Real estate is, more often than not, the biggest single investment we make in our lives. We spend an average of 20 hours per day inside buildings – working, sleeping and passing time with friends and family – so it is doubly important that when making this investment we get it right. Technology innovation brings with it the opportunity to enhance and streamline this process, bringing significant opportunities for the real estate industry – particularly when it comes to Virtual Reality (VR).
According to Property Industry Alliance’s 2016 Property Report, the total value of real estate in the UK is around £6.5 trillion, with roughly another trillion pounds in civil engineering. The industry also adds over 50 million square feet of new space per year, valued at around £12 billion and contributing almost a full percentage point to the UK’s GDP. Behemoth industries like real estate are usually slow to react to change, but this market is set to be massively disrupted as VR changes the dynamics of interactions within the space.
Here’s why: Perhaps the most common phrase heard by realtors is “this does not look like the pictures”. Whether you are an agent or potential client, it is especially frustrating to have to cut a meeting or viewing short and race through traffic, only to be immediately disappointed at the next viewing. Sometimes the other party is late, the site is a mess, or the key can’t be found. Then there’s the problem of unimaginative clients at building sites, or the irresolute viewers who need 10 viewings before they’ve decided they dislike the bathroom tiles. These factors serve to ruin deals and cut commissions. But as VR advances, what used to be problems for realtors are now becoming challenges for tech developers, and relatively easy ones at that. Keys, tidying and traffic are irrelevant to VR. It would be perfectly possible to host an open house, with thousands in attendance, and still maintain the impression of a quiet space, or leave that same irresolute viewer with access to the VR model until they make their decision.
This is also true for commercial real estate, which represents 13% of this built environment and is valued at £871 billion in the UK. Often, when commercial sites are being developed, it can be difficult to see past the loose cables and dirty cement underfloor to the potential of the building. Having VR systems in place from day one will allow developers to show every stage of construction to their prospective clients, without requiring constant oversight, as well as the planned finished product. This could be done off site, using models and images, or on-site with a layered reality, slowly replacing ‘the real’ with ‘what will be real’. Even ‘people’ can be overlaid on the model, allowing the owner of the building to simulate and correct human-flow issues before they’ve even materialised.
Moreover, during construction, in both commercial and residential cases, VR allows prospective buyers to see and change the details of their house, and experience the apartment in various settings. Maybe the space doesn’t get enough natural light, or the sunrise through the second floor bedroom window makes you fall in love with your prospective new home. It will also be possible to ‘fill’ a virtual space with virtual furniture, much like IKEA did with their augmented reality catalogue. Truescale, by Immersion, is a great example of what this may look like. If viewers uploaded models of their own furniture they could virtually ‘trial’ a house.
So are there any downsides to the adoption of VR in real estate, and what’s holding the industry back?
Perhaps not for the industry as a whole, but industry professionals may suffer somewhat, since according to job automation projections real estate agents are among the first to lose their jobs. VR is one element of this, as it allows the landlord to make their space constantly available for unmonitored viewings. So it seems as if the real estate agency has more to win than the employees, though the counter argument from the estate agents is that they can influence the buyer and present other properties when they meet in person. Time will tell, but adding AI to the mix will likely make this argument outmoded.
As for the other elements holding the industry back, there are a number of things including production cost, adoption of VR devices by consumers and the difference in quality between stationary VR device and mobile. The cost of producing high quality VR content based on existing 3D models can be anywhere from £20,000 to £100,000 for new developments. For existing properties on the other hand, 3D models and floorplans usually don’t exist, and therefore a £5000 professional stereoscopic VR camera is required to capture good quality VR. For the time being the smartphone experience is inferior to stationary VR devices in terms of quality, movement and interactivity. Prices, however, are likely to come down fast and, according to Strategy Analytics, household penetration of VR headsets will grow to 10% by the end of 2017, with 9 out of 10 of these being smartphone based.
Finally, commercial real estate companies have generally been slow to adopt new technology, and they usually wait until someone attempts to disrupt the industry before following. But, it’s very possible this particular technology will prove different, as the benefits and financial rewards are so obvious to everyone involved. We have already seen basic 360 photography being used for many years in the residential real estate space as a precursor to VR. Consequently, the transition into VR should be somewhat smoother than other digital transformation initiatives, as the industry has had years to acclimatize itself and prepare for what amounts to a highly disruptive change.