New boundaries. Conceptual framework for the analysis of commercial real estate in smart cities

DOIhttps://doi.org/10.1108/JPIF-10-2018-0083
Pages118-135
Date14 January 2019
Published date14 January 2019
AuthorPatrick Lecomte
Subject MatterProperty valuation & finance,Real estate & property
New boundaries
Conceptual framework for the analysis
of commercial real estate in smart cities
Patrick Lecomte
Henley Business School, University of Reading Malaysia, Iskandar Puteri, Malaysia
Abstract
Purpose The purpose of this paper is to fill a gap in the real estate academic literature by defining the
essence of real estate in smart urban environments. Space has traditionally been a silent component of real
estate. Smart technologies powered by Ubi-comp are turning space into an active part of real estate, which
represents a paradigm shift for commercial real estate. This shift requires new concepts and tools to analyse
and model real estate in smart cities.
Design/methodology/approach The paper defines the notions of smart space and smart real estate.
Several concepts and tools are formulated, starting with a model of space users in smart cities, called the
Cyber-Dasein inspired by Heideggers existential phenomenology of space.
Findings The paper then analyses smart spaces attributes and proposes several metrics for commercial
real estate in smart environments. After introducing three regression models for constructing a price index of
smart real estate, the paper concludes by advocating that commercial real estate take an active role in the
current debate about smart cities.
Research limitations/implications The paper does not provide any empirical analysis of smart real estate.
Practical implications Smart environments offer real estate a unique opportunity to set up
methodologies, concepts and tools for new properties in new cities. Now is the time to think carefully about
the impact smart technologies will have on commercial properties before other stakeholders (in particular
smart cities vendors and multinational technology giants) have fully modelled smart space and its nexus with
smart real estate.
Originality/value This paper is the first paper to provide a conceptual framework for the analysis of
commercial real estate in smart cities.
Keywords Phenomenology, Commercial real estate, Smart cities, Pervasive computing,
Hedonic regression, Smart space
Paper type Conceptual paper
A revolution that does not produce a new space has not realized its full potential; indeed it has failed in
that it has not changed life itself (Lefebvre, 1974).
1. Introduction
The impact of smart technologies on the built environment has generated a myriad of
reports by industry experts who are generally in awe with the so-called fourth industrial
revolution. Meanwhile, real estate academic researchers have remained mostly silent on
the issue. As a result, the public debate has been dominated by technology companies, who
tend to promote a technological vision of smart cities and their real estate components:
smart buildings.
Hence, it is easy to think that commercial real estate in the context of a smart urban
environment is nothing more than an astute application of technologies (sensors, actuators,
IoT) to buildings. Sadly, the focus on technology has overshadowed the necessary thinking
about what the pervasive use of technology in the built environment means for the very
elaborate abstractionthat is real estate (Graaskamp, 1977/1991).
Journal of Property Investment &
Finance
Vol. 37 No. 1, 2019
pp. 118-135
© Emerald PublishingLimited
1463-578X
DOI 10.1108/JPIF-10-2018-0083
Received 26 October 2018
Revised 23 November 2018
Accepted 27 November 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
This paper was presented at the 25th European Real Estate Society Annual Conference (2730 June
2018; University of Reading, UK). The author expresses his thanks to the editor and anonymous
reviewers for very useful comments. All errors and omissions are of the authors.
118
JPIF
37,1
Real estate is essentially a physical structure immersed in space. The spatial dimension
of commercial real estate is customarily defined in terms of location in an Euclidean plane.
Real estate contains space which in turn encloses human activities. Enclosure translated in
square footage defines income producing real estate in the time-space realm. The basic
assumption of a contained and a container linking space and buildings in a fixed and clearly
bounded relationship underpins models developed in real estate.
Space has traditionally been a silent component of real estate. Smart technologies
powered by ubiquitous computing (Weiser, 1991) are turning space into an active part of
real estate, and to some extent into real estate itself. While geographers have long
researched the impact of technologies embedded in smart cities on space, it has never been
done in real estate.
This paper argues that smart technologies have triggered a paradigm shift in the role of
space in real estate. This shift requires new tools to analyse and model real estate in smart
environments. As the physical structure which used to define real estate matters less to both
users and investors, a new concept is emerging: smart real estate. The notion of smart real
estate was introduced in the real estate academic literature in Allameh et al. (2012) who
study smart homes. In this paper, the concept is defined for commercial real estate in the
broader context of smart cities.
Smart technologies are redefining what real estate stands for, thereby leading us to ask
the fundamental question: what is the essence of real estate in smart cities? To address this
question, we propose a framework for the analysis of commercial real estate in smart cities,
and combine innovative concepts with applicable tools that can help move forward
academic thinking and practice alike.
By bringing together concepts from a wide range of subject areas (including geography,
philosophy, computer science, architecture), we fill in a gap in real estate research. Our
objective is to decipher the way space users interact with smart environments in order to
characterize smart real estate and identify factors affecting its value. This theoretical
knowledge, in turn, can be used to model commercial real estate in smart cities.
This paper consists of eight sections. Section 2 introduces the concept of smart space.
Section 3 presents a phenomenological approach of space in real estate based on Heideggers
concept of Dasein. Section 4 characterises smart space in terms of continuity, boundary and
distance. Section 5 explains how commercial real estate in smart cities can be mapped to
account for smart space. Section 6 presents a series of metrics for smart buildings. Section 7
introduces the structure of a score for smart real estate called the Smart Index Matrix (SIM).
Section 8 presents the fundamental principles of three regression models for constructing
price indices of smart real estate in smart cities. Section 9 concludes.
2. Smart space: a new spatial concept in real estate
The notion of a new space opening up as the congruence of real and virtual in smart
environments can be traced back to the computing sciences literature. Ma et al. (2005) note
that since the early 1990s when researchers first introduced concepts such as reactive
environment(Cooperstock et al., 1995), there have been many definitions of smart space.
The core feature of all these definitions is for smart space to be a merger of physical and
digital spaces. Henri Lefebvre (1974) himself wondered about the existence of a space
peculiar to computer technology and information science, albeit without answering the
question which, he reckoned, was beyond the knowledge of his time.
This new space has taken various names: pervasive space (Liu and Gulliver, 2013; Moran
and Nakata, 2010), cybernetic space (Mitra and Schwartz, 2001), intelligent space (Peters and
Shrobe, 2003). In this paper, we choose to call it smart spaceto anchor this notion in the
context of smart real estate.
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Analysis of
commercial
real estate

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