When the sales offices for Luma, a new 24-story condominium development in Seattle’s First Hill neighborhood, opened last summer, it stood out from similar spaces around town. Instead of a full-sized model of one of the units, this smaller sales center contained a kitchenette, bathroom mockup, and a sitting area with an Oculus Rift headset, virtual reality hardware made by the highly-touted, Facebook-owned tech company trying to bring the technology to the masses. Construction on the project had barely broken ground at that point—hard-hat tours are just beginning this week—but prospective buyers could still tour units in virtual reality, "walking" around mock layouts and peering out windows to envision the enviable view they might be able to wake up to every morning (drones were used to capture accurate, floor-by-floor perspectives). For real estate agent Julie McEvoy, accustomed to the days of selling developments off blueprints, the ability to show clients a simulated layout was a valuable tool.
"Virtual reality has been a big piece of early sales," she says. "Being able to see and experience the space is huge. The technology doesn’t replace a salesperson’s explanation—a first-time buyer still needs to be talked through the details—but now you can show them."
The Luma development isn’t the first property to utilize virtual reality as a sales tool, and according to backers and even bankers, it’s far from the last. With the virtual reality market expected to explode over the next decade—Goldman Sachs research suggests VR will be an $80 billion industry by 2025, the size of today’s desktop PC market, while the forthcoming consumer release of Oculus Rift headsets to the public should rapidly improve consumer adoption—the race appears to be on to develop and profit from this nascent technology. And many in the real estate industry, traditionally seen as lagging in terms of technological adoption, seem poised to benefit. Studio216, a San Francisco-based digital production agency that created the simulated space for the Luma development, is one of the firms currently developing industry-specific applications for the technology.
"Our whole business exists to work on spaces that don’t exists," says Jamie Fleming, partner and CEO of Studio216. "Clients are hiring us to show them what the future looks like."
"Real estate technology in New York is far behind where it needs to be."
In a conference room in Midtown Manhattan earlier this week, Stephanie Davis of Virtual Xperience, another company developing virtual reality content for the real estate industry, set up a demo of her company’s product. As she prepped a large laptop connected to a set of Oculus Rift goggles, she explained why she joined the year-old, New York-based startup, and why she sees a massive opportunity right around the corner.
"There are real estate firms using Internet Explorer as their main browser now," she says. "These are examples of how frustrated I am."
A longtime New York realtor, Davis saw the slow pace of tech adoption in the industry, and figured the best way to bring about change was to be small and nimble. Davis believes the three factors needed to make virtual reality take off—price, computing power, and adoption—are there right now.
"The one thing I could never do is convey space and depth, which you can’t show with a video," she says. "Now that’s possible."
As a colleague and myself sat down in front of a laptop, put on goggles, and went through a virtual tour of a Manhattan condo, specifically an apartment in a building on 30 West 63rd Street, we could walk through the apartment (utilizing a joystick) and even open doors between rooms. It felt a little surreal, like being inside a video game (SimCity from the view of citizens). But while it was definitely a not photo realistic, it was possible to understand the apartment layout, experience the flow from living room to bedroom, and even take a look at a real Central Park views from the window (a camera photo was stitched into the simulation).
The developing technology isn’t perfect. As Davis noted, moving too fast through the virtual unit can be slightly jarring and dizzying, and my colleague felt ill after spending about five minutes wearing the goggles. But, as Davis promised, it is a walk-through, and does give a sense of the space’s dimensions, flow and possibilities.
Currently, a simulation like this takes about 48 hours to create. But Virtual Xperience believes they can cut that turnaround time to 24 hours. According to Jeff Maurer, a partner at Virtual Xperience, they expect that a co-evolution of content and technology over the next few years will make the experience more realistic and relevant.
Real estate firms can request a variety of different arrangements for their virtual model. Virtual Xperience has a team of designers who custom-design VR space, from empty spaces to gully furnished apartments in a particular style. For a typical, 750 square-foot, 1-bedroom NYC apartment with balcony, the process would likely cost around $399-$799. Larger properties, including multi-level single-family townhouses, are more complex and more expensive, but only incrementally so, according to Maurer. This is, in many ways, a volume play; it’s a large expense to sell a single-family home, but for a massive apartment or condo building with similar floorplans, there’s more return on the investment.
While the pitch Virtual Xperience makes may sound a little utopian—"We’re trying to show the future state of properties, not something that exists," says Davis—the concept, when done well, has a lot of relevancy in the real estate world. Davis see a few key markets for Virtual Xperience: pre-selling "like a madman," like in the Luma case, since developers love help with early financing rounds; pre-selecting properties before touring, which allows agents to give prospective clients a quick run-through of 10 area properties to decide which ones deserve an in-person tour; and what she calls problem properties. A run-down home that needs a lot of work, or a gut renovation, can suddenly be shown in a more positive, post-remodel light. (Davis noted this they make sure to tell clients this is an additive environment, and that they’re working on the correct legal disclaimers with lawyers).
The team at Studio216 feels the same way, and sees the market exploding once more headsets are distributed. Commercial property and sales centers can utilize this technology to show clients how a space can look, and get clients to engage with a building far before it’s finished. Eventually, there’s even the possibility of A/B testing layouts to see what appeals the most to buyers.
"Now, with virtual reality and these tool, you can engage your audience far before it’s finished" says Liz O’Carroll, director of business development at Studio216. She points to projects such as Park Tower at Transbay in San Francisco, which utilized VR during sales. "One of the biggest challenges we saw with investors and developers grapple with is deciding ahead of time what the market will embrace. Investors love being able to get prospective tenants to visualize and engage so early on."
Numerous brokers and real estate agents see VR as a new and exciting tool, albeit one that still needs development to reach it’s full potential. Avi Voda, of New York’s Voda Bauer, plans to use virtual reality as part of his sales strategy for a forthcoming development in Greenpoint. He foresees a simulated layout from Virtual Xperience being used in numerous stages of the sales, buying, and even decorating processes: choosing which units and buildings to see with a realtor, giving clients a sense of how the apartment can look via virtual staging, even getting a designer to take a look at a new space to make interior decorating decisions.
"It’s a big tool that didn’t exist before," says Voda. "With virtual staging, you can see exactly what’s there. It’ll be a huge help for the decision-making process; if your kids, parents, spouse can’t make it out to see the building this is a great way to make them feel comfortable about moving forward with an apartment.
David Schlamm, of New York’s City Connections Real Estate, believes VR, despite still not delivering the photo-realistic views some may hope for, is still a huge leap forward from the "virtual tours" that buyers may have seen on a real estate website over the last decade.
"The primary use for it is new construction," he says. "You can show lights, views, how the apartment flows. You can’t see that with photos, but can with virtual reality."
Part of the what’s holding the technology back, according to Schlamm, is the availability of headsets and computers that have the processing power to run high-end VR simulations. While many believe VR could speed up the process of wealthy foreigners snapping up overseas real estate, they still need the headsets and proper setups to take advantage of the technology. Matthew Hood, a Los Angeles realtor at Sotheby’s International Real Estate, who has been experimenting with VR over the last year, is using the Samsung Gear VR headset, a more mobile technology that works with a smartphone, so he and his clients aren’t tethered to a more powerful computer.
"The issue is that there are so few displays out there, so distributing the content is currently a little bit challenging," he says. "The industry projections for the next few years suggest there will be millions of displays in the wild."
Right now, if clients are in Los Angeles, Hood can meet them. Going forward, he believes it’s much more likely that VR headsets become a more standard, mainstream device, which will make everything much easier. The paradigm will truly start to shift.
"Regardless of what aspect of VR you’re interested in—gaming, film production, or industrial applications—you see that everyone is still in the process of figuring out how this works," says Hood. "It’s like what I imagine the internet might have been like in the early ‘90s."
As that early days enthusiasm gives way to wider consumer adoption and awareness, the challenge a new technology like VR faces is in many ways one of storytelling. Does this new way of showing and selling property offer an honest and compelling new means of showcasing space?
"When you put headsets on people, there’s a big ‘Aha!’ but then after that, it’s like, ‘What can I do in these spaces?’" says Boaz Ashkenazy, partner and CMO of Studio216. "People want to do things."