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Property market digitisation and trends
On June 14th, the ESADE Alumni Property Club held its 17th Annual Conference to analyse the main trends in the property market and the digitisation of this industry.
Jordi Fabregat (BBA&MBA 80 / PhD 05), professor in ESADE’s Department of Economy, Finance and Accounting and academic sponsor of the Property Club, mentioned during his introduction that the residential market, after three consecutive years of growth, had seen a price increase of 2% in 2016, rental returns of 4.5% and foreign investment of 20%. ''And the first quarter of 2017 has been the best since the crisis, with an increase of 13% in the number of operations.''
During his talk ''Digitalisation applied to real estate: a fact'', Andy Tennant, CBRE’s Digital & Technology executive director for Europe, the Middle East and Africa, explained that 44% of the work done today by real estate companies can be automated, including urban development, construction, operations and marketing, renovations and investment. Against this backdrop, how can this business be rebuilt?
''The IT revolution in this industry could mean a loss of 50,000 jobs in Spain and savings of US$ 1,300m. Drones, 3D printing, augmented reality, virtual reality, and online sales are changing how we build, add value, market and manage property, just as robotic processes and artificial intelligence enable faster, better decision-making in a data-driven industry,'' said Tennant.
The combination of fact and fiction makes it possible to visualise property before it is built, making it easier to take decisions. In addition, the big data gathered from real estate management increases property saleability and returns, and is therefore another source of value.
In addition, intelligent cities, autonomous vehicles and wearables are also changing the way we live and work, obliging real estate executives to respond to customers’ new requirements. Andy Tennant advised companies not to be afraid of change, to regard technology as help, and to be willing to invest. ''First of all, surround yourself with IT executives and data analysts able to complement the work that expert realtors do with a clear aim in mind: to give customers in an increasingly digital world more value and a greater competitive edge,'' he concluded.
This was followed by ''Real Estate Trends'', a panel discussion about macro trends and in-house management featuring Ismael Clemente, CEO of Merlin Properties, and Pere Viñolas (BBA&MBA 86), CEO of Inmobiliaria Colonial, which was chaired by Eduard Mendiluce (BBA&MBA 97), president of the ESADE Alumni Property Club.
On the subject of forecast growth, Ismael Clemente pointed out that although the London and New York property markets are experiencing a downturn which might affect us, this cycle is completely unrelated to the Spanish property market. ''In Madrid, for example, prime prices are not sky high or anything extraordinary in comparison with the peaks in the previous cycle, quite unlike what is happening in other cities like London,'' said the Merlin CEO, and Pere Viñolas agreed that ''the demand and supply of office space in Spain are fundamentally solid.''
As regards international investment flows, Pere Viñolas explained that traditional forms of saving investment are at turning point because ''the risk involved in public debt means that many people prefer to invest in property, and this is a huge amount of money, despite the shift from 4 to 8%. In this respect, there is the possibility of an imbalance between supply and demand.''
Eduard Mendiluce asked the directors if it was more profitable to focus a business strategy on a product or a country, to which Pere Viñolas replied that most things are possible providing they are done well.
The speakers also examined the opportunities and risks of Brexit for cities such as Barcelona and Madrid and whether the City of London could become a land of opportunity for Spanish property companies. ''It’s too early to know, but there is a considerable lack of demand,'' said Ismael Clemente before adding that 100,000 jobs related to the Eurosystem are expected to have to move, requiring 1.5 million square meters of office space. ''This relocation will benefit Paris, Frankfurt and Amsterdam in particular, although demand could climb to about 50,000 sq.m. in Spain – a very positive outlook.'' Clemente also explained that as regards this possible demand, the specialisation of the Madrid and Barcelona markets means that they do not overlap. ''The large establishments, big banks, multinationals and insurance companies tend to plump for Madrid, whereas hedge funds love Barcelona, and so do the biotech and pharmaceutical industries.''
Eduard Mediluce’s last question to the CEOs was about debt management. Pere Viñolas recommended reducing finance from banks and preferring the bond market. ''At Colonial, we focus all our efforts on demonstrating our credibility to the world of equity. We don’t want to make money with liabilities, we want security. We want better ratings, without leverage,'' he said. The president of the ESADE Alumni Property Club congratulated the Catalan real estate company for its forthcoming entrance into the IBEX 35 on June 19th, and then opened the question and answer session which was followed by the traditional networking breakfast.
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