2021 |
 Protecting your identity in the digital world

88% wants more control over the data they verify all the documents. However, if John risks in today’s processes. In fact, major
provide to companies.2 Also, organizations used a self-sovereign identity solution, he steps were taken in the development of
are increasingly concerned about all the could collect credentials about his income self-sovereign identity solutions in 2020.
personal data they process from their from his employer, his bank or the tax An interesting example of its current
clients because of the reputational and authorities in his digital wallet (or holder application is the sharing of proof of a
regulatory risks involved. app) on his smartphone. He could review negative COVID-19 test or vaccination
his credentials in his digital wallet and also that Deloitte and others are working on.3
How self-sovereign identity can solve perform an income check based on the Experiments and pilots with self-sovereign
these challenges criteria shared with him by the landlord. As identity solutions in real estate in 2020
So how could self-sovereign identity solve a result, John would be able to share proof have shown to be very promising. We
these challenges and concerns? Let’s take that he is creditworthy. therefore expect that self-sovereign
a look at the example of John who wants identity solutions will be dominant in real
to rent a house. Before doing so, John Self-sovereign identity as a game estate transactions within two to three
needs to prove to the landlord (amongst changer for the real estate industry years.
others) that he is credit-worthy to pay the Will self-sovereign identity disrupt the
rent. Today, John would have to provide way real estate transactions are being Author
e.g. an income statement, bank account executed? We are without a doubt standing Gijsbert Duijzer
details, and tax statements. This means on the brink of a completely different Director | Real Estate
he would share more personal data than way of personal data sharing, driven by NL
necessary, and the landlord would have to inefficiencies and privacy compliance gduijzer@deloitte.nl

Bank / Employer /
Landlord
Tax authority

Wallet

1 3

Income Proof of
credentials creditworthiness

2 https://ddma.nl/download/81646/
3 Deloitte is involved in different initiatives around self-sovereign identity, particularly in the real estate industry, e.g. with regard to solutions for rental, sale
and mortgage processes. Deloitte is also involved in creating standards around a common self-sovereign identity infrastructure.

39
Real Estate Predictions 2021 |
 Improvise. Adapt. Overcome. How to cope with the impact of climate change

Improvise. Adapt.
Overcome. How to
cope with the impact
of climate change
Climate adaptation
strategies and real estate markets
Climate change has consequences for nature, people, and therefore also real estate.
Mitigation and adaptation are strategies to deal with the potential risks of climate
change. What is the impact of climate change strategies on the future of real estate,
in terms of markets, planning, construction, and renovation?

Strategies for reducing and managing the

risks of climate change can be divided (Inter)national level
into mitigation and adaptation strategies.1
Mitigation deals with the causes of climate
change by reducing emissions. Adaptation
is about dealing with the unavoidable
physical impacts of climate change, such as
heavy rain fall, heat, draught, subsidence, Returning land
Spatial planning
and flooding. These posed impacts can to the water
Existing buildings

occur at different levels and have various

New buildings

consequences. Four different strategies

can be applied: returning land to the
water, spatial planning, renovation, and
construction.

Returning land to the water

Due to increasing flooding risks, some Renovation Construction
areas will likely no longer be suitable for
living, working and leisure, somewhere in
the future. This challenges the long-term
strategies for such areas.2 Other examples
are urban deltas such as Bangladesh,
South Korea and The Netherlands, which Building level
are threatened by flooding, heavy rainfall
and storms.3

1 OECD (2015), Climate Change Risks and Adaptation: Linking Policy and Economics.
2 For example: the plan to move the Indonesian capital Yogyakarta that made it to global headlines two years ago.
3 An urban delta may be defined as a city home to as many as half a billion people living and working in a deltaic zone where rivers meet the ocean.

40
Real Estate Predictions 2021 |
 Improvise. Adapt. Overcome. How to cope with the impact of climate change

41
Real Estate Predictions 2021 |
 Improvise. Adapt. Overcome. How to cope with the impact of climate change

Pros and cons Construction Final remarks

It could be legitimate to relinquish these Next to the above mentioned two options, Needless to say, each strategy requires a
areas. However, doing so will face political there is a third option: developing new different approach, different partnerships
and societal resistance4, because of the “climate change proof” buildings and urban and awareness of possible complications.
impact on communities, socioeconomic areas. Standardizing climate adaptive In this regard, it remains important to
structures and historical landscapes. In measures such as the installation of always compare short-term solutions with
the case of the urban deltas the economic ”green” and ”blue” roofs and facades long-term solutions. Not just for the benefit
impact is huge, since a large part of (absorbing sunlight and rainwater), using of the real estate owners, but also for its
the GNP comes from these areas. This less glass (smaller windows and thicker users.
far-reaching strategy is therefore only walls) and using a light facade color, are
recommendable when safety is severely some measures to adapt to climate change. Authors
threatened and/or costs of conservation More rigorous ones are building stilt Lennert Middelkoop MSc
are too high. In the course of the 21st houses or floating houses or installing a Partner | Real Estate
century, returning land to the water will fuse box and electrical switches on higher NL
become increasingly unavoidable and floors in flood-prone areas. Depending on lmiddelkoop@deloitte.nl
eventually accepted. Depending on the the measures, this might result in higher
governmental strategies, this will influence construction costs in the short term, but Hielke Bos MSc
real estate markets and investment it will also increase real estate value and Manager | Real Estate
strategies in the long run. societal benefits in the long term, as well as NL
decrease future replacement costs. HielkeBos@deloitte.nl
Planning
Next to” returning land to the water”, Renovation Jouke van Campenhout LLM
another strategy is a renewed approach Probably the biggest challenge for climate- Business Analyst | Real Estate
to” urban planning”, like the planning adaptive real estate is the adaptation of NL
and selection of future construction existing real estate. Property owners will jovancampenhout@deloitte.nl
sites. We see an interesting example in therefore need incentives to renovate their
The Netherlands. More than 60% of the real estate in a climate-adaptive manner.
land area of The Netherlands is prone Examples of these incentives are setting up
to flooding.5 This concerns the entire a (revolving) fund, providing government
Randstad area, with cities like Amsterdam, subsidies and/or (favorable) loans, and
Rotterdam, The Hague and Utrecht, where specific regulations. Also, informing
more than half of the Dutch population is property owners of the possibilities of
living and working.6 Planning for growth in climate-adaptive measures (e.g. how to
peripheral areas (especially in the higher create green gardens) is essential. In The
Eastern and Southern areas of the country) Netherlands, people are familiar with the
offer a long-term solution. The demand for concept of ”cost recovery”: costs incurred
housing in rural areas is increasing due to for public space (such as squares and
COVID-19 and working from home7, but the parks) can be recovered from real estate
question is whether this constitutes a long- developers in the case of (re)development.
term effect, as a large population growth European equivalents are the ”Community
is still expected in the Randstad.8 Before, Infrastructure Levy” (Great Britain) and ”Taxe
Dutch policies of spreading population and damenagement” (France). It is possible to
(government) jobs over the country did not use this concept in such a way that it is
substantially change people’s preference applicable to real estate developers and
for the (lower and dense) Western part of owners.
the country.

4 For example: in 2018 the Dutch High Council had to decide that the Hedwigepolder (approximately 2 square miles) might be flood, after years of political
and public disapproval.
5 https://www.pbl.nl/publicaties/overstromingsrisicozonering-in-nederland
6 The Netherlands has 17 million inhabitants, of which approximately 9 million live in the Randstad.
7 https://pers.funda.nl/192221-coronacrisis-verbreedt-horizon-van-woningzoekers
8 https://www.cbs.nl/nl-nl/nieuws/2011/41/forse-bevolkingsgroei-in-de-randstad-tot-2025

42
Real Estate Predictions 2021 |
 Protecting your identity in the digital world

43
Real Estate Predictions 2021 |
 Digitalization is here to stay

Digitalization is
here to stay
How to achieve
an effective digital
transformation in real estate
The real estate industry is currently adapting to evolving market conditions, a
changing regulatory environment, and a fast-growing technological landscape. This
development is described in detail in our recent 2019 European Operations and
Technology Survey for Real Estate Investment Managers. A survey that was completed
by a range of European real estate investment and asset managers, from the largest
to the smallest, but that was surprisingly consistent. What can be learned from their
replies? How to achieve an effective digital transformation in the real estate industry?

Key messages from the industry • Increased digitalization of processes elevated and frictionless human
The overwhelming message across Europe and remote access to management experience, real-time relationships,
is that there is a drive to embrace and information is moving to the top of the empowered employees, data-based
exploit digital innovation. More specifically agenda for many more operators in real decisions, on-demand delivery, and
key messages were that: estate. technology-enabled actions and processes.
It is no surprise that the first three
• The level of interest in innovation and • The drive for increased business elements involve people. It is a common
the use of disruptive technologies is resilience, and the need to have misconception that a digital transformation
very strong. managers able to operate in as agile a is all about technology. The success of
fashion as possible, should provide a popular applications is based on the
• Identifying inefficiencies and further impetus for change. level of adoption by people around the
maximizing value across all activities is world, and the agility of the applications in
a common denominator. This viewpoint is further supported by maintaining relevance.
a recent 'Technology and the Future of
• The digitalization of contracts/ Real Estate Investment Management' The impact of digital transformation
documents, big data and data analytics, White Paper1 that stated that ‘as with within organizations
as well as robotic process automation other industries, digitalization is expected COVID-19 has proved the adaptability of
and AI, are increasingly becoming a key to lead to industry concentration’, and businesses to react to the need for rapid
target area for investment. that ‘only 25% of real estate investment change. Remote working, different retail
organizations currently boast an models, the digitalization of contracts, and
• These trends were all evident established data strategy’. enhanced remote global collaboration
before COVID-19 caused a temporary are all examples of how companies have
upending of business life and pushed How to define digital transformation adapted - in some cases almost overnight.
almost all participants into forms of A digital transformation can be Due to this agility they have managed to
remote working. characterized by six main elements: offset some of the business disruption

1 https://medium.com/pi-labs-notes/integrate-to-innovate-cf50c3b60366

44
Real Estate Predictions 2021 |
 Digitalization is here to stay

45
Real Estate Predictions 2021 |
 Digitalization is here to stay

that might have been predicted from the Both structured and, increasingly, The next generation organization is likely
pandemic, but obviously not in all cases unstructured data is used to drive more to be one that can recognize value and
or industries. complex insights. While data quality and move nimbly via its connected platform’s
availability is often cited as the barrier capabilities. Such companies “make room
Digitalization must be value-enhancing and to change, even with poor data, new for the machines” – they introduce robotic
aligned to solving real business problems. analytical and stochastic techniques can process automation, machine learning, and
Historically some technology has been enhance insight. AI. Also, they create a connected “crystal
implemented because businesses fall in ball” by means of IoT and predictive/
love with the promised functionality and How can a digital mindset help? prescriptive analytics, and big data helps
end up disappointed with the reality. Digital transformation requires leadership them to see more clearly in the data
alignment as well as a digital mindset - one depths. They “conquer data mountains”
To achieve success, in all cases, strong that is comfortable with experimentation (data stewardship in the digital age), and
leadership and sponsorship is a basic and reimagining ways of working. However, extend beyond a strong core rapidly (by
requirement. The implementation of ”being digital” is not as radical as it may means of Platform as a Service Innovation).
new ways of working, which may not seem. Yes, there are elements such as Finally, they create the connective tissue
necessarily display a tangible benefit at an blockchain and machine learning that are through cloud integration. All of these
individual level, is tough to drive through difficult to understand conceptually. Yet in capabilities hinge on connectivity and
an organization. In addition, a digital our everyday lives we already experience seamless data integration, from both
transformation may require completely what being digital is like – with our mobile within the company, and increasingly from
different skills, such as those of data phones, digital watches, and ”intelligent” external sources such as macroeconomic
scientists, and may make some roles household appliances. So transferring and sociodemographic data.
redundant. This is likely to change the these concepts into a real estate
dynamics of the workplace. business is not such a major leap as many How to make sure data flows
might consider. seamlessly through an organization
The internal impact of digital There is nothing new about having data
transformation is huge: flows through a real estate organization.
In its simplest form, data ingestion is a
series of spreadsheets merged into one
spreadsheet with multiple tabs. Data marts
might be described as a look-up table
from a spreadsheet. Presentation layers
can be a PowerPoint with data cut from
ECOSYSTEMS, NEW a spreadsheet. An analytics engine might
EXPERIENCES AMBITIONS & be a spreadsheet Macro and advanced
BUSINESS & SERVICE
& ENGAGEMENT ASPIRATIONS
MODELS visualizations might be putting the data
into Tableau or PowerBi. On this basis it is
not surprising that Excel has maintained
such a stronghold in this space and is likely
to continue to do so in real estate.

VALUE CULTURE What has changed, is that the tools

BRANDING
ENHANCEMENT & LEADERSHIP available to real estate at each of the
stages described above have increased
beyond all recognition in sophistication
and functionality. In addition, both the
price point of such tools, particularly if they
are on the cloud, and the ability to rapidly
ORGANIZATION ENTERPRISE PLATFORM, DATA deploy them, using enhanced technology
& WORKFORCE OPERATIONS & INSIGHTS implementation approaches, offers new
opportunities to exploit digital solutions.

46
Real Estate Predictions 2021 |
 Digitalization is here to stay

Data Ingestion Engine Presentation Layer Advanced Visualizations

Convert raw data from multiple sources and Provides a means for data stakeholders to access Visualizations surface insights for further
formats into a standard form and load data in a variety of ways - ideally tailored to the consideration, review and potential action
into a data lake specific needs of each stakeholder group

Early Warning / Risks to Asset Managers

Actively govern Provide access Enrich with Analytics on

External parties Gather and Move and Combine & Results
& aggregate to aggregated external data combined data
provide data fix data aggregate data cleanse data analytics
data data sets set

Data Lake Data Marts Analytics Engine

A specifically designed data aggregation layer Data Marts subset the Data Lake and provision data Customized analytics using data sourced from the
(maybe data lake) of granular financial and set for visualization and access data lake - tunable according to each client’s thesis
operational data

As digital technology moves on, and The steps below should allow digital Digitalization is here to stay
blockchain is the obvious gamechanger, change to be embraced in a controlled Digitalization is here to stay, and real estate
implementing long, complex programs way. This should help maintain the investment, fund-, asset- and property
should become a thing of the past. important aspects of a real estate managers can either embrace it or risk
Applying machine learning and robotic organization such as culture and purpose, becoming marginalized within the market.
process automation to support data whilst exploiting the opportunities of a It is a complex topic, but it largely relies
ingestion, alongside complex data transfer digital transformation. on the willingness and ability of people to
engines, will radically improve the collation change rather than pure technology.
of both structured and unstructured data.
The technology for data repositories is
radically changing and it is now possible
for analytics engines to use layers of AI.
Visualization tools and the use of Digital
Twins supporting advanced simulations will
likely allow the digital testing of options, Create an
without expensive and potentially sub- Achieve Set Understand appetite for
leadership realistic the Question significant
optimal physical developments.
alignment goals complexity everything change

How to achieve an effective digital

transformation
The real estate industry is beginning
to understand that the market cycles
for change are far shorter than before.
Planning for digital change will occur on
a 2 to 5-year time horizon rather than a
more traditional 10 to 20-year basis. Roles Establish a Improve cross- Develop a
Transform the Embrace transformation functional robust digital
are likely to change, and aspects of what
workforce innovation office collaboration eco-system
organizations do today may either be
automated or become commoditized.

47
Real Estate Predictions 2021 |
 Digitalization is here to stay

Organizations that are willing to experiment

and be prepared to try, test and fail - and
then try something slightly different again -
are far more likely to take advantage of the
new offerings than those who are cautious,
risk averse and traditional in their outlook.
The opportunity offered by digital solutions
has the scope to radically change the way
real estate professionals work. Therefore,
we are entering one of the most exciting
times in our industry.

Authors
Scott Dudley
Director | Financial Advisory | UK
sdudley@deloitte.co.uk

James Daniell
Associate Director | Financial
Advisory | UK
jdaniell@deloitte.co.uk

Contact
Andrew Carey
Partner | Financial Advisory | UK
ancarey@deloitte.co.uk

48
Real Estate Predictions 2021 |
 How to support strategic decision-making in real estate

How to support
strategic decision-
making in real estate
Combining Artificial
Intelligence and real estate
market expertise to enable forecasting
The availability of robust real estate market data varies across geographies.
Incorporating disparate datasets into a forecasting algorithm, in a structured and
standardized manner, enables the user to visualize how the different data layers
interact in, for instance, complex environments such as an asset register for large real
estate portfolios. The overarching purpose of enriching the data layer with as much
internal, external and macro-economic data as possible, is to help understand the
impact of future trends by feeding the forecasting process with more information.
Ultimately this can arm decision-makers with customized, interactive analytics, made
available in easily digested mobile formats, where needed.

Urban planning, asset management and

investment decision-making require a
thorough understanding of the current
and future supply-demand dynamics and
underlying macro-economic factors. The
integration of Artificial Intelligence (AI) with
real estate and financial planning expertise
can help support new ways of analyzing
historic data in an attempt to improve
future decisions.

Four-stage approach
Integration is vital to the successful
delivery of large-scale projects and should
be implemented at the organizational,
portfolio and asset lifecycle levels. Forecast Source: Deloitte Analytics
algorithms and scenario analysis, such
as those used by Deloitte’s Intuition
accelerator, can serve as important tools in
considering and setting out the integration
required for real estate planning.

49
Real Estate Predictions 2021 |
 How to support strategic decision-making in real estate

50
Real Estate Predictions 2021 |
 How to support strategic decision-making in real estate

Stage 1: Data discovery cloud technologies is a way to significantly

Reliable quality data is essential for a increase the speed and overall accuracy
meaningful forecast model. First, we and decrease the overall cost of such
need to ensure that the data is cleansed, a solution.
enriched and structured in a manner that
supports the forecasting process. Also, it Stage 3: Forecast Algorithm and
should enhance insights and connections. Scenario Analysis
For instance, to study the change in A time series accelerator such as Intuition
residential prices, historic data on price can automate the process of identifying
performance, annual supply additions and unique and complex trends within a data
investment yields can be enriched using set. Data is passed through different
macro-economic variables such as GDP algorithms to pair the most predictive
and currency fluctuations. This will provide algorithm with the provided data.
an additional dimension to insights and Additionally, the accelerator allows users to
projections. The local real estate expertise explore the effects of changing key metrics
plays a critical role in this stage. that drive the forecasts.

Stage 2: Technical infrastructure Through advanced pattern recognition and

Technical infrastructure is needed to machine learning, the forecasting tool can
support the forecasting algorithms. This support real estate strategy. It highlights
requires an understanding of the current previously unrecognized patterns in data
state of supporting technical infrastructure, and supports ongoing learning from
costs and compliance needs, to ensure those patterns.
that the tool is fit for purpose. Leveraging

Source: Deloitte Analytics

51
Real Estate Predictions 2021 |
 How to support strategic decision-making in real estate

Stage 4: Consume results and Supporting strategic decision-making Authors

influence strategy As a machine-learning based tool Oliver Morgan
Historically, AI-enabled tools have customized for the real estate sector, the Director | Head of Real Estate
been more commonly applied in sales entire system will get smarter and improve Development | Deloitte Middle East
forecasting in the consumer goods and over time. In this way, it is able to link socio- omorgan@deloitte.com
manufacturing industries. However, the economic factors such as the number of
capability also has significant potential jobs by key economic sectors, with the real Wessel Oosthuizen
applications in the real estate sector. For estate asset demand over time, to assess Associate Director | Cognitive
instance, a fully customizable consumption how this might impact future performance Advantage | Deloitte Analytics | ZA
layer created as a bespoke solution including price. The tool can also provide weoosthuizen@deloitte.co.za
for key stakeholders in the real estate absorption forecasts for planned assets
development lifecycle can allow access to and help define the appropriate phasing Manika Dhama
forecasts when combined with descriptive strategy for each. Finally, the forecasting Assistant Director | Real Estate
analytics to offer users a full view of the real tool can be further integrated within Development | Deloitte Middle East
estate landscape. business planning and financial feasibility mdhama@deloitte.com
models to drive a market-based response
to real estate development. This will
support future decision-making even more.

Source: Deloitte Analytics; Deloitte Middle East

52
53
Real Estate Predictions 2021 |
 Authors

Authors

Peter Adeleye Scott Dudley Wessel Oosthuizen

Bruno Amsellem Doron Gibor Tobias Piegeler

Sascha Bauer Amit Harel Robbie Robertson

Filipa Belchior Coimbra Surabhi Kejriwal Alberto Valls

Hielke Bos Marco Macagnano Jouke van Campenhout

Francisco Da Cunha Lennert Middelkoop Gijsbert Duijzer

James Daniell Oliver Morgan Maya Trajtenberg

Manika Dhama Rowan Muller Stefan Ondrusch

54
Real Estate Predictions 2021 |
 Contacts

Contacts

Real Estate Predictions

Wilfrid Donkers
Director | Financial Advisory
The Netherlands
wdonkers@deloitte.nl

General
Kathy Feucht
Partner |Global Real Estate leader
Global
kfeucht@deloitte.com

AU FR UK
Alex Collinson Olivier Gerarduzzi MRICS Andrew Carey
Partner | Assurance & Advisory Director | Real Estate Advisory Partner | Financial Advisory
Australia France United Kingdom
acollinson@deloitte.com.au olgerarduzzi@deloitte.fr ancarey@deloitte.co.uk

DE IL US
Joerg von Ditfurth Doron Gibor Jeff Smith
Partner | Real Estate Consulting Partner| Audit Services Partner | Industry Leadership
Germany Israel United States
jvonditfurth@deloitte.de dgibor@deloitte.co.il jefsmith@deloitte.com

EMEA LU Jim Berry

Oliver Morgan Francisco Da Cunha Senior Partner | Real Estate
Director | Head of Real Estate Partner | Tax M&A United States
Development Luxembourg jiberry@deloitte.com
Deloitte Middle East fdacunha@deloitte.lu
omorgan@deloitte.com Jim Eckenrode
NL Managing Director | Deloitte Center
ES Jef Holland for Financial Services
Joaquín Linares Partner | Audit & Assurance United States
Partner | Real Estate The Netherlands jeckenrode@deloitte.com
Spain JHolland@deloitte.nl
jlinares@deloitte.es ZA
Jurrien Veldhuizen Marco Macagnano, Ph.D.
Pedro Fuster Partner | Real Estate Senior Manager | Smart Real Estate
Director | Real Estate United Kingdom Leader
Spain JVeldhuizen@deloitte.nl South Africa
pfuster@deloitte.es mmacagnano@deloitte.co.za

55
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