A technology tsunami is heading right at the real estate market. Will your company ride the wave, or be crushed by it?
There once was a man called Andrew who lived in a beautiful house on a tropical beach. Andrew had one neighbour, Lionel, who lived in a similar house just down the beach. Life was good for both of them. One day, Andrew was sitting on the beach and saw a bird in the distance over the ocean. The bird landed next to him, and Andrew soon realized that this was no ordinary bird – because it started talking to him. It warned of a tsunami building on a far shore. Of a wave so large that when it finally got to this beach, every building in sight would be washed away. The bird then flew next door to warn Lionel, but Lionel shooed him off because he thought the bird was coming to eat his berries.
The next morning, Andrew resolved to raise his entire house up on giant stilts. It would be huge job, and he’d have to spend much of his savings to make it happen. But he believed the talking bird, so he decided to do it anyway. Lionel thought Andrew had gone completely mad because he thought birds were talking to him. Besides, the sea was calm and the sky had been blue every day for the past few months.
Two weeks after Andrew finished lifting his house onto stilts, the sky grew dark and a giant wave appeared on the horizon…
Whether you’re in the commercial real estate business or a new home builder you may want to listen to that bird, because there’s a tsunami heading for you as well. It’s a technology wave known as virtual reality and augmented reality (VR/AR) – and it’s going to have a massive impact on the way real estate is sold and leased in the very near future.
It’s All About Imagination
At the end of the day, the goal of real estate marketing is to make it easy for prospective buyers to imagine what it would be like for them to live or work in a property.
Real estate marketers employ many methods to accomplish this. They expertly stage idyllic model homes, produce brochures and websites with beautiful photography, and even bake cookies during open houses.
As with any type of marketing, real estate marketers who spark prospective buyers’ imaginations are more successful than their competition. More recently, innovators in real estate marketing have ignited the spark by employing computer generated images, immersive 3D virtual walkthroughs, and drone videos of properties.
Virtual Reality Is Still On the Horizon
While there are already quite a few companies offering virtual reality services to the real estate market, so far only a small percentage (estimated at 1%) of builders have adopted the technology. Producing high quality VR/AR has been expensive, and most companies still prefer to hire professionals like BDX or a professional photographer who specializes in real estate to do this type of work.
So far, VR/AR has gotten the most traction in luxury home sales and yet-to-be-built office buildings. But momentum is building quickly, and a host of market factors are driving adoption. Now, more and more real estate marketers are experimenting with VR/AR
“Technology is changing rapidly, but we think the use of virtual reality will reshape and transform how new homes are designed, marketed and sold. The number of builders experimenting with the technology has increased exponentially in the past year.” – Tim Costello, founder and CEO, Builder Homesite Inc.
How Big Will Virtual Reality Be?
Goldman Sachs Research predicts that virtual reality will be an $80B market by 2025, of which $2.6B will be specifically for real estate, and it will transform the real estate industry. On the commercial side, one of the most prominent applications is marketing space that hasn’t yet been built.
Apple CEO Tim Cook has been quoted as saying that augmented reality will have as big an impact as smartphones (which is saying a lot given that 1.2 billion iPhones have been sold in the last 10 years).
“Indoor Mapping will be bigger than GPS or Maps.” – Don Dodge, Google
Early Adopters of Virtual Reality
Use in Luxury Real Estate
Luxury real estate is one of the first real estate markets to experience the benefits of virtual reality. Sotheby’s International Realty has already begun experimenting with VR for multi-million dollar homes in major US cities, and Matthew Hood, the co-founder of VR platform Transported, believes VR/AR will trickle down to lower-priced homes for everyday sales within five years.
“A number of young tech companies are exploring an entirely in-VR experience where you enter search criteria like price, location, and number of rooms and you’re presented a number of homes and you can virtually tour. Once that happens, you’ll look back and say, ‘How did we do this before?’” – Matthew Hood, Sotheby’s International Realty & Transported
And it’s not just viewing homes that’s benefiting from VR/AR. Virtual home staging is also appearing in luxury markets, with realtors and brokers able to have houses virtually ‘cleaned’ of clutter and filled with luxury digital furniture.
Use in Commercial Real Estate
VR/AR is also making in-roads in commercial real estate, like with Manhattan’s Halstead Properties, who is using virtual reality to market properties that don’t even exist yet. Halstead already has 3D walkthroughs available for 30 listings, but its goal is to get its entire inventory online. They’ve found people stay on pages with 3D walkthroughs 10 times longer than on pages without.
“We sell based on emotion and attaching that emotion to a vision. Imagine a buyer walking out onto the terrace and thinking: ‘If I bought this home and was having breakfast here, this is exactly what I’d see.’ That’s incredible. For a salesman, it’s a dream come true.” – Matthew J. Leone, SVP of Digital Marketing, Terra Holdings
Use by Residential Home Builders
Atlanta-based PulteGroup Inc., the third largest home builder in the US, introduced virtual tours in two of its communities in 2016, using state of the art technology from Matterport Inc. Matterport’s Pro2 3D camera captures high-resolution 4K photography that is used to shoot 3D images of entire homes. The images are then uploaded to the Matterport website, where their cloud-based service processes them into a virtual walkthrough.
Using a camera from Matterhorn, they’ve created beautiful 3D tours of existing homes in Florida. The Overhead “Dollhouse View” still looks a little rough around the edges, but once you click into the home, the 3D tours are high resolution and give a very good sense of what it would be like to live there as you virtually ‘wander’ around the home.
A piece in Washington Post earlier this year describes how VR is changing how buyers are shopping for new homes, featuring Betenbough Homes, the largest builder in West Texas, who launched the virtual version of their Rebecca single-family home model at the 2016 International Builders Show. One of the biggest benefits Betenbough Homes sees with virtual walkthroughs is significant savings VR walkthroughs offer.
“We have 42 house plans right now, and building a model for each one gets very expensive. Each model home costs $350,000 or more to build, but we’ve found we can attract buyers with virtual reality and spend under $20,000.” – Jeanna Roach, Vice President of Sales and Marketing, Betenbough Homes, Lubbock
Market Forces Driving Adoption of Virtual Reality
Several forces are working together to drive the use of VR/AR in real estate. Soon, the industry will hit an inflection point where adoption of this technology will explode, creating a tsunami effect:
1. Tech Savvy New Home Buyers are Driving Demand
According to the 2016 National Association of Realtors® Profile of Home Buyers and Sellers, the median age of first-time home buyers is 32. This generation grew up with technology. Their smartphones are their constant connection to their friends, and their ability to spread the word (good or bad) about your brand and your offering is unprecedented.
Many of these people are gamers who’ve spent a third of their lives in virtual worlds. To say they’re comfortable with technology would be an understatement – to them, it’s as natural as breathing. This generation expects immediate gratification, and is used to being wooed by sophisticated marketers. So it’s not hard to imagine that when some companies’ mobile apps or websites start to offer high definition 3D virtual walkthroughs and drone video of their properties, they’ll quickly bypass ‘old-school’ website.
2. Ubiquity of Smartphones
The explosion of Smartphones with built-in sensors, accelerometer, gyro, Wi-Fi radios, and cameras are making indoor mapping/positioning possible and easy.
3. The Cost of Producing VR/AR is Dropping
Four of the big five tech companies have been making huge investments in the VR/AR space, which will make it cheaper to produce high quality VR/AR experiences.
Microsoft’s HoloLens is a self-contained, holographic computer, that lets individuals to engage with digital content and interact with holograms in the world around them. Focusing on corporate customers, Microsoft has been working with partners to develop real estate specific offerings as a natural extension of visualization in the design, build, and buy process.
At this year’s Google I/0 developer conference, Google showcased the progress of their Tango platform. Tango is an augmented reality computing platform that uses computer vision to enable mobile devices to detect their position relative to the world around them without using GPS or other external signals. Application developers can use it to create user experiences that include indoor navigation, 3D mapping, physical space measurement, environmental recognition, and augmented reality.
A smartphone equipped with Tango uses two lenses to create a 3D map of an indoor environment. A near-photorealistic 3D walkthrough of a home or office can be created just by pointing the camera as the photographer walks around.
As this technology is refined, it will dramatically reduce the cost of creating 3D virtual real estate tours because it can be done with consumer-grade smartphones rather than relying on high-end camera equipment like Matterport. Tango phones have been released by Lenovo and Asus, and more manufactures will follow suit since chipmakers Intel & Qualcomm have come on board the Tango train.
At the same conference, Google announced Google Lens, a powerful artificial intelligence-driven visual search app. By pointing the camera at an object (or a building), Google Lens will be able to show pertinent information about that object. So, in the future, people could be walking by a home or building and see the model name, specifications, and even take a virtual walkthrough all from their phone.
Over the last 2 years, Apple has acquired three companies in the VR/AR space: Flyby Media (the company that created Google Tango), io, and Wi-Fi Slam. Apple is reported to be working on incorporating AR/VR hardware tech for future iPhones.
Facebook purchased Oculus VR in 2014 for $2-billion, with one analyst speculating that its potential in the real estate area was one of the leading reasons.
4. The Cost of Producing Drone Video is Falling
While most people wouldn’t consider drone video as virtual reality, I would argue that in the context of real estate marketing, it very much is. Home builders can use drone video to give potential buyers the emotional experience of what it would feel like to own in a certain neighborhood. By showing aerial views of the entire property and surrounding land, buyers can see what the drive home or the kids’ walk to school would look like, and get a sense of the entire neighborhood and surrounding area, including the home’s proximity to amenities like parks and trails.
In fact, the FAA reports that the top two commercial uses for drones are aerial photography (34%) and real estate (26%). And as the cost of drones plummets, it’s getting much more affordable to create high quality drone video of properties.
Put all these market factors together, and we’re fast approaching an inflection point where the use of virtual reality in real estate marketing will explode and become the norm.
Read Part 2 for more insights on what it will take to get your company ready to ride the VR/AR wave and how you can prepare to avoid getting swept away by the competition.