Real Estate: From Disruption to Maturity

By John Miller

This accessible book is full of concrete examples for professionals, students or individuals. Like this start-up whose robot builds brick walls or the one that helps you finance your contribution, nearly a hundred start-ups in europe, the united states but also in china are listed. They are the ones who change the way of financing, building , managing or occupying real estate. This book will show you that it is possible to organize this market differently through concrete cases. The strong point lies in the very rich enumeration of digitization players (digital) who want to 'disrupt' the market. It happens very often on the american market, more liberal but not only.

• Language: English
• Publisher: Miller
• Release date: Nov 27, 2022
• ISBN: 9798215528693

Book preview

Preface

Digitization, uberization, disruption, disappearance and appearance of professions, transformation of others, modification of social relations, political and economic upheavals... the modern world is in the midst of a revolution. It is a hurricane of the magnitude of the great industrial revolution of the second half of the 19th century .

100 years ago, everyone was concerned. But not at the same time, nor in the same way. The industrial revolution in textiles preceded that of transport by 30 years, and that of the food industry by 50 years. Professions disappeared in crafts, agriculture, and new professions appeared in transport, the media, industry... but certain professions were less affected, such as doctors, notaries or teachers. Everything happened gradually. A factory, a printing house or a railway line did not open like an Internet start-up.

This perhaps explains why the large world of real estate (which includes development, construction, promotion, services and investment) felt relatively little concerned by the sudden emergence of GAFA (Google, Apple, Facebook, Amazon) and the digitization of the universe around us. Real estate is " brick and mortar ", it doesn't move like that. Real estate, there is no reason for it to change, we will always need it. Building is stacking concrete, nothing to do with the Internet. You will always need an agent to rent or sell well, and your banker to finance yourself...

And while those do not feel concerned at all, others, neosceptics, explain that the digital revolution will take its time before landing in Immoland. And that we will have plenty of time to adapt. We are ready. The proof?... we already use an iPhone and an in-house webmaster takes care of the website and the Twitter account.

John Miller and Vincent Pavanello disagree. As free observers, they think that the digital Big Bang of real estate is already underway and that it will transform the professions of intermediation, promotion, construction, services and real estate finance. They know that the particularity of a digital revolution is its speed of execution, because the byte travels 27 million times faster than the Louis-Philippe railway. Not all their predictions will come true. But, if they are only half right, we urgently need to get going.

Introduction

Uberization has invaded newspapers and the media. However, the phenomenon remains very modest when compared to what has really changed our lives. Rather than uberization, urbanization has certainly been the most striking human phenomenon of the last century. In 1900, less than one person in ten lived in a city, whereas today it is the case for more than one in two. By 2030, cities will welcome one billion additional human beings and three billion by 2050. 417 cities have more than one million inhabitants and 36 more than ten million inhabitants, bringing together one human being in six. Who says concentration of inhabitants says concentration of wealth. In 2030, the 750 cities of more than one million inhabitants that the planet will have will produce nearly two-thirds of the world's wealth. In the words of former Denver Mayor Wellington Webb: "The ¹⁹th century was a century of empires, the 20th a century of nation states. The 21st century will be that of cities. »

While these big numbers may seem elusive – how do you mentally picture 10 million people ? –, the city has a physical, tangible reality, it is the reflection of the buildings and the network infrastructures that compose it. Beyond the urban question, we spend most of our lives in buildings. A study gave the incredible figure of 2h30 per day on average spent away from the protection of buildings, including 1 hour in transport. We had been sleeping there for millennia, but the gigantic productivity gains in the agricultural sector, which employed 80% of the French population two centuries ago, have led people to work indoors. In some cities, the cold and hot outside conditions are such that the buildings provide protection. Real estate does play a central role in our lives.

An Immobile Economic Sector

Unfortunately for us, this real estate sector on which we depend so much is immobile. Immobile at a time when technology is revolutionizing entire sectors, to the benefit of both consumers and the environment. Transport is undergoing a transformation with the development of ever less polluting vehicles, with software making it possible to adapt the offer as closely as possible to needs and soon with the appearance of autonomous cars which will prevent thousands of deaths. by accident. Energy production is becoming more sustainable with production costs for renewable energies falling sharply, which suggests a world that is better equipped and less polluting. Agriculture, which has already shown its tremendous capacity for growth in recent decades, will meet the challenge of 4 billion additional human beings while reducing the quantities of water and fertilizers needed. Among these large major sectors responding to basic human needs – travel, food, heating and lighting – real estate is an exception. Buildings are always more expensive to produce, housing conditions are not progressing, the qualitative update of existing buildings is too expensive, the market is so viscous as to prevent people's mobility...

Today, part of our economic difficulties lies in the poor health of this sector suffering from three ills: an inability to generate the expected productivity gains; information asymmetries and high transaction costs leading to a poor match between supply and demand; a lack of economies of scale due to the scattering of actors. It ends up diverting essential resources to finance the transformation of the rest of the economy. We are in the midst of a cost sickness. The cost disease is the expression coined by the economist William Baumol to designate the differences in the evolution of productivity between the different economic sectors. It still takes five people to play a string quintet today, and the productivity of a troupe playing Le Bourgeois Gentilhomme is little different from what it was in Molière's time. At the same time, the factories have made major productivity gains and are continuing to improve: vehicle assembly time was halved between 1995 and 2003 and halved again since then. This disease of costs which was confined to the artistic sector or to education, we see it emerging in real estate.

A Key Sector Of Our Economies And Societies

This is all the more catastrophic since the real estate sector, both residential and tertiary – in other words shops, offices, warehouses and factories – has been at the heart of our economies, and has been for centuries. Despite national particularities on a global scale, different ownership rates, economies of heterogeneous maturity, more or less old populations, more or less mobile labor markets, we observe a relative stability in the weight of the sector. . Our research has shown that the real estate sector, construction included, is, along with the trade sector, the one with the most stable economic weight in the OECD economies, which brings together countries with profiles as diverse as the United States, Europe, Australia, Japan, Mexico or Chile. Globally, over the past three decades, the sector has accounted for one-sixth of wealth creation on average. In France, real estate activities and construction still weigh respectively 13% and 5% of the added value of the national economy, thus making them the leading sector. Taking an even broader approach including building materials and maintenance, consultancies Global Construction Perspectives and Oxford Economics ¹ predict that by 2030 construction will account for 15% of global value added compared to 12% today . As the sector generates little or no productivity gains, the prices of associated goods and services do not fall while those of other sectors, such as electronic products, collapse. The result is an ever-increasing size in the most developed economies.

Because of its economic weight and its inefficiency, this sector is predestined to be the one where crises arise, whether that of the early 1990s or that of the subprimes of 2008. It becomes a natural receptacle for liquidities when a country is expanding – let us remember the price per square meter which could exceed 1.5 million euros during a transaction in 1987 in Tokyo in the Ginza 4-Chome district – and leaves investors broke when the bubble bursts. It has been calculated that the value of residential property in the highest standing neighborhoods is only 1% of the peak value at its peak. Today, China attracts attention with its famous ghost towns whose real estate development projects remain desperately empty in former industrial regions where steel mills, coal mines and cement factories are at a standstill. A research team from internet giant Baidu ² identified 50 regions with unoccupied residential real estate using queries on its search engine, citing the case of Kangbashi, a neighborhood of 300,000 people. built in 2006 in