What is the impact of the 4th industrial revolution? This is going to be a buzz phrase for the next 10 years to come or more and there is no way of avoiding it.
If someone talks to you about the 4th industrial revolution, they are essentially talking about the 8 main technologies:
- Artificial intelligence
- Machine learning
- Internet of things (IoT), also referred to as the internet of everything
- Smart technology
- Quantum technology
- Nano technology
The capacity of the internet to transfer data has seen exponential growth. In the next minute, there’s going to be 280 000 Instagram posts, 4.5 million YouTube feeds, 511 000 tweets, 188 000 emails and 231 000 Skype calls. Americans are going to consume 4.4 million GB of data. AirBnB will book just under 1400 rooms, Uber will book just under 9800 trips, Tinder users are going to swipe 1.4 million times, Google will process 4.5 million searches and there will be 18.1 million texts exchanged through the various platforms. All of this will happen in the next minute globally. This is just over the 4G network, and everyone is now talking about 5G which is going to multiply this number by at least 10 times. That’s when we realise how quickly things are changing around us.
This quote is from Klaus Schwab who is the founding chairperson of the World Economic Forum, who also came up with the idea of the 4th industrial revolution: “Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate”. This quote encapsulates the move towards platform technology which combines a number of the above-listed technologies to provide sectorial solutions.
If you think about it, most of these companies were not around more than a decade ago. When we speak of the 4th industrial revolution; in 2014 there were 3 billion users of the internet, in 2018 4.3 billion users out of a global population of 7.7 billion, which means that more than half of humanity is on the internet. This coverage excludes large parts of Africa and other underdeveloped parts of the world. We also know that Facebook is putting satellites in the sky to try and cover these areas that do not have internet yet. So you can imagine how fast this is going to grow.
We have Artificial Intelligence (Machine thinking): the development of computer systems that can perform tasks that normally require human intelligence. Examples include facial recognition, translation and video recognition. Sophia, an AI robot that is now a citizen of Saudi Arabia, was developed by a company in Hong Kong. Sophia can express its emotions through facial expressions. Audi also developed a self-driving car. The IQ element of the world will be replaced by machines. We as humans will only be useful for our EQ which is our competitive advantage.
We are living in an interconnected world. The internet of things is a network of everyday devices and objects equipped with chips and senses that transmit data through the internet. What were deserts in Saudi Arabia just 7 years ago are now fledging inter-connected city hubs and real estate practitioners need to be ready for these modern cities.
The president of the country spoke about this in his state of the nation address when he said that he wants to build a smart city, which I’ll touch on later.
Blockchain is going to change everything with platform security especially in the financial services sector. It will be able to outsource the work that is done by attorneys and other professions. Blockchain is a type of decentralised database system that’s based on linking back previous records in secure blocks of information. Bitcoins are founded on the basis of blockchain, they create a currency because it can be verified from a decentralised server. Blockchain could revolutionise the real estate market because it provides 100% liquidity. If you look to invest in real estate, you will be stuck with the value of the property until it’s sold.
We are living in the ‘now’ generation whereby if you want to do banking at 3am, you’ll just open an app on your phone and click a button to do your banking. If you want to communicate with somebody, you’ll just use the social media platforms ‘now’. We are moving into a world where property transfers are going to occur in real-time, no more waiting for 3 months for the Deeds office to process the registration. Government and legislation will catch up, for example, they are yet to make legislation that deals with but drones are already airborne. As valuers if people are trading properties in real time how will we be able to give value at that rate? These are the things that we should ponder on.
SMART refers to Self-Monitoring Analysis and Reporting Technology. This is the technology that knows what needs to be done. Like a building that knows it needs cleaning. The building will call a plumber from a designated panel, book an appointment, arrange for parking, open the gate, receive an invoice, and process a payment. It’s already happening with cars. Cars today will tell you when it needs service and they communicate it to your dealership without you knowing, some even go as far as booking a service. Now imagine in an autonomous world, you’ll park the car, and it will drive itself to the dealership. This is interconnected to the idea of the internet of things. Real estate will not be immune to SMART.
We have to look back at the progressive changes in the valuations industry through the various stages of industrial revolutions.
Industry 2.0 looks back at the time when we used to use book maps, then came the technology of Garmin navigators. This was disrupted by Google Maps which came for free with smartphones. Google Maps proved quite useful to property valuers during the height of Covid-19 lockdown regulations during 2020. They use of measuring wheels and drawing sketches was the order of the day.
Industry 3.0 meant that getting information was very time consuming and valuers were restricted to working in the areas they lived in. Now due to the internet of things, that’s no more. We can measure objects using apps. In industry 3.0, information became cheaper and easier to access which increased the efficiency of the work we do as valuers.
Industry 4.0; this is a game-changer, the contract with the valuation instructor will be a smart contract. Investigations will be conducted using blockchain and internet of things platforms. We might even need to do inspection reports because of drones, there will be other sources of information where you can obtain data of the property. Some of this information will be verified due to blockchain. The residential valuation space has already used AI’s secondary data to help with valuations. As a result, we’ll have a better consensus as to what the value is because the components of determining value will be out there and available. There are systems that already predict value before a valuation is done, so the role of the valuer will be that of advisory and consulting, bringing in the component of emotional intelligence and experience.
Another area that is being disrupted is the property development industry. Currently, we have limited suppliers and very expensive processes, which makes growth slow. Town planning and building design processes are some of processes that attract significant costs, as a result of professional fees and delays, in the development process. In the 4th Industrial Revolution, everything is moving online. So, companies such as Builders Warehouse are growing because people are doing things themselves without contractors.
Buildings will require less parking because of smart cities, people will be using efficient modes of transport. Off the grid buildings will be powering themselves and not need municipal services. This is likely going to accelerate in South Africa given the fast increasing costs of municipal services. AI is also going to design houses and implement ‘just-in-time’ delivery of material. This will reduce the storage space that’s needed, so goods will be provided on time. 3D printing is going to be a disruptor in the construction space. As valuers we need to understand how to value 3D buildings, unfortunately, we are still struggling with alternative building methods at this very moment.
Property management is a very labour intensive field. New developments in this space include online companies that will be able to provide services property management as well as marketing and accounting services. If we look at the office market lately, office spaces are becoming smaller and leases are becoming shorter. People want to be there for a short period of time. The marketing aspect has also changed, everything is online because more than half of the world’s population is online.
The future work of humans is going to have to be dependent on emotional intelligence. There will be no need to work in an office for a specified time limit. But we’ll need to provide an analytical and strategic view of things.
The real estate market is changing at a very rapid pace, whereby the 4th Industrial Revolution will either make you a disruptor or you’ll become disrupted. Property valuers need to try to spearhead the disruption of the valuation industry, we need to own our market when disruption comes, otherwise we run the risk of having others run our market from many kilometres away.