James Scott

James Scott was a master’s student at MIT’s Center for Real Estate (MIT CRE) when he stepped into the orbit of three individuals at the forefront of innovation within the real estate industry: Professor Dennis Frenchman, Dr. Andrea Chegut (who passed away in 2022), and Steve Weikal. “They knew that the real estate industry was ripe for change and disruption,” says Scott. “They provided me with immeasurable support and showed me how we could make things better in an industry that I had become extremely passionate about—much like Siqi Zheng, who heads up MIT CRE, and Professor Kairos Shen.”

When Dr. Chegut co-launched the MIT Real Estate Innovation Lab, Scott signed on as its first researcher. After earning his Master of Science in Real Estate Development, he continued at the Innovation Lab, eventually becoming its lead researcher in 2016. Along the way, he contributed key research papers on topics like the evolution of industrial real estate and helped create a global database of all real estate oriented technology and companies.

Here, we merge the MIT Center for Real Estate’s more than 40 years of research with the technological prowess of the Institute to create a research platform that can better understand the digitization happening across the built environment

Today, he is the director of his own laboratory—the Real Estate Transformation Lab at the Center for Real Estate at MIT. “Here, we merge the MIT Center for Real Estate’s more than 40 years of research with the technological prowess of the Institute to create a research platform that can better understand the digitization happening across the built environment.”

At the Transformation Lab, Scott and his team of researchers collaborate with industry stakeholders to identify and harness technologies for innovation. Take infrared image recognition, for example. It can be used to monitor the energy efficiency of a building, allowing users to understand heat leakage and prioritize spending. If you have a building with 200 windows and can trace the leakage to a few specific windows, it saves time and money while improving energy efficiency and the experience of the end user.

With an estimated 8,000-12,000 new real estate technology companies in existence, and more than $10 billion invested in the sector from 2017 to 2022, real estate technology, or PropTech, seems poised for significant impact. According to McKinsey, generative AI alone has the potential to generate between $110 billion and $180 billion in value for the industry.

But big numbers and rosy predictions based on new technologies do not tell the full story. Compared to other industries, real estate is a laggard in terms of digital adoption and innovation. Scott points to another McKinsey study highlighting inefficiency—by its metrics, productivity in the global construction industry declined by 8 percent between 2020 and 2022.

Scott relays an anecdote he likes to use during his lectures. “I often use the example of the Empire State Building as a marker of greater productivity in the construction industry, which broke ground on the 17th of March, 1930.” By May 1, 1931, New York City was home to the first building in history with more than 100 stories—in just 14 months. Scott is quick to note that at least 5 people lost their lives in the construction of the Empire State Building. Thankfully, he says, safety standards have completely changed since then, “but it’s a staggering illustration of how fast we could build within our cities. These days, you couldn’t build two stories a week despite all of the innovations and technologies at our fingertips,” he says.

These days, you couldn’t build two stories a week despite all of the innovations and technologies at our fingertips

The real estate industry also grapples with what Scott refers to as a unique problem with data. Real estate data is often scattered across various sources, including government databases, multiple listing services, and proprietary portfolio datasets. Ensuring the quality, accuracy, and integration of this fragmented data is essential for the real estate industry to thrive in a digital future. For instance, while Scott believes digital twin technology will be significant for building operators, the historical data of buildings often lacks the precision required to implement truly effective digital twin systems. Moving forward, Scott hopes for greater standardization and collaboration across the industry.

Furthermore, consider the fact that AI’s impact on jobs, and therefore the future of the office (and office buildings), is tough to predict. Combine that with pressing issues like sustainability and the picture gets more complex. On the path towards a carbon neutral environment, initiatives like New York’s Local Law 97 have far reaching implications, including critically impacting deals surrounding future buildings and placing a heavy financial burden on building owners who will need to upgrade or retrofit existing assets. In the commercial real estate sphere, which has been riding out the inflation downturn by clinging to the mantra “survive until 2025,” this means, among other things, an added hurdle.

These are some of the bigger questions that aren’t going anywhere. And, when it comes to navigating the field, Scott says one of the greatest challenges facing the real estate industry is the element of multi-stakeholder complexity: from NIMBYism and transportation networks to building investors and the investors in the companies who use those buildings. Not to mention brokers, developers, and architects—each actor with their own interests to serve. “With so many different views,” says Scott, “how do we bring everybody together on a journey to create the best environment, the most efficient buildings, and provide the highest value for the people that live, work, and play in these spaces?”