Will All the Hot Air in Real Estate Translate to Real Change?

Real Estate and Construction have a reputation as slow to come to the party as far as technology is concerned.

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Having attended a variety of conferences, forums, and events in the last few years, The Proptech Connection has heard almost all the major players (many of whom are our long-standing clients) in the market shout from the rooftops (often covered in grass or plants!) about their energy transition, their “smart” refits or builds and their efforts to implement alternative (and greener) materials.

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In reality, it is only the true tech adopters, who have been driving this in recent years. We expect 2024 and 2025 to be the years when the mass of real estate companies wakes up to the effects that technology can have on their portfolio, new projects, and in particular their key financial metrics.

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We highlighted some of the areas where technology impacts the real estate and construction space in a recent paper about future trends.

Climate concerns and resource security have been identified as investment megatrends for many years. In response to escalating expectations around Environmental, Social, and Governance (ESG) and Corporate Social Responsibility (CSR) commitments, companies globally are facing a growing imperative to address and report on ESG-related impacts of their business activities including property footprints.

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A 2021 survey by PWC revealed a stark reality — slightly over half of the organizations within the ASX 200 did not disclose any ESG metrics. Only 9% of the entities surveyed for a WEF report actively utilize software designed to facilitate data collection, analysis, and reporting on ESG matters. Global ESG funds reached $2.5 trillion in investments in 2022, but there remains a notable lack of confidence among professionals with 54% expressing uncertainty about their organization’s financial team’s preparedness to accurately report ESG metrics.

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Against this backdrop, asset managers grapple with the challenge of incorporating ESG reporting into their existing frameworks. Many managers already operate BMSs intricately linked with their building hardware and IoT setups. The prospect of transitioning to an entirely new system is met with reluctance, as it may disrupt established operations.

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A cost-effective solution has emerged in the form of purpose-built systems dedicated to ESG reporting that can be retrofitted onto existing BMSs offering asset managers a pragmatic way to enhance their ESG reporting capabilities. This approach minimizes the hurdles associated with the integration process, providing a smoother transition for owners.

Buildings currently contribute significantly to city emissions, accounting for 30-40% of the total emissions. Residential and commercial buildings can currently reduce emissions by 36.5% and 21.2%, respectively, with current technology.

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Roughly 80-90% reductions in emissions would be required, however, to meet the COP21 goals for 2050.

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Smart Buildings use the Internet of Things (IoT) and middleware to collect building data, integrating it into BMS for enhanced optics, visualization, and managerial insights. Use cases include tracking energy usage, implementing predictive maintenance, monitoring occupancy trends, and predicting future occupancy patterns.

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This data can be leveraged to optimize building occupancy and energy usage to reduce emissions and achieve sustainability goals. We expect to see an increase in the number of SMART buildings outfitted (or retro-fitted) with wind turbines and solar panels, automated lights, HVAC systems and carbon capture, utilization and storage systems, and smart facades.

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The OECD estimates a potential investment of US$1.8 trillion in smart city initiatives by 2030.

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Sustainable Construction - Building The Future

The construction industry is one of the largest contributors to emissions and therefore could significantly impact climate change.

A typical job site produces 30% of the building's lifetime weight worth of waste and the production of cement alone is responsible for 8% of global CO2 emissions.

As a result, sustainable construction methods and materials, such as prefabrication and modular methods of construction, 3D printing, carbon capture materials, and green concrete, are gaining popularity in the construction industry. Asset owners seek green certifications for their projects, which incorporate sustainability from the start, not just in operations.

We have seen an increase in the development of green concrete alternatives in construction. There is scope for the development of low-carbon solutions to use bamboo for building - a material increasingly being used for construction due to its ability to grow quicker and sequester more carbon than forests.

Biomass, timber, and wood are also viable and scalable alternatives that can help decarbonize an industry that is not on track to achieve net zero by 2050.

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