July 21, 2016

What is the applicability of augmented reality technology on commercial real estate?

  • Augmented reality (AR), a technology that integrates digital information with the user’s real environment, had its mass debut to the general public this month with the release of Pokémon GO, a wildly popular mobile gaming app.
  • A powerful technology called mixed reality (MR) is emerging that combines the best of both AR and virtual reality (VR). VR is the better-known technology that creates a completely immersive digital experience for the user.
  • Together, virtual and augmented reality are estimated to become an $80 billion market by 2025.
  • We believe this new technology will have significant applicability to commercial real estate, both immediately and over the long term, including that:
      1. Consumers of commercial and residential property will soon benefit from emerging capabilities to visualize real estate virtually via mixed-reality offerings in tandem with parallel advances in personal media devices and underlying graphics technology.
      2. The industrial market will have access to technology that will impact multiple elements of the supply chain.  DHL and Ricoh recently carried out a successful augmented-reality pilot in a warehouse in the Netherlands that proved successful in enhancing time efficiency and error reduction.
      3. The retail sector, already seeing an increase in foot traffic around Poké “stops” and “gyms,” is on the cutting edge of using augmented reality to engage its customer base, both online and in-store, so that customers are more informed about the products they buy.
      4. Data centers, already a booming asset class, will benefit from the need for additional infrastructure, connectivity and storage capacity demanded by this evolution.
  • On a cautionary note, this new technology has caused safety and security concerns that building owners and managers must consider. A common concern about Pokémon GO is physical security as the game may encourage players to trespass on private property, thus posing a risk not only to property and business owners that don’t welcome the general public, but to the players themselves.
The Hunt is On

The frenzy around Pokémon GO has doubled the value of Nintendo (which developed the game together with the Pokémon Company and Niantic) since it was released on July 6, adding $20 billion to the company’s market cap in less than a month, and has far outpaced other mobile-device games in terms of active users, retention rates and revenue. What is driving this mega force behind a Japanese cartoon character mobile game that is sure to be featured on VH1’s I Love the 2010s?  Understanding what has catapulted this game into the mainstream is key for any business professional who relies on a new age of digital engagement to achieve success. 

The success of this game is seemingly due to the growing popularity of mobile gaming, users of which have more than doubled since 2011 and are forecast to grow an additional 30% by 2020.  But the differentiating factors of Pokémon GO make it much more than a traditional mobile game:

Nostalgia. The game exploits millennial nostalgia by using a beloved character of the 1990s. Which millennial doesn’t love Pikachu

Release Timing. The July release takes advantage of the outdoor summer months when foot traffic is highest. And the potential danger of distracted walking aside, this app inadvertently promotes exercise and is therefore arguably a socially responsible app.

Consumer Engagement. The game has created indirect marketing opportunities for businesses—social media campaigns that are more readily accepted by consumers than direct marketing. Businesses selected as Poké “gyms” or “stops” are benefitting from increased foot traffic.

Serendipitous Engagement. New relationships are being created between the people and places involved in Pokémon hunts, but not all of them are welcome as illustrated by this entertaining private property notice.


Transformative Technology.  Perhaps most importantly, the game uses cutting-edge technology that combines augmented reality with geolocation and creates a unique digital experience.

The creation of this overall experience has made the augmented reality phenomenon the next big thing for corporate marketers.  

How Many Poké Coins?

Goldman Sachs Research expects virtual and augmented reality to become an $80 billion market by 2025 (according to base case estimates)— roughly the size of the desktop PC market today.  How will this happen?  Augmented reality brings accessibility and simplicity to the average user that virtual reality does not, though both have their place and in a combined state are very powerful. This “mixed reality” is unveiling itself via products such as Microsoft HoloLens, which is an example of the transformation this industry will surely bring (and some say there is no other way to play Pokémon GO).  Investors are doubling down on this trend. For example, powerhouse startup company Magic Leap has a “top-secret technology” that it claims will make the divide between reality and virtual undetectable, and has just landed the largest Series C Round of venture-capital funding in internet history at $793.5 million. Although video games and entertainment are a significant contributor to the evolution of this industry, sectors such as healthcare, engineering and real estate are positioned to benefit significantly from this new technology.


When is a Poké Lure an Unwelcome Threat?

This advent of augmented and mixed reality into the mainstream does not come without risks, and Pokémon GO has highlighted this many times over in the short time it has been active.  Poké “stops” are attracting players to private property and businesses where they sometimes are unwelcome, or to dangerous areas that risk their safety. This phenomenon is creating situations that may seem threatening and must be quickly addressed, yet there is no precedent for doing so. With the combination of augmented reality and geolocation catapulting the success of Pokémon GO, there most likely are similar technologies on the way, so creating rules of engagement is necessary. The Pokémon phenomenon has simply given us a glimpse into potential physical security concerns, never mind cyber security concerns that will result as augmented reality proliferates in our everyday lives.

Prepare the Poké Balls

From residential to commercial, real estate is an industry reliant on consumers experiencing the product before committing to it. In many instances, providing this experience is difficult and costly due to the intangible nature of new construction and build-outs before they are completed, the sometimes long geographic distance between the property and the buyer, or the sheer amount of time invested in visiting numerous properties.  Context VR is a Seattle startup that helps real estate professionals and prospective buyers and tenants save valuable time by using virtual and augmented reality for remote walkthroughs of real estate. Context VR recently collaborated with CBRE to create a VR walkthrough of the newly redesigned CBRE headquarters office in downtown Los Angeles.  This fully immersive VR walkthrough may be viewed through mobile VR headsets such as Google Cardboard—a low-cost system to encourage interest in VR applications allowing users to take a firsthand look at best practices in workplace design . Technology like this will allow real estate marketing and sales managers to save time by showing their properties remotely and will allow prospective buyers and tenants to save valuable time by “teleporting” to a property from the comfort of their office or home.

Real estate companies can also add elements of augmented reality to their marketing, bringing otherwise static flat brochures to life and creating a virtual pop-up book that allows the user to interact with the property through 3D images and simply click a virtual button to contact the company. Studies show that when customers become more interested in a particular property that they previewed through augmented reality, they are more likely to engage that company in further conversation about the property of interest.

There is a multitude of other uses for augmented reality that will have trickle-down impacts on the real estate industry.  Look at what Pokémon GO is doing for malls that are otherwise in distress.  It is drawing consumers into stores, although whether they are browsing while playing is as yet undetermined.  But we do know that Pokémon GO offers a real-time example of the potential for augmented reality in retail marketing by generating foot traffic. Data centers will certainly stand to benefit from the sheer magnitude of digital infrastructure needed to support this emerging technology as AR/MR gains traction across additional business models. 

We are only scratching the surface of AR/MR applications for commercial real estate.  Imagine the efficiency and effectiveness of a world where a building engineer can look at a building system through virtual glasses and monitor its performance, troubleshoot and even fix a problem.  Imagine the impact on the retail experience when consumers can see how clothing or makeup looks on them while virtually shopping, or how a piece of furniture looks in their home before purchasing it.  Imagine the impact on the industrial sector as supply chain logistics become even more efficient.

1. If you have a Google Cardboard, you can check out the apps below:
iOS: https://itunes.apple.com/us/app/office-photos/id1111464204?mt=8
Android: https://play.google.com/store/apps/details?id=com.contextvr.office.photos2

The impacts of augmented and mixed reality are far-reaching and will transform most aspects of our society. Commercial real estate is no exception.  Our virtual and physical worlds are drawing ever closer. Those who explore and truly understand the unique capabilities of both will have an advantage to succeed in whichever realm they imagine.

Now go out there and find that next Poké “stop” because you never know what awaits around the corner.