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Both the commercial and industrial property segments of the real estate market have managed to escape the tides and tsunamis of technological disruption and innovation. The industry – globally and in South Africa – has been in a pretty safe, comfortable and convenient space. Not a lot has changed despite the infinite opportunities afforded to us by information communication technologies.

The ability to generate, process and efficiently apply knowledge-based information is a key feature critical to the digital economy. It is also a networked economy, which offers many ways in which collaboration can be pursued. Sadly, the commercial real-estate and industrial property markets lag behind in innovation and are slow to adopt new technological innovations in relation to the residential real estate market and other industry sectors.

Digital disruption is change as a result of the influence of digital technology.

It has an effect on how we do business, engage and interact, and think. This quick-fire quacking process, which often seems extremely uncomfortable at first, is necessary to maintain the rhythm of profitability and wealth creation, to increase productivity levels and ensure that a climate exists for competition and innovation to drive market leadership.

Disruption shatters business models and then reconstitutes them entirely. It threatens existing business models, and may render them obsolete. But, most importantly, it introduces innovation into the mix and offers alternatives to the status quo.  It is therefore both a threat and an opportunity.

We can look forward to three disruptions in commercial real-estate and industrial property segments over the next few months:

1. Opening up new investment opportunities through crowdfunding

Real estate crowdfunding websites are springing up everywhere, including South Africa. These sites offer small investors the opportunity to pool their money to buy investment properties, or invest in new commercial and industry property developments.

Despite being one of the most profitable investment opportunities in the market, commercial real estate was traditionally only available to the wealthy elite. Through crowdfunding platforms, smaller investors are now able to participate in property investments.

Of course, South Africa already has a burgeoning stokvel culture. Combined with technology, it really offers an exciting new way for real-estate to open up wealth creation opportunities. Interestingly, in the US real-estate crowdfunding is the fastest growing segment within the crowdfunding industry, according to San Diego-based DiversityFund.

Related article: The Commercial Times Are Changing

2. An end of the commercial property agent model?

In a report by Deloitte titled “Commercial Real Estate Industry Outlook – A nexus of technology advancements and consumer behavior changes”, the authors point out that a possible effect of technological disruption is disruption on the current brokerage and leasing model.

Technology can erode barriers between tenants and property owners through cloud computing and social media, providing cost-effective ways to obtain property information and allow the digitisation of transactions.

In particular, the Deloitte report forecasts several scenarios including the rise of an Uber-like or Google market victor – an entrant which completely disrupts the commercial real-estate and industrial property markets. However, it also paves the way for niche and smaller companies by reducing entry barriers.

3. Information aggregation, sharing and collaboration

Many industries have realised the appetite consumers have for obtaining information and data to help them make informed and intelligent decisions.

Trend forecasters indicate that the area with the greatest likelihood for disruption involved data and information, and data sharing and information aggregation is the nervous-system of listings-based industries such as real estate.

Bracing the digital storm

We are already seeing how digital disruption is beginning to seep into commercial property and industrial real estate markets around the globe. And, because we are integrated into the networked and global economy, it is only matter of months before the disruption reaches South African shores.

Dr Paul Marsden, a psychologist specialising in trends and technology believes there are many strategic ways of dealing with technology disruption. The ways in which companies dealing in commercial real estate and private property are most likely to respond are, firstly, by investing in disruptive technologies or the acquisition of these companies. Secondly, by launching products or solutions which directly compete with disruptors or thirdly by exiting from the market altogether by selling out while value still exists.

While the full impact of the digital revolution on the real estate industry has yet to be seen and felt, it is an opportunity for South African companies and entrepreneurs to innovate and disrupt on their own grounds and through their own terms.

Will we innovate and disrupt through own efforts or do we wait for the arrival of disruptors from international markets?

In the end, we can’t tenaciously cling to old ways and business models. It simply is not good business. However, we can ask “what can we do better through technology?” and then ensure that ideas are developed and commercialised. In that we way, we have better control of disruption.

This article “Digital Disruption And The South African Commercial Real Estate Market” was issued by Afri-Corp International Property.

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