Forecasting can be difficult. Just ask any local meteorologist, or if you’re interested in the future of commercial real estate, Dr. Andrea Chegut.
As Director of the Massachusetts Institute of Technology Real Estate Innovation Lab, Chegut manages a team of 12 researchers who forecast the industry. They explore design, computation, finance and planning for buildings and cities.
The one constant for the real estate industry throughout history? Change.
“Real estate has always been changing,” Chegut said. “The Flatiron Building in New York City used to be protested on the street. People said it had the devil in it because it had an elevator. People are skeptical, but they ultimately accept change.
“Buildings last a long time, and our experience of them evolves.”
Exploring the built environment is the mission of MIT’s lab, which JLL joined as a Founding Industry Partner in October 2016. Chegut aims to link buildings to their economic impact. From there, she identifies innovations in design and technology that trigger change. These factors provide clues about what the future of a community or city might look like. It’s certainly not a simple task.
“The lab doesn’t necessarily pretend that it knows everything,” Chegut said. “It just tries to keep its finger on the pulse of change.”
The work started in New York. The lab’s flagship project was the creation of a geometric, geospatial relational database of Manhattan. The database—whose first draft took a year to complete—includes rents, transaction prices, building mortgages, coworking spaces, cell towers, fiber optic cables, subway lines and more. Examining large data sets like the ones used in the Manhattan database are more predictive of the industry’s future than, say, another elevator protest.
Another project underway is MIT and JLL’s Real Estate Innovation Hype Cycle, a visualization of real estate product innovations and how they change over time. MIT research has already illustrated how the expectation of tech products changes through the cycle and the hype cycle will be a framework for the industry to track and harness innovation impact.
“We live in a forecast world, and forecasts are, by nature, usually wrong,” said Ben Breslau, JLL Managing Director of Research for the Americas. “It’s just a question of how much, and in what direction. We’re always looking for every edge to get closer to a better forecast, a better outlook and a better view of what’s coming on the horizon for commercial real estate.
“Our clients always want to know how to future proof their real estate, and our partnership with MIT, just being in this ecosystem, gives us an edge to help answer those questions.”
The autonomous future of real estate
Automation will be the key driver for the future of the built environment, according to Chegut. Software evolutions will feed advancements in data, which will better inform real estate decisions.
As data informs decisions, hardware evolutions, like 3-D printing and robotics, will reshape the industry, Chegut predicts. That could mean removing humans from the process entirely.
“Robots are already laying bricks, tying rebar and 3-D printing buildings,” said Steve Weikal, Head of Industry and Alumni Relations at the MIT Center for Real Estate. “What happens when buildings become completely autonomous? They could someday build themselves and operate themselves. That’s exciting, but it’s also scary.”
We already have self-driving cars. The technology is already here, but the next decade will determine if urban infrastructure can adapt to accommodate a new type of vehicle, paving the way for autonomous cities.
One indicator of that progress could be autonomous parking structures, which may become prevalent in the next five years, Chegut said. That would impact city logistics, final-mile delivery and retail options for today’s consumer.
“The autonomous future is a sleeping giant of an opportunity for investors,” Chegut said. “But there must be an infrastructure shift. If that happens, it will create a new revenue stream for investors who are ready to embrace it.”
Discovery of practical application
While some elements of the lab’s research currently trend closer to science fiction than fact, Chegut already sees drivers of change and opportunity in today’s shared economy, particularly the workplace. The new culture created by shared office environments, backed by big data, is leading to smart workplaces that serve both users and providers.
For the user, that means offices focused on their needs and experience. For investors, this user data provides a greater understanding of how to cater to the future and changing nature of work.
“Coworking is moving at a rapid pace,” Chegut said. “Five years ago, it was a blip on the radar for some, and now it’s morphed into other real estate types as well because the shared space concept is scalable, agile and you don’t have to own the building to do it. We learn a lot about scalable innovation for real estate from the coworking business model.”
Blockchain is another advancement that could disrupt commercial real estate.
It could reshape many phases of traditional transactions, creating a faster contract management process that expedites deals. However, the insights provided by the data collected from those transactions could have even larger implications.
“Think of what’s possible when we can use AI to detect patterns in these enormous data sets that humans can’t possibly begin to observe. We now have the means to do that,” Weikal said. “You can look at a worldwide network of real estate transactions, see some trend or anomaly that wasn’t quite visible before, and make a strategic decision.
“That is the inherent power of big data, but it really is the next step beyond big data.”
Removing uncertainty about new technology
So back to our big question: What’s next? For Chegut, no forecast will be certain, but all of the changes predicted by the Hype Cycle represent quality of life improvements—no matter how scary they may seem now.
That starts with creativity, improving efficiency and eliminating routine tasks, and it ends with a few more steps toward enlightenment for the human race. Chegut’s short-term goals are much more manageable, however.
She plans for the lab to track how long it takes for new building uses to diffuse into a city’s economy, how spatial forms of buildings affect their finances and where global capital is accumulating in real estate.
Chegut hopes the industry is prepared for what the lab discovers.
“Innovation jolts people,” Chegut said. “But technology marches along, despite whether or not there are naysayers. It’s critical that we don’t fight change, but work to understand how it shapes our lives. What we can do [here at the lab] is help our partners in the industry understand the consequences of change and what that means all for all of us.”
Want to receive regular update from JLL Research? Subscribe now.