Sandor Horvath
BC Bricks to Consumer Sandor Horvath

How modern retail properties serve the user.


To dispel a widespread assumption: Not everything has to be digital, but many things can be simplified through digital processes and tools. Digitalization is neither a panacea nor a threat that needs to be armed against. Neither is there “digitization” as such, but it is always dependent on the area of application. Nor does every process or product have to be digitally transformed and encoded by zeros and ones. The current slogan for the new digitization campaign of one of the leading consulting firms in the construction and real estate industry describes it very well: “How much digital is ingenious? Right Mix, Real Value”. Written in large letters, this was omnipresent on the metre-high exhibitor wall of the Drees&Sommer consultancy at Expo Real, the largest real estate trade fair in Europe. Almost a reminder not to succumb to all the hypes and innovations on the market, but to critically select the measures according to user requirements in order to generate the highest added value.


Innovation is also a keyword that often goes hand in hand with digitalisation. But it is a misconception that innovative services and products must necessarily be of digital origin. Our company is currently working on the “supermarket of the future” in a cross-company team. In addition to digitalisation, topics such as distribution, production, architecture, infrastructure, sustainability and more are being examined for optimising possibilities in order to project a holistic showcase market. In addition to the analysis of novel promises which are being touted by start-ups, prop and fin-tech companies, but also by established firms, the innovation process focuses on the future wishes of end customers, operators and real estate companies, right down to local communities and the corresponding microlocation. And this in the context of the entire life cycle of the property.


Project developers, investors and property managers cover the entire life cycle of the property. Sometimes buildings designed 15 years ago return to the original project developer. Not only is it exciting to look at the development of those properties over the past decades, but also at the changed data management. It is precisely here that we also see the personal change in the way we work. As a company that is open to the changes brought about by digitalisation, we decided to adopt the modern Building Information Modeling (BIM) working method a few years ago. All data on the building will be created here on the basis of a 3D model. Internal and external planners can then work together on this model to avoid errors and reduce costs. Due to the increased complexity of the projects and a regular adjustment cycle of the building specifications, an ever higher flexibility is required. On the other hand, the number of properties completed by us has risen steadily in recent years and is expected to continue rising. A holistic planning with an intelligent, component-oriented data structure is therefore essential for us. Beyond the internal economic improvement, a 3D model is a much better instrument than a two-dimensional floor plan drawing, especially in external communication. This makes it easier for us in development to communicate the projects to local councils, mayors, the neighbourhood, etc., thus increasing acceptance and speeding up the process.


Last year we examined the possibility of using Augmented Reality for construction site management. Imagine data glasses or smartphones and tablets that allow you to view the real, undeveloped environment through the camera, while at the same time the 3D building planned on the computer appears in the landscape at the right place. Now you can walk through the building on site before it was built. Particularly in the case of language barriers or problems of comprehension during construction planning, a virtual template of the building can make a mediating contribution or make collisions on site visible at an early stage. In order to obtain as much information as possible about the site and to insert it into the 3D planning, we already commission surveys with drones. Using photogrammetry technology, all details can be captured and displayed including the actual texture. It goes without saying that a digital terrain model can be used to calculate earthworks such as excavation and backfill much more accurately and reliably.


But what happens after planning and construction? The lion’s share of the cycle consideration is taken up by the utilization phase. Up to 80% of the so-called life cycle cost calculation is attributed to the operational phase. That’s why linking the planning data with the real property will be so immensely important in the future. The digital twin in combination with IoT (Internet of Things) is not only part of a buzzword catalogue, but a logical conclusion and necessary to remain competitive in the future. If measurement, control and regulation meet networked systems and malfunctions can be displayed on the basis of a 3D model, not only is control of the market much more efficient, but energy saving potentials of approx. 30% are also possible through automatic tuning of the systems alone.


But how do you get the user, i.e. the operator as tenant and his consumers, the end customer to provide data. What are the advantages of creating data-driven services for these key property players? This topic area is also analyzed in our innovation group. With a glance at the online world, we can currently see the cry — rightly so — for more data security. The legislator has defined a new legal standard through the DSGVO, and following the events of the latest data privacy scandal in January 2019, politicians are also recognising the urgency of corresponding TOMs (technical and organisational measures in cybersecurity). Paradoxically, however, users are often lax in dealing with applications that store data on servers abroad. As is well known, humans are the greatest risk in data security. As a real estate company, we also see a great responsibility here to ensure the protection of personal data and the anonymity of users. We see a benefit of data-centric platform economies especially in the area of facility and property management. An example: the heating system has a malfunction in the middle of the night. Normally the store manager does not notice this until the next day. Depending on the workload or the time when the malfunction is detected, this is reported to the operator’s central office. On the following day, the information is reported to the landlord, who orders a local craftsman depending on availability, after warranty claims may have been clarified in advance. A delay of three days after the occurrence of an incident is therefore not uncommon in this sector. Now imagine a world in which the heating system uses integrated sensors to report an incident on an automated platform, where the contact details of the tradesman’s company are stored and are on site the next morning to repair the damage. Of course with automatic checking of the contract system. But IoT systems also offer cost savings without disruption. Predictive maintenance, for example, analyzes the vibration of TGA devices and signals when a machine could be prone to malfunctions in the next few weeks. It is then better to accept a preventive checkup than to risk equipment failure and new purchases.


Prediction gives the big internet companies their power, especially in the consumer sector, through Big Data Analytics. Who buys when, what and why? Artificial intelligence is not only used by Google, Amazon, Facebook and Apple (GAFA), but has also been made marketable in the real world. Countless providers of in-store tracking from the high-tech sector indicate when the customer has spent how long at which shelf. Payment by mobile phone via NFC (Near Field Communication) no longer completes the glass consumer in online retailing. Where the customer goes after shopping, where he lives, works, which purchasing power category he can be assigned to, whether he has children and more, are further data business solution approaches of PropTech companies that can be of great importance when choosing a location. May sound like a horror scenario, but it can offer enormous potential for both sides. For example, fruit & vegetables or butchery products can be offered for sale in a demand-oriented and thus environmentally friendly manner. Live data of stock levels or the control of cold chains of logistics companies offer further savings potential here. This makes it all the more important to rethink data sovereignty. It is necessary to adhere to legal and ethical standards, which have often been disregarded in the past, especially by internet giants.


But back to real estate, the innovation market and our claim to ourselves that we as a real estate company also have a duty to society and future generations. The credo cannot be to build only cheaply and to demolish the building after only 15 years when the lease expires. Our interest in a responsible, resource-conserving approach is aimed at maximally extending the life of a property by revitalising and modernising the existing property. Here too, BIM offers transparency through data management. Knowing exactly which potential pollutants were installed where in a property is rarely documented for older existing properties. A 3D model with stored manufacturer and safety data, which is attached to the digital component, can help here.


However, after the beautiful bouquet of digital possibilities described above, which is far from being exhausted, we have to go back to what retail real estate is really about. It is about the user and his needs. In the discount sector, price is still the driving competitive advantage over e-commerce business. This is certainly also a factor why the online share of total sales in the food sector is still below 2% in Germany. Nonetheless, a disruption is discernible in the non-food segment, especially in the textile sector, which characterises entire city centres with an unattractive vacancy rate of ground-floor retail space. Depending on the location, at best fashion chains are still settling in, but the small shops are fighting for survival without omnichannel marketing (again often on the platform of the overpowering online competition). Over the course of time, stationary retail has had to reinvent itself, and not only in the course of digitalisation. Mom-and-pop firms had to make way for supermarkets. Certainly, people here were used to being addressed by name by the staff, and shopping was also a place for chatting, lingering and exchanging ideas. Of course, these concepts could not hold their own in the long run with the high personnel costs. Thus, in the early past/present an impersonal mass processing has established itself more and more. The main thing is super cheap, long queues at the cash desk, in which one acts neurotically annoyed, angry and impersonal. Shopping was and is often a must, especially in the discount sector, and is perceived as annoying rather than enriching. Nevertheless, avarice is cool and still trumps. Digitalisation is now turning the tables here, combining Mom-and-pop firms with super cheap. In the online world, we are being addressed personally again, our Smartwatch motivates us to train, push-up messages from apps recommend what is available nearby according to our personal preferences. We are used to being addressed on an emotional and private level again, even if often only by algorithms and chatbots. Talking to a machine is becoming the norm (“Hey Siri”, “Alexa?”, “OK Google”), especially in the smarthome area. At the same time we are used to have all information available immediately and to be able to buy goods at the best price. Just as I immediately get the best offer online for the best product for me (or at least what skillful product placements of the almost overpowering GAFA companies recommend me to buy), today’s expectations are the lowest price even compared to discounters, but still with a touch of personal well-being when shopping. Although we do not see food retailers turning away from stationary retail in the foreseeable future, we do see a change in the user and behavioural profile and the flexible adaptation of properties to precisely these new needs. Of course, we will not be able to create the experience locations in the discount segment now, as we can in large shopping malls or the large-scale flagship stores of full-range retailers. The overall calculation of the production costs of the properties, rental income from the operator and ultimately the attractive pricing, i.e. the passing on of the previous costs to the end customer in terms of overall profitability, must continue to be correct in order to hold our own against online trading. In close coordination with our partners, the retail trade (starting with production, transport routes, warehouses, markets and the customer’s shopping trolley) on the one hand and the construction world (from building materials to planning, processing and turnkey handover) on the other, in short: the retail trade and the real estate industry, come together.


Digitization is the result of our needs and habits, a sum of all (in the long run useful) applied tools, with which an added value and a facilitation can be created by simple handling. As a company, we must continue to keep an eye on, analyse and select the trends and ultimately drive the innovations that will move us forward as people and as a collective society. After all, we are the ones who have to plan and build this environment in which we live to make life a better place.

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