Digital Drivers Of Real Estate Opportunity

4 June 2020

A characteristic feature of modern public relations is the rapid development of information technology that discovers opportunities for large-scale digitization of information, creation, and exchange of information expressed in digital form. Information technology provides versatile collection methods, storage, transmission, display, processing of digital data that lead to a rapid increase in data volume, speed of production, quantity of manufacturers, dissemination of data. In this case, digital data is changing not only quantitatively, but also qualitatively.

Various end-to-end digital technologies are also rapidly developing, particularly big data technologies, blockchain, artificial intelligence, cognitive systems, and others interacting closely with each other. It consequently allows not only humans, but also devices to run certain algorithms to produce and share new digital data.

The development of information technologies (digitalization) is not enough for digital transformation. It requires the restructuring of business processes, the new organization of working with data, the formation of new business models and strategies, the training and adaptation of people, the formation of digital culture and digital society. It’s important that these processes are interconnected.

Digital changes in real estate 

Today with pandemic influence, the global economy greatly changes. That concerns particular sections of the real estate market as well as businesses in retail.

Though, in recent years technology has dramatically turned the market of real estate. Due to digital transformation, goods and services became cheaper and more affordable for consumers, processes began to be transparent. In this regard, it justifies the state’s interest in implementing concepts of the Internet of things, smart cities and massive introduction of digital technologies in housing and communal services.

One of the major digital technology tools which is applicable in housing and communal services is “smart contract”. In today’s system of housing and communal services, the consumer independently records the readings of devices and, in accordance with the amount of consumption, pays obligations. A smart contract involves the automation of cash payments and the process of distributing and bringing the resource to the consumer. In addition, it collects information about the actual consumption of the resource.

It’s important for people to understand that paid utility bills are provided in full and at fixed rates. They are interested in saving their time and money.  Digital technology, specifically telemetry, allows people to automatically collect counters’ readings and reduce errors to zero during transmission data.

Nowadays, such automated systems for the commercial accounting of energy resources as wired transmission, radio broadcast, and power line transmission provide data transmission. Active users of digital banking tools, respectively, will certainly be interested in transparency of settlements with resource-supplying organizations which, in turn, can be achieved within using mobile and digital applications for personal gadgets.

Digital influence on retail

Digital influence on retail
Digital influence on retail

The state of retail has been characterized by increasing penetration of digital technology and tools of the digital economy even before the pandemic situation. For today it’s quite difficult to imagine an organization that would not realize the importance of including digitalization tools into business processes of its trading and commercial activities. Adequate use of these elements allows companies to influence the quality of consumers’ needs and to target product offers, which undoubtedly affects the increase in trading revenue and the margin of trading activity.

E-commerce has raised 13% for retail by non-store sales. A recent situation connected with pandemic has caused closure of most non-grocery mall-based retail. Plus a big amount of brand retailers are on pause or even have already entered bankruptcy.

Structure of delivery methods is dominated by the delivery of own store services. On the one hand, this is a logical way of development in the field of electronic commerce, on the other hand, with the growth of the volume of each particular store problems may arise in the scaling of the business. As a result, stores will have to expand not only in terms of new supply channels and markets but also in terms of finding solutions for the final logistics of goods.

As an alternative to own delivery services, professional fulfillment operators can be taken into consideration as they will take on the bulk of the operations associated with the acceptance, processing, storage and delivery of products.

Ecosystem of electronic commerce 

Huge amount of online purchases, use of social networks, Internet teleconferencing, as well as video streaming used by consumers are caused by current quarantine, distancing in society and other measures in response to the COVID-19 pandemic. As a result, there is a sharp increase in sales to consumers and the rise of electronic commerce between enterprises. In fact, real estate requires e-commerce three times more than “brick-and-mortar” retail. 

Electronic commerce has begun to be seen as a potential major driver of post-quarantine economic growth. On online platforms you can trade absolutely everything, from household chemicals to cars, children’s goods, and even intangible services. Therefore, online trading platforms are a powerful sales channel for small and medium businesses.

Interesting prospects are opening now when demand is adapted to the needs of customers, especially those who are actively purchasing essential goods. Among the latest technological solutions used by retail companies are specialized blockchain IT platforms involving the use of a distributed registry system for maintaining, monitoring, and tracking various trading processes.

The logistics sector that is involved at all stages of the product life cycle, comes to the fore. Various online retailers have appeared, sales have increased, therefore, the demand for standard warehouse operations is decreasing towards fulfillment operators that provide a range of logistics services. Under such conditions of market transformation, the warehouse industry offers new solutions, among them, are multi-level mezzanines, assembly with weight control, conveyors, robotic lines, IT-products.

New online retailers are emerging, ready to invest in building a logistics ecosystem. Changing requirements for logistics companies will push for a change in format and the emergence of new concepts.

All in all, increased demand accumulates the introduction of new high-quality warehouse space. The development of a system of local warehouses will significantly reduce the time of delivery of goods. A rapid increase in development activity is expected in the middle of 2020 – beginning of 2021. Modern commissioning of warehouse space will lead to normalization of the rental rate which will increase the attractiveness of online retailers’ market.

Cell towers and 5G transition

Cell towers and 5G transition
Cell towers and 5G transition

Particular real estate companies rent out space to wireless operators that establish such equipment as cell transistors and antennas. Due to the growth of data from smartphones, cell towers have been in explosive demand during last years.

Tower business has new dynamics with the transition to 5G. Pandemic, on one hand, has shown the limited capabilities of 4G mobile networks, on the other, it has slowed down the deployment of next-generation networks since it requires huge investments. In countries where fifth-generation networks were deployed and begun to deploy, pandemic helped technology development as there was a need for more active use and greater productivity of networks. Though processes stopped in countries where the deployment of networks was only intended to begin. 

As economic growth resumes, there will be new opportunities for positioning 5G-based services, especially if the repatriation of production facilities begins from China. Therefore it is possible that active deployment of 5G networks by operators will resume from the middle of 2021.

Cloud services 

Data centers provide infrastructure for tenants with various enterprise and computing needs. They hold a great amount of information for individuals and companies. The future of the data center industry is “cloud” computing. Although software-defined SDNs and virtualization do not have anything fundamentally new, they have been developed and improved. Their role in telecommunications is becoming increasingly important, they begin to set the rules of the game. The ability of programmatic redistribution of network resources makes data centers more stable. Equipment can be freed from some tasks and involved in the execution of others without physical movement, and changes can be made not within hours, but in a couple of minutes.

The cloud storage market is predicted to triple by 2021 compared to 2016 and reach $74.94 billion. The main driver in generating demand for cloud services will be the growing need for hybrid cloud storage and mobile enterprise solutions and also for ease of data storage in the cloud.

The popularity of the concepts of the Internet of things will continue to grow, and the accumulated amount of data will increase faster. The larger is data amount, the more critical it will be time response. Consequently, the closer location of cloud storage is to the end-user, the more it will be in demand.

One of the key differences between traditional and cloud data centers is the speed of implementation and realization of services, the efficiency of making changes. Following the standards, of course, allows consumers to build high-quality network infrastructure in the cloud data center and ensure the operation of various devices. Here it is necessary to carefully consider the project so that the solutions have versatility and flexibility.

Conclusion

Digital transformation leads not only to positive results, forms new markets and types of business, but also leads to the formation of new risks that require the reliability of management systems and attention from developers of digital models and processes.

Modern digital technologies and tools should be gradually and systematically included in the activities of retail companies at various levels of coverage of the target audience. Data centers provide infrastructure for tenants with various enterprise and computing needs. As a fact, the cloud storage market is predicted to triple by 2021. However, these tools and technologies must be adequately selected, taking into account their economic feasibility and readiness of the target consumer audience for their use.

The influence of pandemic on real estate (including an increase of electronic commerce) can help strengthen international cooperation and, as a result, develop common rules for purchases and deliveries via the Internet. Digital driver in generating demand for cloud services will be the growing need for hybrid cloud storage and mobile enterprise solutions and also for ease of data storage in the cloud. Realities of the current crisis have shown that digitalization can be an effective tool for real estate and can also become an economic engine of both the internal growth of the economy and the entire international trade.

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