Future of Work: Ready or Not, Here I Come! (How) Will Professional Real Estate Services Providers Thrive in the Emerging Economy?
Business – and the real estate associated with it – is changing rapidly. The biggest media company in the world (i.e. Facebook) has no journalists or content producers. The biggest hospitality company in the world (i.e. AirBNB) has no rooms. The biggest taxi company in the world (i.e. Uber) has no cars. The biggest bank in the world (i.e. cryptocurrencies) has no buildings. These software-driven entities leverage automated business processes, artificial intelligence and machine learning. They operate in virtual worlds where machine learning software is becoming ever more advanced, possibly to the extent that it may pose an existential threat. But if the light of that new economy turns out to be the beacon of an onrushing freight train, might not real estate professionals examine it for opportunity or simply be swept aside – a rather bleak prospect?
Over the past few decades we have entered the 4th industrial revolution. With each successive industrial revolution, disruptive technology changed the nature of work – but perhaps not quite so much as the future of work appears destined to change over the next few years:
- The 1st industrial revolution in the latter half of the 18th century resulted when mechanization replaced agriculture with industry. Although we might trace assessors to William the Conqueror’s order for the Domesday Book in 1085, it was during this first industrial revolution that we first find mention of ‘appraiser’ as an occupation – involved in estate valuations.
- The 2nd – in late 19th and early 20th century – introduced new sources of energy (electricity, oil & gas), transportation (planes, trains & automobiles) and communication (telegraph, telephone). During this second industrial revolution, the Appraisal Institute of Canada was formed in response to market demand for credible professional valuation services.
- The 3rd industrial revolution occurred another hundred years on, in the latter half of the 20th century), with introduction of nuclear energy, electronic communication and advanced transportation. During this period, real estate service providers continuously improved professional standards, developing and advancing their careers through relevant and credible educational programs. Thus supported, professional appraisers have deepened their body of knowledge, enhanced skill sets and extended their menus of service delivery.
- But, have professional real estate services providers (“professionals”) proven their worth to the extent that we may reach professional apogee –putting our futures at risk when complacency is preferred over agility?
Entering further into the 4th industrial revolution, we see growing evidence of an economy based on exponential technologies. Examining the first three industrial periods, we see that economic revolutions occur when three kinds of technologies converge: new sources of energy, new kinds of transportation and new forms of communication.
Where the 3rd economic revolution was driven by oil, automobiles and electric communication, the emerging 4th economy is driven convergence of renewable energy, self-driving transport and digital communication.
Real estate professionals might consider two questions arising from this, to better prepare for future success:
- What does the economic convergence of these three factors in the 4th industrial revolution mean for real estate markets?
- What will the future-of-work look like for professional real estate services providers?
Whilst there are not yet clear answers to either question, tools like scenario analysis can provide a lens through which to examine potential impact of critical factors that are driving change.
As property markets have become global and economies increasingly intertwined, it is helpful to develop greater understanding of global competitiveness and how well positioned each country is in terms of its structure and drivers of production relative to global value chains. While regional and neighbourhood analysis have been traditional components in real estate analysis and valuation, global perspectives are now first required for meaningful analytics and credible value conclusions. Real estate supply is local; market demand is global.
Unlike forecasting which generally relies on historical data (unhelpful when considering a changing and uncertain future that does not replicate the past), explorative scenario analysis identifies and ranks key change drivers to describe alternative futures. With such knowledge, real estate professionals (“professionals”) can better plan and prepare for future success.
Having a perspective that spans global perspective to local market knowledge, professionals can build scenarios through which to analyze opportunities and threats. In absence of knowledge specific to real estate, they can borrow from the growing body of knowledge about the future-of-work.
The World Economic Forum (WEF) provides an example of scenario analysis in its White Paper: Eight Futures of Work: Scenarios and their Implications.
Borrowing from such analysis, professionals can develop real estate services scenarios to prospect the future, and to prepare themselves with knowledge, abilities and skill sets necessary to their future success.
The WEF analysis first identifies the most critical factors for labour supply and demand – those that are most volatile and are estimated to have greatest future impact. From that preliminary analysis, WEF selects (for simplicity) only three major trends to develop eight future-of-work scenarios. The three trends include:
- Rate of technological change
- Evolution of learning among current and future workforce
- Magnitude of talent mobility across geographies
This blog looks briefly at the first of these – tech change – to explore, at a superficial level, an example of real estate services context:
- Rate of technological change:
Will tech change occur at a slow, steady or accelerated pace? What evidence indicates current and anticipated rates of change?
Tech change might be explored separately for different real estate / construction sectors and service lines.
To choose one example, consider automation of residential real estate valuation. Data collection, data processing and analytics are strong candidates for automation. One early example is Axilogic’s ‘Valuation-as-a-Service’.
The rate of automation is driven by five factors: technical feasibility; costs to automate; relative scarcity, cost and of appraisers/technicians who might otherwise do the work; benefits of automation (e.g., superior performance) of automation vs labour-cost substitution; regulatory and social-acceptance factors.
Considering these factors, there is high probability that typical residential valuation (form reports) will soon be replaced–the tipping point is likely where labour-cost sinks below minimum wage levels and clients perceive unacceptable risk levels from deteriorating service quality. That is, where the client perceives greater advantage in potentially accessing the appraiser’s liability insurance over lesser value in the valuation service? Service opportunity – taking advantage of tech change – may exist where professional services can be strategically differentiated from traditional valuations.
For more complex properties and advanced appraisal or investment analysis, impacts of tech change will also be substantial. Certain parts of valuation processes (data collection and analytics) will benefit from automation, whilst artificial intelligence and machine learning may augment the analyst’s / appraiser’s human performance.
And similar performance augmentation should be expected in market analysis, where professionals need to explore emerging technologies like unsupervised artificial neural networks and clustering algorithms to enhance market segmentation – and other parts of the traditional market analysis process.
 Klaus Schwab. The Fourth Industrial Revolution. ISBN 13: 978-1-944835-01-9 World Economic Forum. Switzerland. 2016.
 For reference, see Peter Diamandis on The Six D’s of Exponentials. URL: https://medium.com/intuitionmachine/deep-learning-and-platforms-of-disruption-66e2216c3cc6
Real estate professional associations might also consider John Hagel’s Harnessing the Full Potential of Platforms to combat disruptive technologies. URL: http://www.marketingjournal.org/john-hagel-harnessing-the-full-potential-of-platforms/
 The World Economic Forum’s Readiness for the Future of Production Report 2018 is a great starting point to gain a preliminary understanding. URL: https://www.weforum.org/reports/readiness-for-the-future-of-production-report-2018
 World Economic Forum & Boston Consulting Group. Eight Futures of Work. January 2018. URL: https://www.weforum.org/whitepapers/eight-futures-of-work-scenarios-and-their-implications
 Axilogic. Introduction to Valuation-as-a-Service: the patented valuation engine of the world’s largest and most sophisticated mass appraisal jurisdiction. URL: http://axilogic.com/index.php/introvaas/#vaasstory
 McKinsey & Company. McKinsey Quarterly: Four Fundamentals of Workplace Automation. November 2015. URL: https://www.mckinsey.com/~/media/McKinsey/Business%20Functions/McKinsey%20Digital/Our%20Insights/Four%20fundamentals%20of%20workplace%20automation/Four%20fundamentals%20of%20workplace%20automation.ashx