How to win in Asian real estate

| Video

Digital technology is poised to optimize the end-to-end process of the real-estate market in Asia. In this video, Bess Teng, managing partner of McKinsey’s Shenzhen office, highlights the opportunities created by digitization as well as shifting trade patterns. An edited version of her remarks follows. The conversation is part of our series on the future of Asia.

What will be the top three most disruptive, powerful forces shaping the Chinese real-estate market ten years from now?

First, technology will significantly improve our overall productivity in the real-estate industry. After ten years, we should expect to see construction costs reduce by 50 percent and a construction time-savings of 30 percent, with better control of quality and standards. There will also be roughly 30 percent of energy savings in smart buildings, which means that in global commercial-building segments alone, there will be more than 600 million tons of carbon-dioxide reduction issued in each year.

Number two, disruptive changes will happen, as the technology companies attack the traditional way of doing business and as they take an increasing portion in the value chain. We have been observing lots of interesting examples emerging globally. For example, some leading companies transformed an advertising company to start a business of an instant housing transaction.

Third, building as a service. The building will be transformed for user experience and efficiency.

In facilities, customer data will be used to optimize consumer experience in all daily life settings, for example, security, smart CRM [customer relationship management], and traffic monitoring. So imagine, there actually will be a digital world above all the buildings that can optimize end-to-end processes, starting from investments to daily operations.

How should CEOs be responding to these forces as they think about their business strategies for the next decade?

My advice to a CEO would be to watch the trends. Technology is no longer a concept to stay in the lab but will become part of their daily business in the next ten years. Real-estate technology is still very new, and the whole industry is very fragmented now, with no clear winner. The windows of opportunity are still open.

Furthermore, embrace the change and make it happen. I think CEOs should look at their business, taking a new end goal of technology, and import a technology to rewire the whole business model and the business process.

Number three, find the right technology partner to cobuild your business. I don’t believe this is a zero-sum game between conventional real-estate developers and the new technology attacker. I think this is more like a collaboration game. So, find a technology partner, and make things happen in a more efficient way.

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