Digitisation divide in European real estate sector
• Different pace of innovation creating two camps
• Digital strategies defined by four action areas
• Investments expected to pay off after three years at the latest
Digitisation is progressing at different rates among institutional real estate investors in Europe, with the sector currently divided into two camps. The larger group, comprising 63 per cent of companies, have already made significant advances in this area, while players in the smaller group (36 per cent) are still working on initial concepts or have not even begun to incorporate digitisation into their business strategies. Those are the findings of a survey of 150 property investors in Germany, France and the UK by Union Investment.
As the survey shows, the group of innovation leaders in the real estate sector is comparatively small. Only around a fifth of companies have implemented a substantial part of their digitisation strategy. Most of the respondents (41 per cent) see themselves at an intermediate stage – initial concepts and prototypes have been implemented, but there is still a long way to go to meet all the requirements of their wider strategy. Another fifth of companies have not yet started to digitise their business processes, but have begun planning work on initial concepts and prototypes. For 16 per cent of respondents, digitisation doesn’t count as a strategic issue.
Optimisation of standard processes and interfaces tops the list of priorities in the digital strategies of European real estate investors. Some 84 per cent rank this aspect as very important. Improving IT security and data protection is regarded as similarly important by 82 per cent. In third place comes enhancing customer communications, i.e. an aspect that is strongly geared towards sales. The cultural change process sparked by digitisation is likewise far from complete in most companies. Around 80 per cent of respondents say that further progress needs to be made on driving digital transformation in the minds of their employees. These four action areas represent the main concerns, followed by harmonisation of data, which 74 per cent of companies regard as a priority within their strategy.
It is also interesting to note that in the context of digitisation, tapping into new areas of business is a low priority for the real estate companies surveyed. Only 31 per cent of respondents cited this as an important action area.
“The fact that optimisation of standard processes is the number one requirement for real estate companies should encourage PropTechs to develop customised, easily scalable solutions in this area. Focusing on standard processes and seeking to develop innovative new solutions are not mutually exclusive. In fact, they are both likely to indicate a clear practical focus”.
Thomas Müller, Head of Digital Transformation at Union Investment Real Estate GmbH
Two thirds of the real estate companies surveyed expect the investments they are making in digitising their business to pay off after three years at the latest. Around a fifth expect a return on investment within a year. Only a minority of companies (34 per cent) have a longer investment horizon of five years or more for developing digital projects. The expectation of a quick return on investment is also a reflection of the four main action areas identified in the survey, which are all relatively responsive to management control.
About the Survey
On behalf of Union Investment the market research company Ipsos conducted interviews between May and July 2019 with 150 property companies and institutional real estate investors in Germany (n=60), France (n=55) and the UK (n=35).
For Union Investment Real Estate GmbH