In our sector by sector series we look at different industry sectors, the challenges they face and the opportunities that present themselves. In our retail banking series we looked at branches, banking apps and AI. But above all we looked at customer experience. Both online and offline.
You may think the property sector might be a strange fit for this series. But in fact the property sector faces a lot of challenges that better customer experience could help solve. Technology will also play a big part in the future of the property sector. In fact there is a nice term for it already, “proptech”, which will form the bulk of part 2 of this series.
So in part 1 of the property series we will be looking at some of the challenges the property sector faces. Out of these challenges, opportunities for innovation present themselves.
Let’s find out what the property sector faces and how it can innovate.
Challenges For The Property Sector In The Next Few Years
Like every industry sector, the property industry faces many challenges over the next few years. These challenges include outside pressures, like the recession. Plus customer behavioral shifts as a result of the COVID-19 Pandemic.
However, challenges also present opportunities. But only by understanding these challenges do opportunities for innovation present themselves.
So let’s look at the challenges that the property market faces over the next few years.
Macroeconomic Pressures For The Property Sector
Recent economic forecasts suggest that the global economy is heading for a recession. How this recession manifests itself will be different in each region. But it will affect the property market, particularly in territories like the E.U., U.S. and U.K.
In ASEAN, the recessionary pressures on the property market will share similarities with the E.U., U.S. and U.K. This is all down to inflation and rising interest rates. Lending for property purchases will become more expensive, which will cause a downward trend in demand. This is where things may differ in ASEAN. If COVID rules in China get relaxed in a big way in the next 6 months, this may lead to increased property purchases in ASEAN countries. Thailand in particular could benefit from this.
But macroeconomic pressures will be a huge challenge for the property sector around the world. This may necessitate innovation by big property companies here in Thailand. It may be beneficial for large property developers to offer a more diverse range of lending options to aid purchases, without relying on retail banks.
Hybrid/Remote Work Shifts
Remote work is here to stay. That brings some challenges, and opportunities, to the property sector.
But an unanticipated consequence of this has been decentralization. This may be a trend where behavior, and trends in organizational transformation, mirror each other.
With increased remote or hybrid work opportunities, more people are choosing to live and work outside cities. In a recession, this can save people money on travel. Property may also be cheaper outside urban centers. Remote work has given office workers the chance to decentralize their lives. And they love it. In fact, according to some studies, people would take a pay cut to keep a remote work policy in place.
The knock on effect of this is that businesses are now questioning whether they need big offices. Or any office at all. This creates challenging market conditions in the commercial property sector. Many large property businesses own a lot of office space. So the consequences of companies choosing to not have offices anymore are…drastic to say the least.
Opportunities In New Ways Of Working
But this personal and corporate decentralization trend also presents opportunities for property companies.
The first opportunity lies in the move of people outside of cities. A lot of office workers are now working from home in areas that lack the same facilities and infrastructure as downtown areas. They may even have slower internet speeds that hinder their work. Property companies could invest more in these suburban areas. For example, small shared office space buildings with high speed broadband connections. This could be for people who want to stay out of the city, but also want a more social office experience with less distractions than home.
The second opportunity lies in that downtown office space. Many companies are planning to cut their office space footprint. On the face of it, that is bad for property companies. But again, it can also present opportunities.
While workers do not want to give up remote work, company leaders are often less enthusiastic about it. Which makes a compromise of hybrid work more likely to “win” in the long run. This means staff will come into the office on different days of the week. For office space owners this means a reduction of space is more probable than a massive run of companies abandoning their leases.
This means that there will be demand from businesses for smaller offices in downtown locations. Office property companies can step up to fill this gap. On the technical side, office property companies have an opportunity to help businesses manage the flow of people. They can measure traffic in and out of their office spaces to avoid congestion.
So aside from providing smaller office spaces, a property company can also provide a suite of technical tools to analyze footfall into the workplace. It’s estimated that most hybrid staff are in the office on wednesdays. With smaller office space, this can be an administrative challenge.
Property companies can help businesses to spread their hybrid workforce through the week. With this kind of value add, although units may be smaller, there may be more tenants to fill those units.
Climate Change & Environmental Legislation Requirements
War, pandemics, recessions…They all pale in comparison to climate volatility and change.
MAQE has written about this topic before, specifically around climate adaptation. Climate change will affect every industry sector. But the property sector has a key role to play and very distinct challenges to meet.
Environmental, Social and Governance legislation (ESG) is playing an increasing part in real estate operations. Demand on property businesses to disclose the environmental impact of properties is increasing. In the U.S. these disclosures are a legal requirement. Property businesses should be as transparent as possible in this regard. And technical investment can help them with this.
Environmental disclosure should be seen as a positive development by property businesses. In fact, this is an exercise in increasing efficiency. By investing in technology to improve measurement and data collection, property companies will make better decisions. We will cover exactly how property businesses should invest in technology in part 2. But transparent data collection and disclosure will help property companies increase positive sentiments of their brands. It is possible that it also aids customer experience.
With better measurement companies could, for example, help people save money on their energy bills. Cost of living is increasing, so any savings will be positively received by customers. Giving lawmakers and customers full insight into ESG data should be seen as an area of innovation by property companies, rather than an inconvenience. It is an opportunity to collect more data and use that data to make better decisions.
Read on for part 2 where we will see how technology, and better CX, can help the property sector overcome these challenges.
Talk to MAQE
Do you work in the property sector? Do you need help collecting data to make better decisions? Or do you need to transform to meet the demands of an integrated digital world? Talk to MAQE. We are experience experts who can help you increase engagement and return on investment. Get in touch via [email protected].