Who is responsible for innovation in real estate?
The COVID-19 pandemic has changed the way most businesses operate. In real estate, it has made developers embrace digitalization. Stakeholders are now more geared toward adopting contactless technology and predictive analytics, establishing health and safety measures, and emphasizing cyber security for business reasons. Following the resumption of transactional activity, the real estate market has entered its next growth phase.
At this juncture, there is a broad consensus on the need for a shift from product-driven strategies to experience-based approaches. Meanwhile, governments and regulators are increasingly formulating policies that require stakeholders in the industry to constantly innovate and build agility. Such regulations and policies have been common in the Middle East, particularly the UAE, in recent months.
The objective behind these policies is to enhance efficiency, bridge gaps, and embed sustainability across the real estate value chain. So, there is an onus on the real estate community to constantly innovate. But the question remains: Who is responsible for innovation? This stems from the fact that the real estate industry is relatively late to the digital party, hence lacks a dedicated department for innovation.
There is no definitive response to the above question. It boils down to the internal structure and strategic approach of each firm. Innovation requires leaders to take the mantle, recognize areas ripe for transformation, spearhead technology adoption, and distribute innovation-related responsibilities.
Some real estate companies have dedicated roles such as Transformation Directors or CIOs or Chief Innovation Officers, who liaise with other departments, exchange ideas, and innovate. CIOs may lead the digitalization efforts, but they cannot be the sole drivers of innovation.
First, to be innovative on all fronts, real estate companies need people across the board to have agency in the adoption of technology. Senior executives need to develop a joint vision, designate certain professionals within departments for related duties, and ensure periodic meetings for interdisciplinary collaborations.
Second, innovation should be institutionalized, creating a culture where people in the organization view functions across the value chain through the lens of technology. The great thing about innovation is that it provides decision-makers with deeper insights to reconcile investments with future ROI. The ability to make a business case for innovation is consequential in real estate, as it involves considerable capital investments to optimize certain functions that have long remained averse to digitalization.
In fact, PropTech’s uptake in the last couple of years can be linked to increased savings in operational costs and energy consumption. Real estate has been known for its disproportionate energy and carbon footprint, which need to be addressed as part of broader climate actions. In the UAE, goals such as net-zero 2050 have a strong real estate factor. And constant innovation will determine how well the industry can stay on track to achieving such goals.
While it is true that innovation was previously the differentiation that companies aspired for, it has now become a business imperative. The line between innovative companies and conservative ones has been moved; the new line being drawn separates innovative companies from less-innovative ones. Which side a real estate company wants to be on will now be determined by everyone across the board.