Need for Digitalization and Urbanization in Real Estate

2015 saw a new trend in global economy. It’s been seven years since the Global Financial Crisis (GFC) that brought attention to loosen monetary policies in US, Europe and Japan characterized by quantitative easing and reduced interest rates. At the same time, emerging market economies have expanded, thus opening doors for new business opportunities. This has been characterized by the following further changes:

1. China’s impact on global trade and economicsInterest rate volatility has made business look for outside credit

2. Increased scrutiny on lending and real estate mortgages

3. Surge in investor appetite for real estate related funds from 43% in 2013 to 54%

The backdrop to all these changes meant increasing capital inflow into real estate from pension funds and sovereign wealth funds. This involved increasing focus of private equity firms in emerging markets in Asia, India and Middle East. This also added necessity to increase the yield on real estate investments from 3.9% to 5% on average by improving business process, building process and IT systems.

With the increasing amount of investments in urbanization and creating cities to accommodate the growing population and work-force, it is understood that the requirements for creating smart and sustainable buildings will go up. Effective infrastructure planning and sound investments will make future cities competitive and resilient.

In 2014 World’s 750 biggest cities account for 57% of GDP. By 2030, they will grow to 61% OR USD 80tn.

Urbanization will require USD 60–70tn investment over 2012-2030. Under current condition only USD 45tn is likely to be realized. USD 8tn worth of new infrastructure capacity by 2030.

On average Fortune 1000 companies miss their capital plans target for real estate by USD 12.2bn yearly. This allows for looking across alternative industry in infrastructure sector and across strategic groups within real estate industry – paving the way for success of RealexApp as a blue ocean strategy.

Almost 80% of the companies across industries are facing changes in customers buying and consumption patterns due to online and digital channels. Consumers spending via mobile will increase from USD 204bn in 2014 to USD 626bn by 2018. This will redefine the industry buyer group and allow for blue ocean to evolve.Businesses are failing to use almost 80% of customer data now generated.

By 2020 more than 50% of workforce will be Generation Y and Z members – and they have grown up connected, collaborative and mobile and will generate between 5x-8x more data than today. This will allow for RealexApp to apply blue ocean to create alternative and complementary services based on the data generated and used by the millennial.

ICT-enabled solution offers the potential to reduce annual emissions by an estimated 9.1 gig tons of greenhouse gases by 2020 which represent 16.5% of the projected total by 2020. This allows real estate to participate in blue ocean shift by shaping external trends on sustainable and renewable solutions over time.

Entrepreneurship is rising across the world and 600 of top entrepreneurs of the year outperformed ROA (return on Assets) with 16.8% Vs. 7.1% of that from S&P 500 companies in 2012. This shows that the new breed of entrepreneurs is creating blue oceans by re-thinking the functional and emotional orientation of the industry.