JapanReal estateThe impact of technology on the Real Estate industry

3128 min

There is no doubt that the evolution of technology is affecting many occupations. In the survey “which jobs are more likely to increase (decrease) in the future”, the response rate for the increasing industry was highest in the IT area, followed by the offshoring/outsourcing department.

As for IT, companies are focusing on securing IT professionals who will contribute to business growth, and supportive work has begun to head towards outsourcing and the cloud. Some global companies have started using coworking spaces and incubation centers to secure talented people in the IT field.

In order to apply technology to the growth of companies’ revenue, the outsourcing/offshoring sector is also considered as a way to form partnerships with external talented people.

Changes in corporate real estate strategies

So far, the basic process has been to first select a place to set up an office, carry out the interior work according to the business needs, and finally, introducing the technology required by employees. However, with the evolution of technology, this conventional flow is about to change greatly, as the way of working and personnel composition is changing as well. After establishing what kind of technology is available and how it will contribute to the business growth, the next step will be focused on hiring and developing human resources who will be implementing it. The office, thus, will be selected in terms of securing and developing such human resources and supporting diverse working styles.

Smartphones are transforming the business

In terms of technology evolution, AI, VR, 3D printer, etc. can be mentioned as an example, but from the results of this survey, the technology that has the greatest influence on business is smartphones. This was the same result in the survey targeting both APAC and Japan. It is thought that the existence of as many as six million mobile apps is enhancing the efficiency of smartphones.

But in the real estate industry, the use of apps is still in its early stage. There is still a short number of apps used by multiple owners and tenants that offer schedule room viewing, delivery services or air conditioning adjustments to mention a few.

In terms of the impact of technological evolution on the working environment, the highest response rate for “increased mobility” is expected by most companies to increase freedom of working styles. In fact, workplace providing various options as locations to work from is also spreading in popularity.

With regards to “reducing labor costs” by introducing technology, personnel in charge of tasks that cannot be automated have a high market value and contrary to the overall view in APAC that labor cost per person will increase, in Japan, the focus seems to be on the chance that overtime pay may be reduced due to work efficiency.

The choice of expanding tenants

Future office demand surveys show that 50% of the number of tenants will decrease. Besides the decrease in the number of employees, more efficient use of space was also quoted as one of the reasons. On the other hand, building owners are somewhat optimistic, with 32% reporting a decline. Demand from start-up companies and new industries seems to be expected.

In addition, the trend of sharing and exchanging information with other companies is now plausible, as mobile working outside the office is possible, and 50% of the tenants has replied that the source of demand for shared offices such as co-working spaces will increase in the future, supported by the new IFRS 16 lease accounting standards, which will come into force in 2019: all leases with a term of 12 months or more must be recorded on the balance sheet as liabilities, but membership in coworking space can be recorded as expenses.

About 70% of building owners welcome shared offices as a new source of office demand, with emerging cases of their own co-working brand being established in their property.

Technology that contributes to CRE strategy

Many companies believe that the most impactful element in workplaces is the technology that enhances mobility. In response to the growing need for mobility, companies that choose workplaces such as Free address and Activity Based Working are also gradually increasing.

On the other hand, these offices will need to invest in new technologies as it is difficult to track the actual usage. There are also examples of companies that are helping to optimize the real estate portfolio by analyzing the collected data and quantitatively grasping employee productivity, the efficiency of office operation, turnover rate and workplace design evaluation, etc.

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