Transformation of the real estate and construction industry: empirical findings from Germany

Abstract

The German real estate and construction industry is facing a transformation, triggered by fundamental changes in technology, the economy and society. The purpose of this paper is to explore how these changes exert pressure to adapt on existing business models, while also offering opportunities for their further development. A model that attributes the transformation of the real estate industry to megatrends, specific structural change drivers, business models and the interaction of the groups of players in the value creation system is developed. The model is tested empirically by a survey. Structural equation modelling is used to measure the impact of various determinants of transformation and the relevance of adaptation strategies to the different groups of players. As a result, the study explains three impact mechanisms of the transformation in the real estate industry. The transformation originates from the occupiers, who need more flexible space and are focusing on holistic solutions that are not provided by the real estate industry. Service providers are striving to increase the efficiency of their traditional processes, rather than evolving new business models or services. The investors recognise the increasing importance of the occupiers but they are rarely pursuing the resulting strategies. Property developers recognise these requirements: their adaptation strategies most strongly question their previous business. For practitioners, the results point out the opportunities and risks of transformation and help to illustrate the need for change. For academicians, the results indicate a way to explain and measure the transformation of a value creation system.

Recent trends in real estate research: a comparison of recent working papers and publications using machine learning algorithms

“…All these aspects have led to a booming demand for housing in the major cities in Germany. Similar trends can be observed for other major European countries (Battistini et al 2018 ; Pittini et al 2019 ); Germany has a total housing stock of 41.97 million units with 305,659 housing starts in 2017; for France and the UK, the corresponding figures are 35.80 million units with 430,000 housing starts, and 28.74 million units with 193,390 housing starts, respectively (Pittini et al 2019 ).…”

“…According to the study “Transformation of the real estate and construction industry: empirical findings from Germany” by Andreas Pfnür and Benjamin Wagner , the specific drivers of structural change on the German real estate market are more important than the general mega-trends mentioned above (Pfnür and Wagner 2020 ). Based on a comprehensive survey, the following main determinants of the transformation process in the German real estate industry are identified: Massive changes in space requirements and the way space is provided induce occupiers to search for holistic and flexible solutions to fight increasing uncertainties regarding their requirements for space.…”

The Impact of Structural Changes on Corporate Real Estate Ownership: Evidence From Germany

“…To secure the long-term success of the company, activities such as the CRE provision must be realigned to new conditions. This can be explained by a continuous reweighting of corporate objectives and strategy (Schehl, 1994) and corresponding adjustments in terms of business models, structures, processes and products (Pfnür & Wagner, 2020). As a result, the demand for space is changing.…”

“…The aim was to identify megatrends of structural change that would lead to significant adjustments in the ownership strategy. The procedure in the preliminary study is similar to that of Pfnür and Wagner (2020). Using a semi-structured questionnaire, 25 interviews were conducted with selected decision-makers and experts.…”

“…Although the latter is briefly outlined, it cannot be considered in its entirety due to the breadth of the subject matter. In this context, readers are referred to the work of Pfnür and Wagner (2020). Afterwards, the research design and methodology are presented in section 2, subdivided into a preliminary and an em-pirical study.…”