They say a picture is worth a thousand words--which may be particularly true when it comes to real estate. In the not so distant future, property owners will be able to utilize Virtual Reality (VR) and Augmented Reality (AR) applications to map physical space, ushering the real estate industry into a new normal.
With VR technology, users are able to immerse themselves in a realistic replication of a physical space. AR technology supplements can take such replication a step forward by projecting computer generated images on top of the actual world. Both technologies enable a potential buyer, tenant, or lender--wherever they are in the world--to transport themselves into an actual property as it currently exists or even how it might exist after redevelopment.
VR & AR provides a new tool to reach more buyers and sellers of real estate
Properties with the right photographs and plans tend have higher perceived values.1 Nonetheless, static pictures or event videos are not immersive; the viewer must still imagine himself in the proposed environment. VR and AR technology allow the viewer to to virtually walk through and interact with a property from such viewer's current location, saving the viewer valuable time and travel expenses.
VR and AR will empower sellers and landlords to market their properties (existing or conceptual) across the globe to potential buyers and tenants through guided or self-directed interactive tours.2 Residential real estate brokers are already offering virtual reality tours, real time virtual tour packages, and virtual reality theaters.3 In addition to the flexibility and greater reach, such brokers also report that the technology saves time and eliminates the cost to stage properties for those properties presented remotely using AR.4
Scrape and rebuild before actually scraping and rebuilding
VR and AR enable the end user, occupant, or buyer to start the design process of real estate development earlier; providing the benefit of communicating expectations, reducing change orders and avoiding costly overruns.5 Both technologies dramatically improve the visualization of information models, design and safety processes, and reduction of errors in the real estate industry.
By allowing a user to interact with and modify a superimposed design, issues can be identified with greater accuracy earlier and informed decisions regarding changes can be communicated across various contractors and subcontractors faster.6 This application also allows for virtual trial-and-error practice, reducing physical errors.7 Design coordination errors, missing elements, or incorrect routes can be identified upfront, reducing wasteful change orders in the matter of clicks.
Showing lenders the finished project can expedite the lending process
VR and AR technology can expedite the commercial real estate lending process by providing realistic representations of the secured property. 8 Unqualified projects are identified before diving into due diligence, reducing costs and minimizing the risk of bad loans. Strong deals can move through the pre-approval process faster.
Lenders need to make informed decisions in a timely manner, requiring borrowers to provide access to documents, records, and images. These vital documents, records, and images help the lender see the collateral securing their loan. Rather than combing through stacks of paperwork to try and picture how a lease on the first floor affects the value of a mixed-use building, a lender could interact with a virtual or augmented rendering. Through AR rendering can be supplemented to superimpose title information directly onto the rendering.
For construction loans, utilizing VR and AR, borrowers can present both the as-is unbuilt property or property undergoing rehab alongside with the proposed new and improved depictions of the property. Such VR and AR renderings will provide the lender with a clearer view of the property, reducing the guesswork associated with its valuation, with the added advantage of enabling more involved lenders to monitor the construction progress in real time.
VR and AR sectors are predicted to generate $150 billion by 2020.9 As the use and application of these technologies increase, it will be important to consider the following issues:
- Ownership and intellectual property - who owns the virtual and/or augmented renderings?
- Data and cybersecurity - what data needs to be collected and shared to produce a virtual and augmented rendering, and who will that data be available to?
- Managing expectations - what constitutes a breach if VR or AR is used in a deal?
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