Even though it’s been around in its earliest form since the 1950s, virtual reality is not something we readily associate with commercial real estate. Instead, we’re more likely to visualize a millennial wearing oversized dark goggles in a darkened room, playing video games we’ve never heard of.
In actual fact, virtual reality (VR) is being used to transform experiences in commercial real estate and also in industries from travel to healthcare and automotive to name just a few. Innovative companies like Matterport are demonstrating the very tangible benefits that VR offers to commercial real estate, however to date, it’s use has been limited to bigger organizations and those with the willingness to overcome concerns over data privacy or apprehension around headset wearing.
Maybe just as video-conferencing needed a global pandemic to ‘come-of-age’, this extended period of disruption will maybe be the motivation the industry needs to introduce VR to at least some of its business operations.
Use cases for Virtual Reality in Commercial Real Estate
The Internet was a game changer in allowing prospective clients to view photos of properties without them having to be there in person, however VR takes the game and raises it. Being able to place your client or a potential tenant, directly into a space (virtually) and allow them to walk around it could transform the entire process. Imagine being able to complete 10 initial viewings of properties that may have taken a few days of physical visits, in just minutes.
Investors both domestic and internationally get the chance to view what a site will look like before it’s even built and tenant decision makers can envision how the workspace will look and feel for their employees through mocked-up interiors without ever having to leave their homes. These types of decisions around finishes, lighting and amenities can all be made more swiftly, drastically reducing transaction time and holding costs and allowing revenue to be realized earlier.
3D modelling has been used at the construction stage for some time but VR advances this further with builders able to assess the viability of a project and identify potential issues before it even starts. During construction, regular virtual reviews by all stakeholders in design, architecture and construction can serve to expedite the process and save money through faster decision making and problem-solving even from remote locations.
Virtual reality could put an end to the delays and budget creep that occur with inaccurate blueprints and challenges that could often have been predicted earlier. The lifetime value to a builder in delivering projects to their clients’ exacting specifications can’t be overstated either as a positive brand story.
Agents, landlords and property managers are using virtual reality as a means to communicate with tenants on trivial issues that might ordinarily generate costs for building owners. VR can be used to manage property and track renovation and construction projects from wherever you are in the world. VR might be particularly appealing to owners and managers of office class or recreational assets that have relatively high turnover and require frequent human intervention.
So where do other technologies fit into the equation?
We can’t talk about virtual reality without giving a nod to its sister technology, augmented reality or AR. AR does exactly what it says on the tin - it adds something to the current, fixed reality that is there by superimposing text or images onto what we can see in front of us. This is achieved via apps for smartphones and tablets mainly. VR immerses someone in a new reality that is completely separate from the physical place they’re in, replacing what they see and experience and this involves the use of a headset or other hardware.
The combining of these two technologies, mixed reality, is something being developed and refined to give real estate and other industries a very detailed and immersive view of projects like never before. AR probably doesn’t do enough on it’s own, mixed reality is a step too far right now but with the immersive nature of virtual reality and the cost of adoption coming down, it’s becoming more and more accessible to the wider industry.
The tipping point of VR adoption
We’re close to a tipping point in the widespread use of virtual reality technology in commercial real estate as hardware is becoming less expensive, concurrent to its performance capabilities finally reaching the same level as the software needed to produce it. Cost has been prohibitive in the adoption of VR in the past, however there are now solutions emerging which negate that argument. As an example, some CRE companies have sent branded Google cardboard VR viewing kits to potential clients which they can use to view properties of interest with their smartphones.
In 2020, the global virtual reality market size was valued at USD 15.81 billion and is projected to grow at a compound annual growth rate (CAGR) of 18.0% between 2021 and 2028. COVID has only accelerated the pace of adoption. Brokers should also pay heed to the fact that the average age of investors is getting lower with millennials and Gen Z comprising a bigger portion of buyers - buyers that demand nothing but a virtual experience. CRE can and should claim a part of this growth if their non-technical world can start intermingling happily with technologies that are by very nature techie, or even geeky some may say.
With advancements in virtual reality comes a dynamic job description for the commercial real estate consultant. The role of the real estate professional will likely change to one of coordinating the efforts of several parties at the beginning of a sales cycle but then the human-touch will once again be required in later stages in negotiating and touring the finished property.
Virtual reality is here and although it may never replace the sealing of the deal in person, it’s expediting the sales process and delivering cost savings for those innovators that are willing to embrace it.