German Real Estate Sector Experienced a Boom But Pressure Is Increasing for Firms to Innovate – Report

For a long time, the German property industry experienced a boom, but with increasing regulation and rising cost and efficiency pressure, “the pressure on companies to innovate is increasing,” according to report from KPMG.

The majority of companies have recognized the need “for more innovation, but there is still some catching up to do when it comes to implementation,” the KPMG report stated.

This is the conclusion of the ‘Road to Disruption’ study, for which KPMG in Germany and blackprintpartners surveyed “over 200 managers from the property industry on the topic of innovation.”

The topic of innovation is “anchored in the corporate strategy of 72 per cent of companies, and managers promote innovation in three quarters of companies (75 per cent).”

There is a consensus that investment “in innovation is crucial for long-term success (92 per cent).”

This is the only way for companies to “remain competitive (88 per cent), grow (85 per cent) and open up new business areas (64 per cent).”

Innovation is critical to success, but difficult to achieve

However, there is a discrepancy between ambition and reality: a conservative corporate culture is the biggest obstacle “to successful innovation processes for 51 per cent.”

34 percent recognize hurdles “in their own organisational structure, for example complex decision-making processes in the planning and implementation of innovations. In 27 per cent of companies, there is a lack of knowledge and experience in the application of innovation methods. Half of the companies (50 per cent) lack human resources and almost one in five (22 per cent) lack a corresponding budget.”

The good years in the property industry are over for the time being.

There is a backlog of innovation and many companies have “failed to create a framework for ongoing innovation. In order to align business models for the future, it is now important to promote innovation, provide resources for this and establish a culture of change.”

Sarah Schlesinger, Managing Partner of blackprintpartners, says:

“Innovation is the key to sustainable business success. The industry has no knowledge problem, no technology problem and largely no resource problem. A weak economy and pressure from digitalisation and ESG provide optimal conditions to further promote the will to innovate. In order to develop this innovative strength, a change in mindset, significantly more strategic and methodological expertise, adapted organisational and decision-making structures and implementation skills are also required. This is how the construction and property sector can be successfully geared towards economic, ecological and social sustainability.”

In order to increase their innovative capacity, 34 per cent of companies cooperate “with start-ups, 29 per cent rely on collaboration with external research and development institutions and almost one in five companies intends to enter into a joint venture in the next five years.”

31 per cent rely on their “own resources and have set up an internal innovation department.”

Thematically, companies see “the greatest innovation potential in the topics of ‘sustainability’ and ‘digitalisation’, which are mentioned most frequently at 19 percent and 17 percent respectively. ‘New construction/renovation’ (16%), ‘data management’ (12%) and ‘process optimisation’ (11%) were also identified by the participants as innovation fields with high potential.”

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