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The worlds of music, entertainment and finance have been radically altered as a result of digitalisation. The world of residential real estate and the real estate development industry at large, have not. And that is an understatement. But change is on the horizon.

The imminent arrival of the smart, connected home has been arriving imminently for some time. It has been, in fact, announced repeatedly over the past four decades. Unlike other industries and societal domains, such as music or the world of work, residential real estate has proven to be a rather late arrival to digitalisation.

A word of caution: digitalisation is not the same as digitisation.

Digitalisation is the changes made possible by digital technology, such as new business and service models, new forms of human interaction and even a change in culture, norms and values. Characteristics of digitalisation are networked and distributed operations, such as place- and time-independent work, the peer-to-peer editing of Wikipedia and smart energy grids. End of intermezzo.

Much of the smart home industry has remained focused on the consumer, rather than evolving into a business-to-business market. This has resulted in a lack of standards and interoperability. Unlike digitalisation in the enterprise, in which interoperability and standards are imperative and are responsible for its expansion for all stakeholders, smart home consumer solutions have remained niche products locked within walled gardens by the companies that produce them. Perhaps because of this, the appetite for smart home solutions has remained limited, with few standing in line for a smart fridge, for example. Most people remain concerned about where the data from the fridge will end up. Almost needless to say, many of the solutions may exchange data on individual preferences, routines and private activities most would prefer not to share blindly.

Privacy in residential real estate, as in most other industries undergoing a digital transformation, is still a big issue. In addition, the real estate industry itself has proven to be highly resistant to change.

Old modes of production continue to generate large sums of money – and the impact of digitalisation is being viewed as incremental at best, and irrelevant at worst. Housing as an industry is due for an upgrade. The influential factors are:

• The ‘as-a-service’ (AAS) business model has started to make an impact on residential space. Airbnb and its competitors, for instance, are no longer new kids on the block; they have systematically altered how we approach travel access or rent out holiday accommodations or temporary residences.
• Young adults these days would like to own a home (someday), but they are less inclined to lock themselves into a 30-year mortgage, and many find themselves unable to meet the new, stricter requirements for a mortgage. ‘Pay-as-you-use’ wedded to ‘the here and now’-culture is the more prevalent sentiment among millennials in many western societies. The shift in ownership and the rise of AAS approaches are altering the way we design, build, deliver, own and service residential property.
• Modular building construction allows for a cost-effective way to embed conduits, sensors and network technology. As the costs of prefab embedded technology comes down, planning for smart home wiring with redundancy to spare will increase.
• Tenders, contracts and requests for proposals issued by public sector entities increasingly stipulate the need for an environmentally sustainable design of greenfield real estate.
• Other societal needs such as environments for the elderly increasingly require smart designs and digital solution as well.
• Smart energy grids mature. City residents can experience more direct benefits from smart grids by allowing greater differentiation in smart grid services within the home. This could include broader monitoring and management of services including electric vehicle (EV) charging at the home, dynamic energy consumption by specific home appliances to reduce energy use, especially during peak hours, and individual solar power generation that can sell excess energy back to the grid.
• The worlds of residential, work, learning and entertainment space are converging. Hybrid use of space requires digital smartness to serve dynamic user needs, manage physical access, apply personal settings and more.

An example of a best practice that speaks to those influential factors is the Amsterdam-based, micro-living developer called Change=. This company develops large apartment buildings that are constructed and operated in the most sustainable fashion possible. It provides as-a-service options that allow the living environments to be tailored to the needs of the younger segments of the market. A menu of services includes, for instance, appliances and furniture choices; restaurant, gym, and wellness facilities; and flexible office space (Change= PRO) and support services for young entrepreneurs. ‘Inclusion’ is a key term that Change= uses, although the quality of design may actually lean more toward ‘exclusive.’ The company aims is to think of ‘community first’ to then follow with bricks, interior design and technology. As such, Change= applies design thinking to every component of its operations, versus the more traditional approach of architecture or engineering first. Change= is growing fast and has gotten the attention of the bigger players in the Dutch housing market as a disruptive change agent. Its name then seems apt.

Bas Boorsma
Chief Innovation Officer bij Change=
Auteur van “A New Digital Deal”.

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