Forget about the old saying that property is all about location, location, location - it is now all about technology, technology, technology and data, data, data, according to Associate Professor Francois Viruly, a property economist of the University of Cape Town.
Research by Viruly and his team at the UCT Urban Real Estate Research Unit points out that data is now becoming the world's most valuable commodity. It is argued that the next industry leaders will be organisations that can filter and analyse data to guide business decisions.
"Anybody entering the property market – whether it is commercial or residential property – needs to take into account the long term trends. Central to these long term trends is something called 'STEEP'. This stands for social trends, technology trends, economic trends, environmental trends and political trends," Viruly told Fin24 at the annual convention and expo of the SA Property Owners Association (SAPOA) taking place in Cape Town.
"All of these trends influence the performance of the market. The further problem we have in the property market is that we build for the long term, but the uses of space are changing rapidly. So, for the property investor it is critical to identify properties that could be obsolete in the near to medium future due to these trends."
Viruly explained that every property boom comes along with the obsolescence of some space. For example, shopping centres "killed" the department store. The shopping centre also promoted decentralisation and played a role in the demise of South African CBDs to some degree.
"The challenge for the property investor is to figure out the causes of the next property boom. Those will be driven by factors other than necessarily gross domestic product (GDP) growth and the macro economic performance of the economy. Emphasis should be on structural changes that could alter the property market," said Viruly.
"The one thing to also retain a focus on is that these trends we are seeing at the moment - in particular the digitisation of the sector - will alter the way the property market itself functions. For instance, the question to ask ourselves is whether the property broker faces the same future as the travel agent did some years ago. There will be a place for a broker, but it would need to be someone very carefully attuned to local market conditions."
According to Viruly, some of the disruptors to look at will be of a social nature – related to access to the city and the property needs of millennials, who are willing to live in small spaces, but will expect high levels of property and urban management.
"On top of that, work practices are also rapidly changing. The type of space required by users will remain fluid and will alter depending on requirements," said Viruly.
"We are also dealing with the night time economy – an economy that is increasingly functioning 24/7."
The UCT Urban Real Estate Research Unit states in its research that technology has been a disruptive force in the real estate sector too. So-called Prop Tech firms emerged at the start of the millennium in response to the inefficiencies of the property market, most notably through online property listings and search engines, according to the research unit.
"Now the industry is growing to accommodate an ever-expanding variety of services and products from virtual reality, to crowdfunding property development. As a result, these technologies are re-imagining the way in which real estate is procured, developed, managed and utilised," the unit states.
First published on Fin24