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The Implementation Strategy of Virtual & Augmented Reality for the Real Estate Industry by

Kaini Huang

B.A., Architecture, 2011

Shanghai University

Submitted to the Program in Real Estate Development in Conjunction with the Center for Real Estate in Partial Fulfillment of the Requirements for the Degree of Master of Science in Real Estate Development

at the

Massachusetts Institute of Technology

February, 2019

The author hereby grants to MIT penrnission to reproduce and to distribute publicly paper and electronic copies of this thesis document in whole or in part in any medium now known or hereafter created.

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Certified by_ Signature redacted Dr. Andrea Marie Chegut Research Scientist, Center for Real Estate Signature redacted Thesis Supervisor Accepted by

Professor Dennis Frenchman MASSACHUSETTS INSTITUTE Class of 1922 Professor of Urban Design and Planning, OF TECHNOLOGY Director, Center for Real Estate School of Architecture and Planning FEB 28 2019 LIBRARIES ARCHIVES This page is intentionally left blank

-2- The Implementation Strategy of Virtual & Augmented Reality for the Real Estate Industry

Kaini Huang

Submitted to the Program in Real Estate Development in Conjunction with the Center for Real Estate on January 11, 2019 in Partial Fulfillment of the Requirements for the Degree of Master of Science in Real Estate Development

ABSTRACT

Virtual reality and augmented reality (VR/AR) are computer-generated immersive environments that can interact with users. VR/AR have been under development for 180 years, but they have yet to be adopted by the mass-market. During the whole development process, VR/AR's adoption rates have been much lower than other general-purpose technologies at the same point in time. After the popularization failure in the 1990s, VR/AR were brought back to the public by the success of Oculus, a VR startup that was acquired by Facebook in 2014. It was followed by the exploration of various applications of VR/AR to different industries. One industry that could use VR/AR is the real estate sector, due to the needs for inventing and forecasting the appearance and quality of complex projects. The real estate industry's contribution to U.S. Gross Domestic Product was approximately 15% in 2017. A tiny improvement in efficiency may result in a large growth in this industry; therefore, it is important to study the impact that VR/AR could bring to this sector as disruptive technologies. The current status of VR/AR applications show that despite the strengths and opportunities they could bring, there are still some barriers and challenges for real estate industry adoption. To document these difficulties and strategize solutions, qualitative analyses such as market research and case studies were executed in this thesis. The adoption of VR/AR is limited to date because of the high cost of equipment, inadequate hardware, the lack of attractive content and platforms, and the absence of education. It is also limited by the specific real estate industry challenges, including unknown adoption cost, unpredictable risk, inadequate support from software suppliers, vague regulations, conservative company executives, and VR/AR's disruptive impact on organizational structures. Therefore, solutions from market, policy, and academic aspects are needed to accelerate this adoption process.

Thesis Supervisor: Dr. Andrea Marie Chegut Title: Research Scientist, Center for Real Estate

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-4- Acknowledgment

I would like to thank my thesis advisor, Dr. Andrea Marie Chegut first for guiding me through this thesis and sharing her insightful comments with me during the whole process. Andrea gave me the opportunity to work beside her and other amazing colleagues at the MIT Real Estate Innovation Lab, which has brought so much inspiration to me and my thesis. Without Andrea's help, this thesis would not have been possible.

I would also like to thank all the interviewees I talked to for giving me the opportunities to learn directly from industry pioneers. Thank you all for the encouragement and informative conversations. Special thanks to Mr. Xue Congyu, founder of Shanghai Evolutional Virtual Artist Interactive Entertainment Technology, whose entrepreneurial spirit inspired me to write about this topic.

Thanks to my classmates and friends who are always there for me. You brought so much laughter to my life which backed me throughout this difficult journey at MIT.

Last but not least, I would like to thank my family, especially my parents for supporting me mentally and financially to pursue this degree. Thank you for encouraging me to jump out of my comfort zone and embrace a wonderful new world.

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-6- Table of Contents Chapter 1: Introduction...... 11 -

Chapter 2: Introduction to VR/AR...... - 14 - 2.1 Histo of VR/AR ...... - 14-

2.1.1 Stage One - Early Attempts at Dimensions and Immersion (Before the 1960s)...... - 14 -

2.1.2 Stage Two - Early Attempts at Head-mounted Display (HMD) (1960-1970)...... - 15 - 2.1.3 Stage Three -Formation of the Theories and Early Attempts at Applications (1970 -2000).- 16- 2.1.4 Stage Four -Multichannel Applications and Technology Improvement (2012-Present)- 17 - 2.2 Overview of the M arket ...... - 19-

2.2.1 Financing History of VR/AR ...... - 20 -

2.2.2 Cycle and Trend of VR/AR M arket ...... -22 -

2.3 Challenges to the Supply Side of the VR/AR M arket...... - 26 - 2 .3 .1 P rice ...... - 2 7 - 2.3.2 Content...... - 28- 2.3.3 Platform...... - 29- 2.3.4 M obility and Portability ...... - 30- 2.3.5 Resolution & Refresh Rate ...... -31 -

2.3.6 Latency & Virtual Reality Sickness...... - 32 - 2.3.7 5G Speed...... - 33 -

Chapter 3: Im plementation of VR/AR in the Real Estate Industry...... - 34 -

3.1 M IT Virtual Experience Design Lab (VEDL)...... - 36 -

36- 3.1.1 Introduction...... - 37- 3.1.2 Challenges...... - 3.1.3 Projects...... 41 - 3.1.4 Lab's Responsibilities and Vision...... - 43 -

3.2 Gensler - A Leading Architectural Design Firm ...... - 45 - 45- 3.2.1 Introduction...... - 3.2.2 Advantage and Challenges...... - 47 - 3.2.3 Projects...... 49 - 3.2.4 Goals and Vision...... 49 - 3.3 Suffolk Smart Lab - A New Technology Focused Department in a Leading Construction Contracting Company ...... 50 - 3.3.1 Introduction...... - 50- 3.3.2 Challenges...... - 51 -

-7- 3.3.3 Projects...... 53 - 3.3.4 V ision...... 55 - 3.4 Evolutional Virtual Artist Interactive Entertainment Technology Co. - A VR/AR Consulting and Project M anagem ent Platform Provider...... - 56 - 3.4.1 Introduction...... - 56 -

3.4.2 Challenges...... 57 -

3.4.3 Projects...... 59 -

3.4.4 V ision and Goals...... 64 - 3.5 Company A (pseudonym) - A Company Released a New Mobile Application for Property Leasing and Sales...... 67 -

3.5.1 Introduction...... 67 -

3.5.2 Challenges ...... 69 - 3.5.3 Practical Uses...... - 71 - 3.5.4 V ision & Goal...... - 72 -

Chapter 4: Strengths and Implementations Brought to the Real Estate Industry by VR/AR...... - 73 - 4.1 Design Phase...... - 73 - 4.1.1 Enhancing the Design M ethod ...... - 73 -

4.1.2 Simplifying the Communication with Designers and Non-professionals...... - 74 -

4.1.3 Creating Interactive Design Options...... - 75 -

4.1.4 Sim ulating Real-world Scenarios...... - 76 -

4.1.5 Controlling Design Quality ...... - 76 -

4.2 Construction Phase...... 76 -

4.2.1 Reducing Rework...... 76 -

4.2.2 Lowering M ockup Room Costs ...... - 77 -

4.2.3 Im proving Safety...... 78 -

4.2.4 Meeting Tim elines ...... - 78 -

4.2.5 Increasing Communication Efficiency between Subcontractors ...... - 78 -

4.3 Sales or Leasing Phase...... 79 -

4.3.1 Increasing Efficiency for Property V isiting Process ...... - 79 -

4.3.2 Increasing Absorption Rate and Reducing Vacancy...... - 79 -

4.3.3 Creating a Fair and Transparent Platform ...... - 79 -

4.4 Project M anagem ent ...... 80 -

4.4.1 Reduce Com m unication and Coordination Cost...... - 80 -

4.4.2 Understand the Project Progress ...... - 80 -

4.4.3 Integrate W ork from Different Disciplines ...... - 81 -

-8 - 4.4.4 A ccelerate Decision-m aking Process...... - 81

4.4.5 M anage Building System A fter Construction ...... - 81

4.4.6 Support Project Standardization...... - 82 4.4.7 Collect D ata ...... - 82

Chapter 5: Recommendations for VR/AR Adoption in the Real Estate Sector ...... - 83

5.1 O pportunities for V R/A R Popularization ...... - 83

5.1.1 U ser Experience Integration...... - 83

5.1.2 M ulti Innovation Collaboration ...... - 84

5.1.3 M alleable Platform Creation ...... - 84

5.1.4 W orking Procedure Evolution ...... - 85

5.2 G eneral Challenges for V R/A R A doption ...... - 85

5.2.1 Unknow n A doption Cost ...... - 86

5.2.2 U npredictable Risks ...... - 86

5.2.3 N o Industry Specific Software...... - 87

5.2.4 Undefined Regulations...... - 87

5.2.5 Conservative Executives ...... - 87

5.3 O rganizational Challenges for V R/A R Im plem entation ...... - 88

5.3.1 A rchitectural Innovation A doption ...... - 88

5.3.2 D ilem m atic Com petence Im pact...... - 92

5.4 Future Prospects of V R/A R ...... - 93

5.4.1 Dem and from Developers ...... - 95

5.4.2 National Supportive Programs & Government Regulation Requirements ...... - 95

5.4.3 N ew Business Opportunity ...... - 97

5.4.4 University Education...... - 97 5.4.5 Benign Collaboration ...... -97 Chapter 6: Conclusion...... 98 Bibliography: ...... - 103 A ppendix A -I...... 107 A ppendix A -2...... 107

- 9- List of Figures

Figure 1. Part of FMAGA's Acquisitions in VR/AR...... - 18 -

Figure 2. VR/AR Annual Global Financing History ...... - 21 -

Figure 3. Gartner Hype Cycle for VR/AR, 2017 ...... - 23 -

Figure 4. V R/A R G lobal D eal Share ...... - 26 -

Figure 5. The Lifecycle of the Built Environm ent...... - 35 -

Figure 6. Cycle of VR/AR Implementation Challenges ...... - 40 -

Figure 7. Comparison of the Original Design, VR Adjusted Design, and Finished Garden Trail...... - 62 -

Figure 8. Comparison of the Original Design, VR Adjusted Design, and Finished Pavilion...... - 63 -

Figure 9. Comparison of the Ancient Tree VR model and the Real Tree Planted...... - 64 -

Figure 10. EVAR's V ision for its Future Positioning ...... - 67 -

Figure 11. The Correlation between Different Design Methods' Integrity and Intuitiveness ...... - 75 -

Figure 12. The Framework for Four Different Innovation Types...... - 90 -

Figure 13. The Vicious Circle of the VR/AR Implementation in the Real Estate Industry...... - 94 -

List of Tables

T ab le I ...... - 28 -

- 10- Chapter 1

Introduction

Although virtual reality and augmented reality (VR/AR) have been under development for 180 years, its application is still at its early stage. Many companies are trying to incorporate VR/AR into their daily production, especially for those industries that have a very complicated workflow such as medical treatment, skill training, and real estate development. People are eager to find out whether VR/AR are the next general-purpose technologies that can be used in a wide range of sectors.

Real estate industries' productivity growth is relatively low according to McKinsey's report

(Barbosa et al. 2017). Construction sector's productivity growth only increased by 1% annually for the past 20 years. The efficiency of this industry needs to be raised to keep up with the automation revolution of other industries. There has not been any technology-based revolutionary change since the adoption of AutoCAD and now some pioneers think VR/AR might be the disruptive general-purpose technologies that could bring the transformation and revolution to the real estate sector.

Due to the booming of VR/AR, universities are establishing research labs; start-ups in the real estate industry have already started their exploration; global architectural companies are forming their VR/AR specialty teams; leading construction companies have launched labs to seize the opportunities of this new market; and some developers are considering making VR/AR walkthrough a routine for their monthly project review meetings.

- 11 - Current research is either focused on the technology itself (e.g., Mihelj et al., 2014) or the application in other popular industries such as video games (e.g., Zyda, 2005). Although VR/AR have been applied to many different industries, an effective method of implementing VR/AR in the real estate industry is missing. A market report (The Goldman Sachs Group, Inc. 2016) shows that there is a huge market awaiting VR/AR implementation in the real estate industry, but the value and cost of VR/AR adoption are yet to be determined

The real estate construction sector and the real estate rental and leasing sector contributed USD

1.54 trillion and USD 3.75 trillion respectively to the U.S GDP (Gross Domestic Product) in 2017, which adds up to approximately 15% of the total U.S GDP (U.S. Bureau of Economic Analysis

2018). Although this industry plays an important role in the world economy, it is an industry with relatively low efficiency. While other industries such as manufacturing and transportation are leading the automation evolution, real estate is falling behind in this transformation process.

Research needs to be conducted and changes need to be made to help this industry follow up the market trend. VR/AR implementation might be the trigger for this revolutionary transformation.

To find out the potential impact of VR/AR to this USD trillion-level industry, this thesis delves into the trend and challenges of general VR/AR technologies, and at the same time, focuses on the opportunities and barriers that will be encountered during the implementation process of the

VR/AR for the real estate field. To understand, I answer the following questions:

1. What are the origin stories of VR/AR? What stage are VR/AR technologies at now, and

what are the challenges that are holding them back from mass adoption?

2. What could the usage of VR/AR bring to the real estate industry? What strengths and

challenges could VR/AR bring to the different phases of the built environment's lifecycle?

- 12 - 3. What are the major opportunities and challenges of the VR/AR adoption in the real estate

industry? What are the general drivers and implementation strategies that can carry the

deployment of VR/AR forward? Will VR/AR lead the real estate industry to a new era of

transformation and automation?

To do so, I looked into VR/AR's origin stories and the overview of the current VR/AR market.

With the data from CB Insights, the market trend of VR/AR and the funding trend of VR/AR startups were studied thoroughly. Combined with the origin story, they depict a whole picture of the current status of VR/AR. I executed an organizational analysis through a series of case studies.

The case studies are for five different players in the real estate industry. Interviews are the other main information gathering method for this thesis. From the interviews, different perspectives and project details were collected. Pioneers that are doing research on the utility of VR/AR in the real estate industry and companies that are incorporating VR/AR into their workflows were interviewed. These interviews turn into five case studies which all contain practical examples that could reveal the strengths and challenges VR/AR can bring to this industry. Finally, I summarized the opportunities and challenges for VR/AR adoption in the real estate industry based on the research from previous parts. Then, it unveils the best drivers and implementation strategies from different perspectives to accelerate the deployment process of VR/AR in the real estate industry.

- 13 - Chapter 2

Introduction to VR/AR

2.1 History of VR/AR

The basic concepts of VR/AR were formed 180 years ago. There are some inventions worth being mentioned during this period because they are important milestones in this evolutionary process of VR/AR development. The period could be divided into four stages.

2.1.1 Stage One - Early Attempts at Dimensions and Immersion (Before the 1960s)

In 1838, the very basic concept of VR/AR was discovered by Charles Wheatstone. He built a device called Stereoscopic(Bowers 2001, 45-52). It is a wooden viewer which has two lenses.

People could use the two lenses to see two pictures, which are slightly different, with each eye.

This viewer gives users a sense of immersion and depth because the brain tends to process two slightly different two-dimensional images with each eye into one three-dimensional scene. This finding of how the eyes and the brain work became the basis of the low budget VR head-mounted display (HMD) in the 21st century.

Ninety-one years after the Stereoscopic, the Link Trainer was invented by Edward Link in 1929

(Sherman and Craig 2003, 24). It is a flight simulator built to help the military train their pilots.

More than 10,000 Link Trainers were used and more than 500,000 pilots were trained by them during the World War II. There is no screen or image inside this simulator. It is only used to simulate the turbulence that a pilot will encounter, which could be seen as the early attempt of an immersive experience.

-14- In the 1950s, Morton Heilig, a filmmaker, wrote a paper called "The Cinema of the Future," in which he pictured a multisensory device that could create a new world of consciousness (Heilig

1992). Heilig patented his invention, Sensorama, in 1962 (Sherman and Craig 2003, 25). This machine could give the audiences a full sensory experience which is simulated by a stereoscopic display, fans, stereo sound system, smell generators, and a tiltable chair. Users can only watch the six films that were built in Sensorama's system.

All these three devices, the Stereoscopic, Link Trainer, and Sensorama, were focused on a three dimensional and immersive experience, and none of them can interact with users.

2.1.2 Stage Two - Early Attempts at Head-mounted Display (HMD) (1960-1970)

While Heilig was making the prototype of the Sensorama, he invented another important device which is called Telesphere Mask in 1960 (Dodsworth 1998). It was the first head-mounted display

(HMD), and it looks very similar to the new HMD in the 21st century. But still, the Telesphere

Mask did not have any motion tracking or interactive function. Therefore, it could only be used to watch the stereoscopic 3D video.

One year after the Telesphere Mask was invented, two engineers developed the first motion- tracking HMD called Headsight in 1961(Garner 2018, 191). The principle behind the display is still based on the Stereoscopic 3D, but the content on the screen is linked to a remote camera. The camera is controlled by a magnetic motion tracking system. When users move their heads, the camera will move according to their movement, which allows users to see the surrounding environment remotely through the camera. This system was used by the military to investigate dangerous areas.

- 15 - In 1968, Ivan Sutherland, a computer scientist and the "father of computer graphics" and his student built the first HMD that was connected to a computer. This HMD is called the "Sword of

Damocles" which is an interesting name as the device is suspended from the ceiling. The display showed a wireframe shape that is generated by the computer. Users could move their heads and see the wireframe move with them, and they could also see through to the real world with the transparent glass. Due to the fact that the wireframe was superimposed on top of the real environment, the Sword of Damocles is also seen as the birth of AR (Mihelj, Novak, and Begus

2014, 5).

2.1.3 Stage Three -Formation of the Theories and Early Attempts at Applications

(1970 -2000)

One big development of AR happened in 1974. Myron Krueger who created the term "Artificial

Reality" developed a project called Videoplace (Garner 2018, 192). It enabled people to interact with the computer-generated shadows on the screen. The shadows' shapes will change when people move or change gestures. Videoplace was the first interactive visual system that incorporated a camera and projection devices.

The term "Virtual reality" was finally coined in 1987 by a virtual artist Jaron Lanier. Before this name, there wasn't a proper term to describe this new field. Lanier's company, Visual

Programming Language Research (VPL Research), developed a large number of VR related equipment such as EyePhone HMD and matching gloves. VPL Research was the first company to sell VR equipment to the public (Lowood 2018).

- 16 - In 1990, in order to describe a digital display that combined computer-generated graphics with the physical world, a researcher at Boeing, Tom Caudell, coined the term "Augmented Reality"

(Cassella 2009).

In 1992, a technologist Louis Rosenburg built the first AR system, Virtual Fixtures. It could help with worker's efficiency by overlaying information on a workspace. Virtual Fixtures set the base for what AR can do today (Rosenberg 1993).

Sega, a large mainstream video game developer announced the Sega VR headset in 1993. Sega was going to release it soon after the Consumer Electronics Show. The company released exciting advertisements and even developed four games for this product. Unfortunately, however, due to technical difficulties, the headset ended up dead in the water. Sega, a leading company in the video game industry, was one of the first companies that tried to release a VR headset which was targeting the mainstream consumers (SEGA FORCEMEGA 1993). Another video game developer,

Nintendo, had a flop on their virtual headset in 1995 too.

Stage three ends in the 1990s and the VR/AR technologies retreated from the limelight after many attempts and failures.

2.1.4 Stage Four -Multichannel Applications and Technology Improvement (2012-

Present)

From 2000-2012, VR/AR seemed to have a very quiet period. Although they didn't attract much public attention, they were used by car manufacturers to test and design cars (Ottosson 2002), by doctors to study new treatments for phantom limb and mental health issues (C. D. Murray et al.

2007), and by the military to conduct therapy for soldiers who have PTSD (Post-traumatic Stress

Disorder) (Reger, Greg M. and Gahm, Gregory A. 2008). After the failure of applying VR/AR to

- 17 - the video game industry in the 90s, other industries became interested and began to see the opportunities in these technologies.

After the long silent period, VR/AR came back to public attention when Oculus, a startup that develops VR headsets, raised more than USD 2.4 million on Kickstarter in 2012, and it was acquired by Facebook in 2014 for USD 2 billion. Oculus brought to the market not only better technologies but also the hope of VR/AR being adopted by the masses again after the first attempts in the 90s.

New VR/AR technologies are burgeoning in the 21st century. Instead of being a research project in the lab, many companies launched their commercial HMD to the consumer market.

Google, HTC, Sony, and Microsoft all wanted to share a piece of the VR/AR market by releasing

HMD that are targeting different users. The price of a VR/AR headset starts from USD 15 (Google

Cardboard) to USD 3,000 (HoloLens 2). FMAGA's (Facebook, Microsoft, Apple, Google, and

Amazon) acquisition of VR/AR related technologies and companies indicates a new cycle has started (Figure 1).

Figure 1. Part of FMAGA's Acquisitions in VR/AR facebook 5 *microsoft Google aimazon

a culusF fok Av AltspaceVR OCUlUS Ma N A -EYERL/EAALE M@L@6AAP HOW) Licenees IP from. - oimft eLYT (O

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Source: CB Insights / cbinsights.com Notes: Figure 1 shows the VR/AR companies that were acquired by FMAGA (Facebook, Microsoft, Apple, Google, and Amazon) since 2014.

- 18 - 2.2 Overview of the Market

According to CB Insights' research, before 2000, there were only four companies (USD 171.4 million total funding) that were engaged in VR or AR industry. Among those, two of the companies were in the aerospace & defense industry, while the third one focused on electronic components, and the fourth one was in the educational & training software industry. From 2001-2009, only 34 companies (1.25B total funding) were established in the VR or AR field, but the number drastically increased to 805 (8.69B total funding) worldwide in 2018. The hyped market was mostly due to the arising of the Oculus Rift in 2010. Palmer Luckey, an eighteen-year-old entrepreneur, created the first prototype of the Oculus Rift in 2010. The prototype presented a 90-degree field of view

(FoV) which hadn't been seen from any consumer VR/AR device before. As mentioned earlier, it raised USD 2.4 million on Kickstarter in 2012 and was purchased by Facebook for USD 2 billion in 2014.

Starting from 2016, two years after Facebook acquired Oculus, VR/AR were brought back to the center stage again. The year 2016 is called the beginning of the new VR/AR era. In 2016, more than USD 2.12 billion was invested in this market, and more than 281 companies were established and funded worldwide.

More sectors are involved with VR/AR now than in the 90s. As of 2018, the top 3 industries that have the most VR/AR related startups are the software (non-internet/mobile) (351), mobile & telecommunications (156), and consumer products & services (75). The market is transferring from focusing on R&D (Research and Development) for VR/AR hardware such as headset and controller to a more user-driven stage, resulting in more companies creating applications and content based on these technologies.

- 19 - 2.2.1 Financing History of VR/AR

With all this technological progress of VR/AR market, many people are convinced that this is finally the time for these technologies to be adopted by the masses. Figure 2 depicts the annual global financing history of VR/AR startups from 2009 to 2018. The horizontal axis shows the year and the total funding amount VR/AR acquired in that year. The left vertical axis and the blue histogram show the funding amount. Meanwhile, the right axis and the orange line show the deal numbers. As can be seen in Figure 2, the number of deals increased by 55% from 199 in 2015 to

309 by 2016 and continued its growth to 406 in 2017 worldwide. The invested funding soared from USD 1.02 billion to USD 2.13 billion in 2016, which reached a more than 100% growth rate.

Although the disclosed funding totaled more than USD 2.35 billion in 2017, with a 32% year-over- year deal growth, investment volume and public attention has been decreasing since 2016. If we look closer, the AR headset developer Magic Leap received USD 793.5 million for its series C round in 2016, which could be counted as 37% of the total funding in that year. In 2017, Magic

Leap secured USD 502 million for its series D, and Improbable, a game-focused company, received USD 502 million for its series B, which adds up to 43% of the total funding acquired by

VR/AR industry in that year. Again, Magic Leap had the series D-III in the first quarter of 2018 which is approximately USD 461million. Other than Magic Leap, the deal amount and total founding declined over 2018. Q2 of 2018 represented a 65% decline in investment volume. Total investment to the VR/AR industry during 2018 is USD 1.51 billion, which is a 38% decrease compared to 2017, and the number of deals shrinks to 278.

20- Figure 2. VR/AR Annual Global Financing History

$8.62bn 1,479 $8.18M $1M Total Funding Deals Avg. Deal Size Median Deal Size

Funding Amount ($) Number of Deals

W CBINSIGHTS $4 61 M

40 6 -400

2B- 30 6 -300

1.5B - / 19 / -200 11-

-100 500M - 62-,---- 34 i 15 18 26

OM - - M I "M =T _ 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 $19.4M $57.8M $166.8M $115.9M $363.2M $885.OM $1.02B3 $2.13B $2.358 $1.51 B

U Funding Amount ($) a Source: CB Insights / cbinsights.com

Notes: Figure 2 displays the financing history of VR/AR startups over the 2009 to 2018 period. The horizontal axis shows the year and the total funding amount VR/AR acquired in that year. The left vertical axis and the blue histogram show the funding amount. Meanwhile, the right axis and the orange line show the deal numbers. Due to the large amount, the funding for Magic Leap and Improbable are indicated from 2014 to 2018.

Among all the investors, Booster VC, Vive X, and Rothenberg Ventures are the most active ones, which completed more than 144 deals in total from 2014 to 2017. However, according to CB

Insights' data, only Booster VC realized two deals in 2018. As these investors all have a long-term focus on the VR/AR industry, the plunge of the number of deals could be a sign of a downward market.

-21- The drop in the number of deals and investment could lead to another failure of the rejuvenation of the VR/AR industry, or it could be a sign of the market becoming mature as speculators are quitting, leaving only the companies which have a clear vision of their goals and future.

2.2.2 Cycle and Trend of VR/AR Market

Figure 3 shows VR/AR's current status on the latest Gartner Hype Cycle. The horizontal axis indicates different adoption stages and the vertical axis shows the expectation of people. VR is at the Slope of Enlightenment phase and only needs 2-5 years before reaching the Plateau of

Productivity stage. When VR climbed up to the Slope of Enlightenment in 2016, the cycle predicts that VR still needs 5-10 years to reach the mainstream adoption. However, the prediction changed to 2-5 years in 2017 stems from the rapid evolution of the VR industry in 2016. The slope of

Enlightenment usually indicates the merit and application of the technology have been widely understood and accepted by more people. Also, the second or third generation products have been invented by pioneers, and prototypes are being funded by more investors. However, conservative companies are still being prudent about applying this technology to real projects. Some people argued that VR shouldn't be on the Slope of Enlightenment due to the fact that the application of this technology is still at its early stage. However, according to International Data Corporation 's study (S. Murray 2018), the prediction of increasing demand from the gaming industry and other sectors such as manufacturing and education may be able to carry VR forward.

AR is at the Trough of Disillusionment phase which still requires 5-10 years to reach the

Plateau of Productivity phase. The Trough of Disillusionment means that the technology is getting less attention from the public due to the failure during the developing process. It can move forward only if providers are able to improve the technology itself or develop better products.

-22- Figure 3. Gartner Hype Cycle for VR/AR, 2017

Expectations AL I I I I I I I I 2-5 years I I I I I I 5-10 years

I I

I I I I I * I I I I I

I I * I I I

I I I I I I I I * I * I I I Augmented Reality I I I I I I I * I I a I

Innovation Peak of Trough of Plateau of 2017 Trigger Inflated Disillusionment Slope of Elightenment Productivity Expectations D Source: Gartner (July 2017) 1 Time

Notes: Reprinted from Top Trends in the Gartner Hype Cycle for Emerging Technologies, by Kasey Panetta, August 15, 2017, retrieved from https://www.gartner.com/smarterwithgartner/top-trends-in-the-gartner-hype-cycle-for-emerging-technologies- 2017 Copyright 2017 by Gartner, Inc and/or its affiliates. The horizontal axis indicates different adoption stages and the vertical axis shows the expectation of people. VR is at the Slope of Enlightenment and AR is at the Trough of Disillusionment.

Although AR is several years behind VR on the cycle, the success of the Pokdmon Go game in

2016 was a momentum which helped AR skip many years of the education process and become a technology that is more prevalent. As more AR applications are designed to be used on smartphones, the convenience and accessibility of this technology are widely understood and accepted by the masses. Research shows that the AR market will follow with or even surpass VR's position in five years. (Digi-Capital 2018)

International Data Corporation (IDC) predicts several trends about VR/AR for the following years (S. Murray 2018):

- 23 - 1. The VR/AR market will keep growing over 2017 - 2022 by approximately 71.6% per

annum (compound annual growth rate). An upsurge from USD 27 billion in 2018 to USD

215 billion by 2022 is expected for the total spending on VR/AR products and services.

2. The largest VR/AR market is the U.S. market in 2018, which is approximately USD 6.4

billion. Asia/Pacific (excluding Japan) holds the second place with a market of USD 5.1

billion. Western Europe market is the third place, which is USD 3.0 billion. The forecast

shows that by 2022, U.S. market will keep its leading position while Western Europe will

surpass Asia/Pacific to the second place.

3. Consumers are the biggest source of VR/AR revenue in 2017 and 2018, and it is predicted

to reach USD 53 billion by 2022. Also, the prediction for the following years shows that

the demand from other segments such as construction, manufacturing, government, and

education will increase sharply by 2022.

4. The spending on VR software and hardware is greater than AR in 2017 and 2018 due to

the higher accessibility of VR equipment, games, and content on the market. Nevertheless,

AR spending will exceed VR's after 2018 due to its availability, convenience, and value to

industrial uses.

Other than IDC, many institutions are trying to predict the future of VR/AR too. Digi-Capital's prediction is more conservative. It forecasts that the revenue for VR within five years will be USD

10-15 billion, while at the same time, due to a larger installation base and mobility, the revenue for the AR industry will reach 85-90 billion (Digi-Capital 2018).

Another company ABI Research's report forecasts that the whole VR content market will generate only USD 6 billion by 2022 (ABIresearch 2017).

- 24 - PwC's prediction is more optimistic than ABI's because it expects VR content to reach USD

21.2 billion by 2022, including the gaming, video, and app revenue (Eeden and Chow 2017; PwC, n.d.).

SuperData's report shows that consumer VR will generate USD 19 billion revenue by 2021.

Meanwhile, consumer AR will reach a USD 20.3 billion revenue which will surpass the VR market for the first time (SuperData 2018).

In spite of the very different results from these predictions, they all show the same market trends which are the soar of VR/AR market for the next few years. All these reports present positive prospects to readers, nevertheless, VR/AR markets are very hard to be predicted due to their relatively long-term development period. Therefore, the timing of vital changes is unknown.

Figure 4 shows a histogram from CB Insights that depicts the global deal share of VR/AR over

2013 to 2018 Year to Date (09/06/2018) period. indicates a large percentage of the VR/AR related companies are still at their Seed/Angel round. Series B, C, and D only add up to 11% of the total funding in 2018, which shows that this industry is still far from maturity. Any new breakthrough or product could skyrocket the market as any challenge or unsuccessful product could bury this new cycle.

- 25 - Figure 4. VR/AR Global Deal Share

C0 ARNR global deal share 2013 - 2018 YTD (9/06/18)

4%.4% 4%%

2013 2014 2015 2016 2017 oSeed/Angel ESeries A wSeries B r Series C wSeries D *Series E+ s Ot- Source: CB Insights / cbinsights.com VCBINSIGHTS Notes: Figure 4 displays the global deal share of VR/AR over the 2013 to 2018 YTD (9/06/2018) period. The horizontal axis is the year. The vertical axis is the percentage. This histogram shows the percentage of different funding stages for VR/AR startups.

2.3 Challenges to the Supply Side of the VR/AR Market

It has been 180 years since the basic idea of VR/AR being invented. The first period that created a significant amount of progress of VR/AR was in the 1960s. As the changing of times, the introduction and adoption rate of new technology are accelerating according to Comin and

Hobijn's research and Visual Capitalist's summary (Comin and Hobijn 2010; Desjardins 2018).

For instance, microcomputer took 32 years (1984-2016) to reach a 78% adoption rate, and cell phone waited for 22 years (1994-2016) to reach a 92% adoption rate. VR/AR are continuously under development from the 60s to present, but it didn't obtain the same adoption rate as most of the technologies had at the same point in time. Most of the general use technologies from the same

- 26 - era such as programing language and computer graphics had gone through the whole lifecycle and been adopted by the mass-market, leaving VR/AR struggling with its way to mainstream adoption.

Usually, the development of technology could be derived from the progress of itself or breakthrough of other technologies. For instance, computer graphics were invented in the 1960s, but it hadn't been adopted by the masses until the personal computer became pervasive.

Technology could also be pushed forward by market needs. VR/AR are having some technical barriers as well as some user experiences issues that need to be conquered before the mass adoption.

2.3.1 Price

Today, a comprehensive solution, which includes CPU (Central Processing Unit), GPU (Graphics processing Unit), and HMD, is needed for a sophisticated VR/AR experience. The bundle could cost more than USD 1,000; therefore, not many people have the budgets for the required equipment.

As can be seen in Table 1, prices for popular VR/AR headsets range from USD 15 to USD 3,000.

Google Cardboard only costs USD 15, but it's common to experience virtual reality sickness' from this low budget VR equipment, which gives people a bad first impression. Also, people use a cell phone as the display for Google Cardboard, resulting in a low-resolution scene which may mislead users to a frustrated user experience. Once new users have been disappointed, it is doubtful that they will return to these technologies easily, let alone promote them to others. Most people put low budget VR/AR headsets away after a few tries. How to lower the price of high-end VR/AR equipment is crucial to a broad adoption.

'The symptoms of virtual reality sickness are similar to motion sickness.

- 27 - Table 1

A Overview of Selected VR/AR Headsets

VR Headset (On the market) Google Cardboard 2014 $15 $15 Native to phone Varies Mobile Samsung Gear VR 2015 $130 $130 Native to phone 96 degrees Mobile Oculus Rift 2016 $599 $399(including Touch) 1200X1080 110 degrees Tethered HTC Vive 2016 $799 $499 1200X1080 110 degrees Tethered Google Daydream View 2016 $99 $99 Native to phone 100 degrees Mobile Sony Playstation VR 2016 $399 $399 1080x960 100 degrees Tethered Oculus Go 2017 $199 $199 1280x1440 101 degrees Standalone HTC Vive Pro 2018 $799 $799 1440x1600 110 degrees Tethered HTC Vive Focus 2018 $599 $599 1440x1600 I10 degrees Standalone Lenovo Mirage Solo VR 2018 $399 $399 1280x1440 110 degrees Standalone VR Headset (In the Lab) Oculus Quest 2019 $399 N/A 1280x1440 N/A Standalone Pimax 8K TBD $499 N/A 3840X2160 220 degrees Tethered AR Headset (On the market) HoloLens 2016 $3,000 $3,000 1268x720 35 degrees Standalone Magic Leap 2018 $2,295 $2,295 1280x960 40 degrees Standalone DAQRI Smart Glasses 2018 $900(per month) $900(per month) 1360x768 44 degrees Standalone Notes: This table provides a general overview for popular consumer Headsets over the 2014 -2018 period. The current price might vary due to companies' policy. Source: https://store.google.com/us; https://www.oculus.com/; https://www.samsung.com/us/mobile/virtual-reality/all-virtual-reality/; https://www.vive.com/us/; https://www.playstation.com/en-us/explore/playstation-vr/; https://www.lenovo.com/us/en/virtual-reality-and-smart- devices/virtual-and-augmented-reality/lenovo-mirage-solo/Mirage-Solo/p/ZZIRZRHVROI: https://pimaxvr.com/pages/8k: htts://wwwN N.micr-osoft.com/en-us/hololens: htts://www.iaciclean.com/: https://dauri.com/nroducts/smart-elasses/

2.3.2 Content

The VR/AR market is still looking for killer content. Video game is one of the biggest segments

that attract consumers. Although there are many well designed VR/AR video games which draw certain new players, it's still a small percentage compares to the whole gamer group. The market

doesn't lack useful and creative applications. Some applications enable users to measure a room

with their cell phone or meet remotely in a virtual environment. These applications allow users to

improve efficiency or have an unprecedented experience; however, they are not necessary for daily

life. Also, people's daily life is being improved constantly by technologies. When lifestyles are

advanced enough, almost everything has its routine and is being taken good care of. Therefore, people prefer not to change due to the high opportunity cost of changing and the risk of low return.

- 28 - An increasingly higher standard for innovation adoption will be applied. Now, useful and interesting are not enough for a killer content, it also needs to be prospective and irreplaceable. It should be able to solve problems that cannot be solved by other technologies or present a whole new world to users. Such a killer content is still missing for the VR/AR market.

Not like movies have trailers and video games have demos, VR/AR, as a new media, doesn't have multi-channel to communicate with potential users. Anyone who doesn't have a VR/AR headset won't be able to feel what immersive environment is. So, content is mostly limited to people who are already interested in VR/AR. One exception is the "Pok6mon Go" game that released in 2016. It became widespread on the day it released due to the fact that it is cell phone based, and Pokemon has a strong cultural embedment already. Therefore, even after making the killer content, how to make it attractive to the vast majority of the public is another problem

VR/AR are facing. Education is needed for the adoption of VR/AR, letting businesses and the public experience what exactly these technologies can do.

2.3.3 Platform

Different content formats are used by different VR/AR HMD, which means that the content that can be run on Oculus Rift cannot be run on Sony PSVR without modifications. A consolidated platform is needed for VR/AR, enabling creators to make content for multiple HMD with ease.

It is difficult to operate an efficient platform for digital technologies. Control is definitely needed for these platforms, but at the same time, too much control kills possibilities and drives third-party developers away. To retain the generativity characteristic which is crucial for digital technology adoption 2, companies need to carefully decide how much control they want to exercise

2 The importance of generativity will be elaborated in section 5.1

- 29 - over the platform to achieve a balanced status. Too little control will turn the platform into a disordered and confused place where people can't see the superiority and value of using it. To stimulate the innovation and keep the development on the right track, a well-balanced platform must be built.

2.3.4 Mobility and Portability

One of the key affordances of VR/AR is to give people the "freedom" to move around and look at the scene from different perspectives. Most of the advanced VR HMD still have the cable that is tied to the computer. It limits the movement of users and creates potential hazards. However, most

AR headsets don't have this problem due to the fact that they don't require a high-end PC (personal computer) to run the model. AR headsets are either standalone or tied to a small wearable computer that can be strapped around users' waist. Hence, mobility and portability are more challenging for the development of VR.

There are three types of VR: mobile, tethered, and standalone. Mobile type needs users to slide a matching cell phone into the headset as the display so that the resolution depends entirely on the cell phone that is used. Cell phones usually have overheating problems after 1-1.5 hours' use.

Mobile VR is easier to set up compares to tethered HMD, but it is not the best experience VR could offer.

Most of the high-quality VR HMD are tethered. It can ensure a more sophisticated scene.

High-end PC is needed to provide a more immersive experience.

Standalone is the future of VR HMD. Many companies have announced that their next generation headset will be cordless. There are three known standalone HMD on the market which are Oculus Go, HTC Vive Focus and Lenovo Mirage Solo. Lenovo Mirage Solo is the first

-30- standalone headset that has been released to the market, and it could provide a mid-tier experience due to its average resolution. HTC Vive Focus is targeting business and developers. It is sold with

Vive Enterprise Advantage which provides supportive service to businesses that are using HTC's

HMD. Oculus Go is the cheapest among these three HMDs. It only has 3DoF (3 Degree of

Freedom), which means users could only rotate, turn and tilt their heads in the immersive environment. It cannot detect spatial motions such as moving bodies up and down, or backward and forward. Users can't walk around freely in the scene as using other high-end headsets. It is a trade-off between high-quality immersive feeling and a more mobile and portable user experience.

Most pioneering companies realized that mobility, portability, and easy operation are three essential requirements for VR to be adopted by masses. Therefore, it must be one of the prior problems to be fixed with the next generation headset.

2.3.5 Resolution & Refresh Rate

Resolution is another key to a more realistic and immersive experience. The capability of the human eye is to detect 60 pixels/degree (retinal resolution) at the fovea, which means that a person won't be able to tell the difference between a picture that is on a l x Idegree area with 3,600 pixels

(60x60) and a same size picture that has 4,900 pixels (70x70). For instance, the highest resolution that VR headset has is 1440x 1600 pixels per eye 3 with a FoV (Field of View) of 110 degrees. So, the pixel density of this headset is approximately 13 pixels/degree (1440/11 013). 13 pixels/degree is a linear pixel density of this headset, which means it is not only 4.6 times (60/13~4.6) worse than the human eye, but more than 21 times (4.6x4.6~21). It is still much lower than the retinal resolution which is 60 pixels per degree.

3 The comparison of resolution is only between the headsets that are released to the market.

- 31 - Most of the high-end VR has a 90 HZ refresh rate, which means the display updates the content

90 times per second. Higher refresh rate could ensure a better immersive experience. PSVR has the highest refresh rate on the market which is 120 HZ, and it is known for its comfortable user experience.

Although higher resolution and refresh rate will definitely bring a better user experience, the diminishing returns from doing further R&D (Research and Development) on these aspects and a higher requirement for a powerful PC might outweigh the benefit. How to balance the inputs and returns for resolution and refresh rate improvement will be a hard question for companies to answer.

2.3.6 Latency & Virtual Reality Sickness

Latency is the delay between action and reaction, causing the brain to reject the legitimacy of the virtual world. Latency is the main reason for virtual reality sickness. Also, for AR, high latency can cause misalignment between the virtual content and the real-world scene. The latency in drawing new content is one of the biggest technical challenges VR/AR are facing now. It appears when users move around, causing the system to start a new content rendering. Due to the fact that

VR provides a completely immersive scene, and users cannot adjust their perception according to the real-world references, latency is more crucial to the development of VR compares to AR. VR headsets typically target a latency less than 30-40 milliseconds.

As VR/AR are no longer limited to entertainment use, there are tremendous opportunities in delivering services remotely by using VR/AR. For instance, doctors around the world are experimenting with the possibilities of delivering their services remotely with these technologies.

In order for such applications to be realized, latency issues must be solved.

32 - With the problems that are mentioned in this section, latency, low resolution, and low refresh rate are the three main reasons for virtual reality sickness. Latency is the most blameful one among these three factors. Users will feel dizzy if the HMD gives them a sluggish feeling, which is fatal especially for emerging technologies such as VR/AR due to the fact that the pervasiveness of a product largely depends on a good user experience.

2.3.7 5G Speed

Research shows that 5G (fifth-generation wireless system) will provide more than 100 Mbps

(Megabits per second) download speed to over 90 percent users (Gartenberg 2018). 5G speed might be a solution for some of the problems mentioned in this section, such as cordless headsets, resolution, refresh rate, and latency. In spite of the recent success of simple AR games and facial filter applications on smartphones, AR still needs higher bandwidth if it is going to become an indispensable part for everyday life as predicted by many researchers.

To support the development of VR/AR applications, the bandwidth for streaming needs to be expanded immensely. For instance, HTC Vive has a resolution of 1200X1080 pixels per eye

(1200X2160 pixels in total), which is slightly above 1080p. Due to the fact that VR/AR will eventually reach 4K 4 resolution per eye (4096x4096 pixels in total), 4G connection, which provides a 5 to 12 Mbps download speed, is insufficient to provide a fluent user experience. For example, a one-minute 4K video, which is being shot at 30 frames per second, requires approximately 375 Mb. Therefore, 4G is inadequate to support the future development of VR/AR.

Because the telecom industry is moving towards to the next generation rapidly, 5G is possible to become the turning point of VR/AR streaming.

4 The word 4K comes from the horizontal resolution of the display which is approximately 4,000 pixels.

- 33 - VR/AR have already created a multi-billion market. With the decrease in price, powerful content, and technology development, VR/AR have the potential to become game-changing general-purpose technologies as the advent of personal computers.

Chapter 3

Implementation of VR/AR in the Real Estate Industry

With the boom of VR/AR, more companies are trying to apply these technologies to different sectors, including the real estate industry. Goldman Sachs has predicted in its report that the real estate, retail, and healthcare market will be disrupted first in addition to the video game industry.

(The Goldman Sachs Group, Inc. 2016). Real estate, which is an integration of many different disciplines, is a relatively complicated industry. Also, real estate is not very automated compared to other industry, and its automation hasn't improved in decades. one of the least automated industries in decades; therefore, it needs to be reformed with the help of new technologies. As shown in Figure 5, the lifecycle of the built environment can be divided into seven stages: the land selection, design, and entitlement stage, capital stack stage, construction stage, sales, leasing and brokerage stage, asset operation and monitoring stage, acquisition and disposition stage, and demolition or redevelopment stage. Theoretically, VR/AR can be used for almost every stage during the whole lifecycle. In this thesis, we mainly focus on the design, construction, and sales, leasing and brokerage stages.

-34 - Figure 5. The Lifecycle of the Built Environment

Land Selection, Design, and Construction Entitlements

Capital Stack Sales, Leasing & Brokerage

Demolition

Acquisition & Asset Redevelopment Disposition Operation & Monitoring

Note: Figure 5 shows the lifecycle of the built environment. It can be divided into seven stages: the land selection. design. and entitlement stage, capital stack stage, construction stage, sales, leasing and brokerage stage, asset operation and monitoring stage. acquisition and disposition stage, and demolition or redevelopment stage.

According to CB Insights' data, there are only 23 VR/AR startups worldwide in 2018 that are

real estate related. There must be some new startups that are not on this list, but compared to the

number of other industries such as telecommunication (156) or industrial (590), 23 is still a small

number. The number 23 shows that VR/AR have not been widely applied in the real estate field.

To ascertain the value of VR/AR to the real estate industry, five organizations that are using

VR/AR and focusing on different stages of the built environment were studied. Interviews were conducted with people who work in these organizations. Interviewees include a researcher at the

MIT Virtual Experience Design Lab, a Digital Design Manager at Gensler, a former VDC (Virtual

Design and Construction) specialist who worked for a construction company, a Collaboration

Services Engineer at Suffolk Construction's Smart Lab, and the founder of EVAR, a startup that provides project management service to the real estate industry by using VR/AR. From these

-35- interviews, the goal was to understand the current status of these companies or labs, and then learn the obstacles they have encountered during the VR/AR's implementation process. In the end, the objectives of these organizations were revealed. The most representative questions that were asked during the interviews are listed below:

1. What is the company's main business/ What is the lab's current goal?

2. How are VR/AR used in this company/lab?

3. Is there any practical example that can be shared?

4. Who initiated or what triggered the idea to use or do the research on VR/AR?

5. What are the competitive advantages that the company/lab could obtain by using VR/AR?

6. During the process of VR/AR implementation and diffusion, what is the biggest obstacle

and concern?

7. What is the company/lab's vision for future VR/AR markets and applications?

All the cases are written in chronological order of the development of a real estate project.

These cases showed the adoption level of VR/AR technologies in different development phases, and they shared these interviewees' insights into the VR/AR industry.

3.1 MIT Virtual Experience Design Lab (VEDL)

3.1.1 Introduction

The MIT Virtual Experience Lab (VEDL) was established approximately one year ago. It was formed by faculty and students from the MIT School of Architecture and Planning. The reason for launching this lab is due to the thriving development of VR/AR and the concern of a lack of established and formal study on how VR/AR can be used for design purposes in the future.

-36- Opportunities are burgeoning in the virtual design world as the immersive environment that is created by VR/AR could provide a spatial context which is different than that of any other conventional media. Other than the spatial immersive ability, designers are inspired by Sensorama which was invented in the 1960s. VR/AR are not only about the sense of sight, they can also immerse users using other senses too, such as hearing and touch, which means these senses could all be integrated into design work in the future. As VR/AR are emerging design vehicles, the lab's strategy is to first learn the changes these technologies could bring to a static document based design world and then to create an environment where people can learn and develop different methods for doing designs with VR/AR. VEDL's last step is to prepare all the architects and designers for the new design methods when the time for VR/AR comes.

3.1.2 Challenges

Due to the fact that VR/AR are relatively new design methods, lacking training in the use of

VR/AR is one of the primary challenges for its diffusion and application. Architects need to be trained again to master new software and understand new design principles. This process will not be easy because VR/AR are not design methods that have been used for decades such as digital

2D drawing or 3D modeling, and formal pedagogical methods are lacking in this field. There will be a long experimental period before finding the proper approach to teach people about these new technologies.

A second challenge is that architects are still not used to doing things in the virtual environment because they work with software such as AutoCAD and Revit which transform their design into an abstract representation. They are more used to observing and working with floor plans and sections. Now VR/AR become another medium which is more direct and perceptual, creating a

-37 - new design method that architects have never worked with. For example, architects never work with an 1: 1 sample model due to the large scale of buildings, but VR/AR could provide this experience in the virtual world easily. In this example, the problem is that this new medium will disrupt the conventional way of design despite the fact that most architects still don't have the experience of working with an 1: 1 model. To explore the full use of VR/AR, new areas such as human behavior, perception, and new interaction methods need to be studied. Adjustments need to be made for new experiences and new principles.

The third challenge is that there are certain methodologies for architectural design which are accepted as the modus operandi. For example, most experienced architects still prefer drawing 2D sketches on paper prior to the digital design process. They think digital software limits architects' creativity due to the fact that they will be drawn to the details of digital drawings too soon because it detracts architects from the broader concept, or the outcome is restricted by designers' modeling skills. Also, the reason why building physical models is still a compulsory step for early design process while the use of digital 3D models is already widely spread is that most architects believe that the depth and the sense of perspective that is brought by physical models cannot be replaced by digital models. Physical models can help architects and clients study the design from different perspectives. They also can make up for cognitive defects such as a lack of spatial imagination. In addition, executives of some architectural companies are mid-aged people who have struggled with AutoCAD and Rhino already. They believe more in business performance and efficiency more than risky new technologies, which makes it harder to promote VR/AR as a new design vehicle. The conventional approach of doing architectural design is deeply rooted in architects' mind, creating another level of barriers for virtual design methodologies to be accepted. There is a company that is trying to build a virtual environment, in which architects can adjust a 3D massing

- 38 - with their hands, mimicking the process of working with soft clay in the real world. Applications that could make the architectural design a more intuitive process might be a breakthrough for the third challenge above.

The fourth challenge is that some architects consider VR/AR models higher level renderings, which underestimates the value of VR/AR. These architects ignore the value of spatial context, immersive experience, sensory stimulation, etc., that could be brought to the design stage by

VR/AR. Since there is no inherent need for more sophisticated rendering, VR/AR won't be used by these architects due to their misunderstanding of VR/AR. It is essential to correct their opinions about VR/AR, which will take a certain time and capital during the learning process.

The fifth challenge is that it is difficult to quantify the advantages that are brought by VR/AR.

Although VR/AR could bring new design methods to architectural companies, the fee these companies charge for the design work will not change just because of the use of VR/AR. Also, the benefits such as time and budget savings are difficult to quantify. It is impossible to obtain an accurate number to prove how useful VR/AR could be because there is no exact same project, which does not use VR/AR, which can be compared to one that is using these technologies. People can estimate the revenue that will be gained by using VR/AR, but estimates and predictions are not convincing enough to initiate the change.

Lastly, there are not enough tools and accessibility that enable VR/AR to become pervasive in the architectural design field. In VEDL, Unreal Engine and Unity are the most used software. Both of them are game engines that are designed for the video game industry, so software for architects and designers is still needed to support their design in a virtual world. The work of architects is usually to create a story or a vision which can make their audiences believe in and look into a promising future. Although Unreal, Unity and other game engines are very powerful modeling

-39 - software, they can't support architects from a narrative perspective. Realistic models provided by

these two software could distract audiences' attention from the storyline which is the last thing

that architects want. Accessibility is another big challenge since VR/AR require equipment such

as HMD, high-end PC, controllers, etc. VR/AR could only be experienced by people who own an

HMD. Therefore, only these people understand or believe the enormous benefits that VR/AR can

bring to the design world. As we can see in Figure 6, the experience of VR/AR can't be explained

by words, a consumer who doesn't have the chance to try these technologies will probably choose

not to purchase the equipment, which leads to a unfortunate situation in which people reject the

idea of purchasing VR/AR equipment because they don't know if it is worth purchasing, but they

will not know the usefulness if they don't buy and try it.

Figure 6. Cycle of VR/AR Implementation Challenges

No chance to No VR/AR experience headset the virtual world

No intention to buy VR/AR headset

Note: Figure 6 shows the cycle of VR/AR implementation challenges. Three situations, which are no chance to experience the virtual world, no intention to buy VR/AR headset, and No VR/AR headset, create a loop, causing problems for the accessibility of VR/AR headset.

All these challenges will be encountered along the development of VR/AR technologies and

application process. As a pioneer in the virtual experience design field, VEDL brings together

departments such as architecture and media studies, cognitive science, and artificial intelligence

together across MIT, seeking an answer for the potential of immersive technologies.

-40 - 3.1.3 Projects

Projects in the VEDL are not just building 3D walkthrough for buildings and space, they are an education process and they are also experimental research.

One project that has been done is by the students of a VR/AR related course which is taught by

VEDL's researchers. The students were asked to build an immersive scene to either show an existing or imaginary space to tell a short story. The most impressive work was done by a student who wanted to tell the story about her and her scarf. She used a 3D scanner to scan her scarf and transform it into a tall mountain in the immersive environment. Audiences need to climb the "scarf mountain" and collect floating and glittering sparkles. When audiences touch these sparkles on their way to the "mountaintop", they will trigger the audio that was recorded by the student. This audio contains a brief memory of the owner and her scarf such as the time she purchased it, places she traveled with it, and the story of how she lost and retrieved it. The whole experience was not only about the visual sense, but it also integrated other senses such as the tactile and auditory senses into the design. It was an unprecedented way of storytelling, and it is just one of the inspiring experiments from innumerable methods that VR/AR could bring to the design process. What

VR/AR are capable of could aid the imagination of architects. Each experimental story or scene took students from architectural school approximately two weeks to build. These students learned how to use VR/AR modeling software, 3D scanners, and other VR/AR devices in two weeks: a preliminary time frame for VR/AR's education process.

The second project is to create an interactive story of Henry Thoreau with AR for his museum at Walden Pond. The idea is to make the cabin looks like its used to when Thoreau still lived there.

One way to do this is by scanning something such as Thoreau's hat with a cell phone, AR technology enables the cell phone to show a digital Thoreau walking in the cabin by overlaying

- 41- information onto the real world scene. It is a project that not only shows people the content in digital space, but also the physical context of the cabin. It is expected that, with a 3D digital model of Thoreau's cabin, people can experience it easily, while not interacting with it. VR/AR are creating a new channel of communication by embedding the digital content into physical daily experience. The low-level affordances provided by VR/AR is perceptual information overlay, which is a very basic interpretation of these technologies, however, what this basic affordance could bring to design is what VEDL believes as the real power embedded in VR/AR: creating narratives. VEDL, by using AR, is trying to create compelling stories such as Thoreau's daily life in the cabin, enabling people to interact with historical preservation in a different way. The Walden

Pond project is a step into cultural settings. It will impact the broader society instead of a small group of architects.

The third project is a clean-room walkthrough built for MIT's new Nano building launch event.

Nano building is a new lab building equipped with many high-level clean-room research labs.

During the launch event, building tours were offered to all visitors; however, entering clean-room labs has very strict rules such as changing garments and wearing masks. In order to give all the visitors the opportunity to understand the function and configuration of the clean-room lab, the communication director of the Nano building asked VEDL to build several immersive scenes for their clean-room labs. VEDL made three immersive experiences for the Nano building. The first one is a 3D walk-through of the clean-room, in which visitors can walk freely in the virtual scene.

The second one is a VR immersive scene created for the Oculus Go, which only provides a 3DoF experience. Visitors can only look around the room, but they cannot move. The third experience is an AR scene in an iPad. When visitors hold the iPad toward the clean-room lab's window, it will show them a virtual scene with a researcher working inside, which gives a vision of how the

-42- lab will be used and look like in the future. Unlike the first two projects which are done in a more experimental way, these three virtual scenes for the Nano building are basically the most common application now of VR/AR in the built environment. It also shows a very basic affordance of

VR/AR which is remote sharing. Instead of going to the physical location to check on things,

VR/AR offer an alternative option by bringing everything to users virtually.

3.1.4 Lab's Responsibilities and Vision

VEDL's first responsibility is to do basic research to understand the interaction between the architects and VR/AR, and at the same time, develop tools to explore this new medium. VR/AR have so much potential that has not been realized yet. Most of the masses of people can only see what has been revealed by others, but they don't have the ability to deliver new ideas. Many architects are still staying at the basic level of understanding the capability of VR/AR, in which

VR/AR are nothing spatial but high-level renderings because that is what they learn from the market. Successful applications sometimes are discovered in the process of other unsuccessful attempts. Therefore, basic research and experiments are needed to dig into a deeper level of relationship between architecture and VR/AR. Another basic work is to develop tools to support these new technologies. As stated in section 3.1.2, there is no specific VR/AR software to be used in the architectural field. Also, the learning process for software is usually time-consuming, therefore, software will be widely spread only if they are exclusive or irreplaceable for certain fields. VEDL is seeking to set the base for the internal structure and external practice of VR/AR applications in the architectural design process.

From a cognitive and perceptive point of view, the human mind is naturally prepared to understand things in space, so when people see things in a spatial context, the whole scene can

-43 - communicate with them directly. This brings challenges to the design in a spatial format, and these spatial-based designs communicate with people in a different way. How to take full advantage of the new cognitive and perceptive behavior brought by VR/AR is another problem to solve for

VDEL.

As a part of the responsibility of VEDL, the lab offers classes under the School of Architecture and Planning at MIT. During that class, VDEL enables students to be involved in the research, and create a knowledge base for VR/AR implementation during the education process. Then, these students can build a new knowledge structure based on these fundamental understanding. The class taught by VDEL is an opportunity that allows the researchers from the lab and students from MIT to work together, and hopefully, refine the use of VR/AR in the process.

The latest Gartner Hype Cycle shows that VR is on the Slope of Enlightenment and AR is at the Trough of Disillusionment. Since these two technologies have struggled for a long period, many researchers disagree with Gartner's result. They believe VR/AR still have a long journey to go before reaching the Plateau of Productivity. Nevertheless, researchers at the VEDL consent with the Hype Cycle's prediction, and they are looking positively at the future of VR/AR. The researcher in VEDL thinks that the demand for an immersive experience is growing for entertainment use, and optimistically, that VR will be widely spread in two years. AR, on the other hand, is catching up due to better accessibility and pervasive applications on cell phones.

Looking into the future, VR/AR might bring a new methodology of design to the real estate industry. There are several new notions that VR/AR could bring to the design process. The first and most important one is the narrative storytelling ability, which probably will overturn the whole design routine. For now, there is no other method that could tell a more immersive and compelling

-44 - story than VR/AR; therefore, this ability could be the major impetus to push VR/AR forward for its implementation in the design field.

The second one is the space creating ability. With the immersive scenes that are created by

VR/AR, the way people look at designs is changing. Instead of looking at a 2D rendering or masterplan, VR/AR propose a new method to present designs. New methods such as 3D walkthrough give clients a chance to look at designs in a spatial context, which might be disruptive for human cognition and perception. A new media could be created with VR/AR, and a completely different spatial affordance will be perceived. Advanced perception is needed to work with this new media.

Lastly, VR/AR could create a direct communication channel with people by providing perceptual information overlay. It is an intuitive way for people, especially for someone who doesn't have an architectural background, to understand design. Using VR/AR could reduce the likelihood of misunderstanding and increase communication efficiency.

VEDL is pioneering the integration of immersive technologies into research, experience, and education. Researchers at the VEDL believe that immersive technology such as VR/AR will be fundamental and pervasive as the use of computers today.

3.2 Gensler - A Leading Architectural Design Firm

3.2.1 Introduction

Gensler is a well-known architectural and design firm based in California. It was ranked in the first place among the architectural firms in the U.S. according to its revenue in 2017. As a company

-45 - that stands on the edge of innovation and creation, Gensler's Boston office established the new digital design department in January 2018.

The digital design department includes five axes: the Revit service, creative media, computational design, performance, and making. VR/AR fall under the creative media axis which is relatively new to the whole company. Inside the department, it has digital design manager who works 40 hours per week to manage all the efforts and support the digital design work. And an assistant work 10 hours per week with the manager. Other than the manager and assistant, employees from other departments work part-time for the digital design department too, and their work adds up to 16 hours per week for each axis (72 hours per month). A total of 272 hours of work is spent on these initiatives per month.

The digital design department is trying to educate their employees while promoting the new technologies to their clients. Internally, they are holding VR/AR related competitions or presentations to educate Gensler's employees about these technologies. The team also approaches to clients about the use of VR/AR. The VR/AR team is still working on projects that are driven by the design directors or project managers in Gensler. Design teams go to the VR/AR team if it is the most effective approach to show the design with immersive scenes, but it is not a strict top- down policy in Gensler. Only 25% of the projects in the Gensler Boston office are using VR/AR, and most of them are for marketing and branding use.

The fee that's charged for using VR/AR is included in the fee that's been agreed upon for the projects if architects use them as a part of the design process. If the VR/AR are requested by the clients, and they are not included in the original contract, it will be charged by the estimation of the time that needs to be spent on this project and also on the form of final deliveries. As VR/AR are still relatively new to architects, there has to be some overhead invested in the learning process.

-46 - For example, the design team needs to figure out how much human capital has to be spent on

VR/AR in order to finish it on time, and the leadership needs to learn how to manage these projects as a part of their education process.

3.2.2 Advantage and Challenges

One of the most important advantages VR/AR could bring to the architectural design firm is the improvement of spatial awareness. For clients who don't understand 2D drawings, the immersive scene could be a good way of showing them how space will look like in the future so that architects' ideas can be fully understanded.

VR/AR can also help with the design quality control. With the immersive scene, architects can easily detect conflicts and unpleasant space so that they can change it in time during the design process. In the later stage, architects can oversee the construction site by checking the VR/AR model which shows all the information about the building. VR/AR could lead architects to better design outcomes. But, many clients and architects still see VR/AR as a frivolous toy due to the fact that it is challenging to perceive the value that these technologies could bring to the projects before deploying them.

Architects are storytellers. They are good at creating a beautiful scene which makes you believe in their design. The extremely real and detailed scene provided by VR/AR may shift user's focus out of the storyline to trivial details. The simulation could also kill the imagination of clients.

Clients usually can fill the design for unshown parts with their imagination when they are looking at a 2D rendering, which helps architects complete their stories. With the immersive scene, clients are harder to be satisfied. On the software side, the most popular software that is used to create

VR/AR scenes at Gensler is the Enscape. Unlike Unit and Unreal, Enscape creates a gentle and

-47 - soft expression for the virtual environment. This software doesn't focus on how real the simulation is, but it excels at creating ambiance, which is a good tool for storytelling. Also, the Revit and

Sketchup5 models can be easily uploaded into Enscape, and the software provides a real-time update, which means when architects make changes in Revit or Sketchup, the VR/AR model will be updated in Enscape too. It's a simultaneous process.

On the hardware side, VR/AR model's file size starts from 100 to 500MB. It can be easily doubled if designers put in more details such as an apple on the table or ten chairs in a meeting room. The large file size will slow the production and lower the efficiency of the design process.

Although VR/AR can be helpful in many aspects, many architectural firms still aren't planning to use it. There are several reasons for that. The first one is using VR/AR doesn't change the fee companies charge for the design work. They can't charge more because they are using VR/AR. To use these technologies, companies need to spend more time and human capital on it, but they don't get a considerable return from it. Architecture is not the most lucrative business, so for big offices, their small projects can't justify the cost, and for middle and small size firms, they do not want to bear the extra fee. Therefore, most of the architectural firms decide to do the minimum within their contracts instead of going above and beyond the basics.

It is always important to know about your clients. Picking the right clients is crucial in the branding and promoting process for VR/AR. Some clients are curious and supportive while others are stubborn and conservative. The latter will discourage architects from trying new innovations.

Choosing the right clients to gain enough support at the beginning gives architects the confidence to continue investing time and energy into the VR/AR deployment process.

5 Two software that are commonly used for architectural design process.

-48 - 3.2.3 Projects

Gensler has different studios that work with various design needs such as interior, small retail, and full shell exterior design, but only the big scale ground-up building projects are using VR/AR in the Boston office (5 projects or less). As the education process is slow, the VR/AR team is trying to step into new fields for which VR/AR could be applied. One of their clients was trying to invest in a mall, so the VR/AR team built a 3D walkthrough for this mall to show the investor how it can be revitalized. In this project, Gensler's job was more like that of a consultant instead of that of an architect. They showed the vision of the mall and gave advice to the client on whether to buy or walk away.

The second project was specifically requested by one client who was trying to sell the new retail space to potential tenants. VR/AR provide a possibility to show the finished look of the retail space to potential buyers while the construction is still in progress. The VR/AR team had two options for that project, one was to use Oculus Go, which could show an immersive scene from some fixed points (users can look around the scene or jump to other space, but they could not move freely) , the other option was to build a 3D walkthrough for the entire project. The team decided to use the Oculus Go in the end because the walkthrough would give the buyer too much freedom which is not necessarily appreciated. Too much freedom would distract users from what the client wanted to show, also they would easily be allured by unimportant details. It is instructive to know that although using VR/AR is a good solution for many problems, an immersive walkthrough is not always suitable for every case.

3.2.4 Goals and Vision

-49 - One of the future goals for the VR/AR team is to build a cloud space, in which the VR/AR models of every project could be uploaded. With a customized VR/AR headset and a specific application, clients can review the design changes immediately and remotely anytime and anywhere. The other goal is to help their clients to be more familiar and comfortable with these new technologies.

Compared to Gensler's New York office, which has 3-4 dedicated people who are in charge of the VR/AR modeling job, the digital design department in Boston is building a hybrid system which is more helpful for VR/AR adoption inside the company. The VR/AR team in Boston is trying to create a simplified streamline workflow and toolset so that every architect can do it easily.

People who mastered the skills can train others to make the technologies more accessible, creating a benign loop. Therefore, VR/AR will be integrated into projects gradually. The vision of the manager of the Digital Design Department is that VR/AR can be used for every project in Gensler

Boston office in two years.

3.3 Suffolk Smart Lab - A New Technology Focused Department in a

Leading Construction Contracting Company

3.3.1 Introduction

Suffolk is a national construction company that is a pioneer in integrating new technologies into their daily routines. Suffolk Smart Lab (SSL) was launched in New York in 2017, and it is a new innovation hub to study new technologies in order to apply them to real projects in the future. SSL aims to create a more collaborated and efficient work environment for the construction industry.

SSL owns a lot of innovative products such as digital paper, a timeline scheduler, and, of course,

VR/AR. VR is one of the most used technologies in the SSL while applications for AR are still under development. VR is widely used in Suffolk's daily routine. It is used to detect clashes in

-50 - early stages of constructions, conduct safety training for workers, and simulate solutions for real- world challenges. For instance, VR could combine pedestrian and traffic data into the immersive environment to forecast the time for bringing a cement truck to the construction site. It can simulate different scenarios to help trucks avoid rush hour or cause less traffic congestion to surrounding areas. Pre-build buildings is another useful application of VR, which simulate the whole construction process before conducting it in the real world. It can reveal many unexpected mistakes and contingencies in advance so that they can be solved ahead of time.

One of SSL's jobs is to do research with technologies and products that have a potential impact on the built environment and find out their roles and value for real projects. Therefore, after trying all the HMD on the market, SSL picked the HTC Vive Enterprise as it provides the highest resolution and 360-degree access on HMD, controllers, and supportive software. The high frame rate and resolution enables users to have a more believable experience with no latency that leads to virtual reality sickness. The accuracy allows users to catch a small ball with their hands in the virtual environment, which unlocks more possibilities for the VR experience.

As a construction company, SSL is mainly focused on the BIM (Building Information

Modeling) side. It outsources the modeling part to third parties and works closely with architects or other consultants to build this collaborative platform of VR/AR.

3.3.2 Challenges

A large portion of the VR/AR cost lies in the early setup stage. A powerful and presentable solution requires a high-end computer and at least one set of HMD and controller. Configurations such as high resolution and frame rate are needed for business use. It is a big investment at the beginning, similar to the challenges that were encountered by architectural design companies. Small

-51- construction companies are not willing to invest in these technologies unless they are doing large scale projects. Also, in big construction companies, they are not using VR/AR on small projects because the cost of using VR/AR, including the setup and modeling process, will exceed the benefits they can bring to the projects. They are more useful to projects that are big and complex.

The relatively high cost is always the barrier that keeps VR/AR from being adopted by the mass- market.

Another challenge for SSL comes from the bad reputation of VR/AR brought about by some of the commercial cases. Since VR/AR are often used as a marketing strategy, low-quality VR/AR experiences are usually provided as a gimmick to attract clients. These low-quality experiences embed a biased impression in users, which causes doubts when it is suggested clients use VR/AR.

Also, at the early stage of implementation, data is not sufficient to prove the value of using VR/AR, which leads to questionable necessity and legitimacy of these technologies. This is also the reason why SSL is not using AR for real projects because showing immature and unshaped products will disappoint clients, and it is difficult to gain back their trust even if there will be an improvement in the future. Most clients still see VR/AR as a gaming gadget or fancy rendering, but this situation is improving as more and more real projects have been finished with the help of VR/AR, which arouses the interest of clients.

The third challenge is people. Most people don't like changes. People's tendency to refuse the adoption of new technologies is due to the fact that they are afraid of unknown future and risks, especially for technologies that require new equipment such as HMD and controllers. Making people acquainted with the new equipment is difficult. Cultural change is always slow, and people need to realize the benefits VR/AR could bring to their lives are worth the changing of their habits.

-52- 3.3.3 Projects

VR is used for a huge hotel project that is developed by a very strict owner. He used to ask for mockup rooms for every hotel project he built. Now, with VR, the costs of mockup rooms are enormously reduced. SSL built several virtual mockup rooms for the hotel project, presenting the design for lighting, furniture, wallpaper, etc., with VR models. Compared to a real mockup room, the design of the digital one is easier to be changed. It takes a long time to change the wallpaper or furniture in the real world, but in the virtual environment, it takes less than 1 minute. With a sophisticated VR model and a high-level HMD, almost every single detail can be shown in the virtual world. Another element that can be showed by VR is the view. SSL took a 360-degree capture of the hotel's surroundings by drones and incorporated it into the VR model. Users can see the real view from the virtual mockup room's window which is not possible for physical mockups.

For instance, users can experience the room on the 1 8th floor when the construction just started from the basement. The view that is captured by drones can also be used for pricing and positioning the rooms. For some luxury hotels, physical mockup rooms are still needed because some owners insist in touching and feeling the materials, but the virtual mockup can always be a valuable complement to the physical one as they are cost-efficient and time-saving. For example, hotel owners could build one mockup room to experience the materials, and instead of a second mockup room, they can use the money to build ten virtual mockup rooms which could cover more room types and details. As real estate projects are always unique, and user experience is essential to some product types such as hotel, retail, and medical related building, VR could save developers from the expensive and inefficient experience method.

The second project is to build VR operating rooms for a hospital project. Mockup operating rooms are usually suggested by contractors in order to ensure the usability of the rooms and the

-53 - efficiency of the hospital staff. From the VR scene, doctors and nurses experienced the operating rooms as they are used to seeing in the real world. All the lights, operating tables, chairs, hanging arms were arranged exactly as how they will be built. Users can walk around the room and move the objects to wherever they feel comfortable. Virtual operating rooms can save a large amount of money and energy for developers. For instance, a MRI (magnetic resonance imaging) scan device usually costs USD 1 - 3 million. It is a huge cost to bring in the MRI to the mockup room for simulation purpose. With the help of VR, contractors can build any kind of mockup rooms with any machine with much less cost.

Suffolk's employees are spread in many different cities in the U.S., so VR is also used for in- house communication and studies. Teams all over the country that are working on the same project use VR to conduct remote meetings in the virtual environment. Now, with advanced VR/AR technologies, most things that can be done in the real world can also be done in the virtual world.

For instance, people can measure the scale, discuss the space with each other and mark a modification in a virtual building, which makes remote collaboration much easier. Also, during the construction process of a high-rise building in Boston, the team used VR to determine the best location for the hoist elevator. Engineers can learn how much weight can be brought onto the structure by simulating different scenarios to find the most sensible solution. It is helpful to examine the VR model before making such important and irreversible decision.

Although AR application is still under development, it is used for managing MEP (Mechanical, electrical, and plumbing) or HVAC (Heating, ventilation, and air conditioning) systems as an experiment in SSL. By using the HoloLens, users can see the MEP, HVAC, and structure behind the wall after the construction. If some mistakes occur, workers don't need to cut the walls to find the right spot, which leads to a more efficient and economical workflow. In collaboration with

-54- other technologies such as the IoT (Internet of Things), mistakes or damage of pipes could be easily located with the help of AR in the future.

As Suffolk has many projects going on all over the country, it has the opportunities to apply

VR/AR to various real projects to test their usability and value. It is the advantage that other smaller construction companies don't have. And Suffolk has the capability to take the risks of implementing these technologies, which cannot be afforded by other construction companies.

3.3.4 Vision

The main vision of SSL is to find a way to transform the current construction industry into a new generation. As millennials are becoming the largest labor force, it is time for the changeless construction industry to embrace the cultural transformation. SSL provides a platform for technologies such as VR/AR to be experimented and improved. By using VR/AR for real projects, employees and clients obtain chances to learn how to interact with these new technologies. There is a learning process before users feel comfortable with VR/AR applications, and SSL is accelerating this process by implementing them into real projects. SSL is also a place to educate

Suffolk's employees and clients in understanding the merits of using VR/AR, and at the same time, to familiarizing themselves with VR/AR's operational method.

New capabilities of VR/AR are developed at the innovation department in SSL. For example, with the new implementations that were developed, now the Revit model could be transformed into a VR model in less than one minute. It is a critical improvement due to the fact that the construction cannot be paused easily after it has been started. A VR file that could be created quickly and easily enough is important for its implementation process. The implementions of AR

-55 - are also under development. SSL is a place to execute new research and incubate new applications for technologies.

A broad variety of programs used by different disciplines makes collaboration difficult. SSL is a platform where these issues could be mitigated. VR/AR allow people to work in an integrated environment and save time from misunderstanding and long-distance traveling.

Suffolk Smart Lab is a pioneer in using new tools and integrating new technologies into their construction process, and the lab is the best way to interpret Suffolk's "build smart" approach.

3.4 Evolutional Virtual Artist Interactive Entertainment Technology Co. -

A VR/AR Consulting and Project Management Platform Provider

3.4.1 Introduction

Evolutional Virtual Artist Interactive Entertainment Technology (EVAR) is a China-based startup that was inspired by the burgeoning of the VR/AR industry. It obtained funding from its mother company, which is a famous architectural design firm, that started the company in 2016. EVAR cannot be easily defined as a high-end rendering company, a VR/AR service provider, or a technology company. It created a new business model by using VR/AR. As the real estate projects are becoming more complex, 2D documents cannot fulfill the needs of a multi-disciplinary collaboration.

With the use of VR/AR, EVAR provides a 3D real-time immersive scene, multi-disciplinary integration, and most importantly, a project management platform. The immersive experience

EVAR provides is the same as other VR/AR service provider's, which brings a sense of scale to users. The multi-discipline integration part combines all the 2D design files such as architecture,

-56- MEP, and structure together to create a virtual scene which is similar to digital twins of projects.

Mistakes, clashes, and other undetectable details can be fixed by examining the VR/AR models.

The project management platform is the most valuable innovation created by EVAR. With this platform, developers can manage the design schedule intuitively by checking whether every part has been built in the VR/AR model. Clients that are working with EVAR required all the disciplines to update their work with EVAR, and then EVAR changed the VR/AR models accordingly. For example, a blank corner indicates that the corner has not been designed properly.

The platform could also be used for companies' review meetings as a more efficient way to make decisions. Clashes and mistakes have higher possibilities to be detected at an early stage, and project completeness has been increased by using VR/AR. It is a new tool that could improve the efficiency of project management process.

The team in EVAR is comprised of experienced architects, game designers, programmers, and

R&D specialists, so it can fully understand the need of developers, and at the same time, deliver a user-friendly application. Its clients are all over the country and mostly top-tier developers in China.

3.4.2 Challenges

When EVAR was established, the founder was trying to sell its service to architects. But after several rounds of promotion, they found out that architects are not interested in coordinating

VR/AR into their design process. There are three main reasons for this reluctance. First, the details that VR/AR can show will drastically increase the workload of architects. The dark corners that are intentionally ignored are brought to the light by examining the VR/AR scene. Second, VR/AR will give their client the freedom of "looking around". Usually, during client meetings, architects prepare a story and show their clients what they want them to see with 2D renderings. Clients don't

- 57 - have a choice to look at the design from another perspective, which makes architects' job easier.

But with VR/AR, the details could double or even triple their workload.

Lastly, VR/AR could lower the threshold of the architectural design industry. VR/AR can

transform ambiguous and complicated 2D drawings into a 3D model which is understandable for

most people. While other industries are trying to refine jobs to a more detailed level so that some jobs can be eliminated by automation, architects are people who still need to obtain a large amount

of knowledge such as design, engineering, planning, policies, etc. For example, most development

companies have in-house architects who are dedicated to helping other non-architectural

background people understand the design. With the help of VR/AR, it is possible that these in-

house architects will be replaced by these technologies in the future, which is not an attractive

future for architects.

While most architects are refusing to use VR/AR, some of the developers find them practical

for project management use. For example, large development companies usually have a

headquarter in a metropolis and have many city branches in other cities. One of the top-tier

developers, Company L (pseudonym), decided to work with EVAR and make VR a mandatory

vehicle for their projects. In the beginning, most city branches refused to use this new technology

due to the fact that VR models always expose unexpected mistakes, which leads to a disordered

schedule. After several attempts, most city branches realized how useful VR is, and they

discovered many new uses during the implementation process. Surprisingly, it is the headquarter

who is unenlightened because it only reviews and permit projects. The headquarter doesn't have

the chance to use VR for real projects and experience its strengths, so the executives at the

headquarter need to be educated by more advanced users. It is difficult to make the headquarter

-58 - and city branches have the same level of understanding for VR/AR, which is the barrier to maximize the advantages that VR/AR can bring to projects.

3.4.3 Projects

As one of the biggest developers in China, Company L is one of the most important clients of

EVAR, and they are working together to develop a new project management platform together.

Company L has shopping mall projects all over China, and it has its own positioning system for different project series. "H Mall (pseudonym)" series is one of the first test beds for EVAR's

VR/AR service. For instance, Company L hired EVAR to build a VR immersive model for the "H

Mall" project in Chengdu from the beginning of the design process, and VR is used through the whole project development cycle.

The first advantage that VR brought to the 'H Mall" project is its ability to expose cognitive blind spots. Some columns that will block the retail entrance were detected; a beautiful ceiling design for the children playground area were found abruptly when checking the overall fagade from outside; a clash between a large flower-shaped decoration in the atrium and the curtain wall fagade were noticed. All these problems are almost undiscoverable with 2D drawings and renderings, but with the immersive scene, they become obvious and detectable.

The second advantage is the sense of scale from an immersive environment. The design for the flower-shaped decoration, mentioned above, was much thicker and larger before examining the

VR model. It is very difficult for people to understand how big things are especially when they are not regular size subjects that people are familiar with. Also, even if people do understand the size, the same size doesn't feel the same when experienced in different scales. In this case, Company L

-59 - saved a large amount of time and money from shipping the decoration back to the factory and waiting for the modification.

VR is also changing the way of design study. During the design review meeting, VR creates an interactive review process, with which decision-makers can experience different design options in the virtual environment and choose the most satisfying one. This process used to be tedious becuase design can only be shown in 2D, and people are not confident with their spatial cognition, which leads to hesitation and uncertainty. For instance, the lighting design for the "H Mall" is impossible to be shown by 2D documents. Now, the pattern of the LED screen, the change of color, and the lighting combination all can be built in VR models. With the VR scene, clients can switch between different options, observe from different angles, and pick the best design intuitively.

Due to the fact that the VR model could show an integrated project overview, Company L used

VR model for the project permit meetings with the Chongqing Planning & Development Agency

(CPDA). The conventional way of having a permit meeting is to bring slideshows and talk committee members through the whole project. Sometimes these members will come up with very abstract comments which are difficult to be interpreted properly. With VR, Company L provided a concrete scene, in which CPDA's committee members could have a better understanding of the project and give more valuable advice, making the permitting process more efficient.

In addition to commercial projects, VR/AR are also used for residential projects. There is one luxury residential project in Beijing, China that used EVAR's service for its landscape design stage.

The project has a traditional Chinese style design for its villas, and a classical Chinese garden is planned to match with the villas. A classical Chinese garden is known for creating ambiance and an elaborate scenery. The 2D construction drawing of classical Chinese gardens is always ambiguous. It can only show the approximate areas for trees, vegetation, sculptures, and cascades.

- 60 - Experienced workers are needed because the final presentation of the garden largely depends on workers interpretation of the 2D drawings. It is risky to put all the expectation of a sophisticated garden on construction workers. Therefore, the developer turned to EVAR and asked them to build a VR model for the whole project. The modeling team built the model based on the 2D drawing first, and the outcome was a disappointment., the developer found problems such as too much pavement and stone decoration made the garden look dark and cold as shown in Figure 7; pavilions and verandas were blocked by trees and rockeries which is shown in Figure 8; stones were stacked randomly for cascades, etc. In the end, the landscape designer was sent to EVAR's office by the developer to work with modeling specialists and solve all the problems in the VR model. They went through every location for stacked stones and vegetation. For the pavilions, the designer used the immersive system to check from every perspective, making sure that these landscape nodes can be seen as planned. On the other hand, ancient trees are always the key objects in a classical

Chinese garden as they represent the class and authenticity of the garden. The modeling team went to the tree nursery and took pictures of the ancient trees that were picked by the developer. EVAR duplicated these trees in the VR model, and they were planted carefully according to the studies of their location and orientation by the landscape designer as shown in Figure 9. The project was finished and highly coincided with the VR model due to the fact that the developer bought a high- end PC for the construction team and asked workers to check the VR model when they felt confused or uncomfortable. 2D drawings were barely used during the landscape construction of this project, the VR model replaced them as a more explicit blueprint.

- 61 - Figure 7. Comparison of the Original Design, VR Adjusted Design, and Finished Garden Trail

The Original 2D Drawing VR Scene Built Based on the 2D

New Landscape Design after the Adjustment with VR Finished Project

Notes: Figure 7 shows the design adjustment process of a trail in the Chinese classical garden. The upper two pictures show the 21) drawing for this trail and how the original design from 2D drawings looks in the VR model. The lower left picture shows the new landscape design for the trail after the adjustment by VR and the lower right picture shows the finished scene.

- 62 Figure 8. Comparison of the Original Design, VR Adjusted Design, and Finished Pavilion

The Original 2D Drawing VR Scene Built Based on the 2D Drawing

New Pavilion Scene after the Adjustment with VR Finished Project

Notes: Figure 8 shows the design adjustment process of the pavilion in the Chinese classical garden. The upper two pictures show the 2D drawing for the pavilion and how the original design from 2D drawings looks in the VR model. As we can see the pavilion was covered by trees and rockery. The lower left picture shows the new landscape design for the pavilion scene after the adjustment by VR and the lower right picture shows the finished scene.

- 63 - Figure 9. Comparison of the Ancient Tree VR model and the Real Tree Planted

VR Model for the Ancient Tree Finished Scene Notes: The picture on the left shows the VR tree that was built according to the real ancient tree which was in the nursery. The picture on the right shows the real scene after the ancient tree was planted.

3.4.4 Vision and Goals

During the development process, there are several cruxes that must be faced. Real estate is the only industry that cannot build real size samples for its products. For other industries such as industrial products design and fashion design, the decision-maker can always examine the real size model before production. But for buildings, people can only see the integrated outcome after the construction, which leaves either low a possibility for changing or high cost of rebuilding. 2D drawings with scale, 2D rendering, and axonometric views are usually the only ways that architects can solve this problem. But with VR/AR, EVAR can pre-build a 3D model and inspects all the disciplines before the construction has been started.

Eliminating cognitive bias in the real estate industry is also one of EVAR's goals. One common cognitive bias is the scale. For instance, it's hard for people who don't have any architectural background to imagine the difference between 10 feet and 15 feet. The only way to have a consensus is to compare with their own eyes. The immersive experience that VR/AR provides can be very helpful under these circumstances. For instance, for a luxury townhouse project that is

-64- located in the central area of Shanghai, China, VR was used to determine whether 26 feet is too close for the distance between two rolls as the site is fairly small. The architects debated with the developer for more than half a year to convince them that 26 feet are enough, but the developer thought 26 feet sounds too narrow. So, they went to EVAR for help. After putting on the headset and had a walkthrough in the VR scene, the developer agreed that 26 feet feels wider than they thought and the project finally could be carried forward. It is typical that architects and developers cannot reach a decision during the client meetings, as they can talk about one tiny detail such as the height of fences and the scale of lobby for more than one hour. It can become worse when other consultants are present at the meeting too. Everyone can express their opinions, but no one can give a definite conclusion. So, these debates usually end with no conclusion and are left to another meeting. By using VR/AR, the efficiency can be improved significantly. The most basic but prominent value that EVAR can bring to the real estate industry is to provide a sense of scale.

Another goal of EVAR is to build a platform to coordinate different consultants and disciplines.

The final construction document is a combination of architectural design, MEP design, landscape design, structural design, etc., which are extremely complicated even to experienced architects and contractors. VR/AR have the ability to coordinate all the documents together and create an easier and more efficient way to manage projects. EVAR is closely working with Company L to create a

VR management platform which includes VR models for the monthly review meeting, 3D scene for different mobile devices, remote meeting system, etc. The traditional way of a board review meeting is to let the architects talk through the whole project for the first part. It usually takes forty-five to sixty minutes. Then every board member gives their opinions which will take another

30 minutes. It is usual that the decision makers don't have the same opinion due to the fact that they are the heads of different departments and their priorities do not coincide. So, after many

-65 - rounds of debate, architects are often sent back to their studio and are expected to present more options next time. Now with VR/AR, this developer announced that the VR scene will be sent to meeting participants' smartphone three days before the meeting, so these participants must study the model and go to the meeting prepared. Therefore, architects don't need to go to the review meetings anymore, and there is no more slide show to be presented during the meeting. The board members just need to go through the whole VR model together and bring up questions and problems they have already detected from the VR model before the meeting. Now, the average time for review meetings has declined to half an hour at Company L, which is much more efficient than before. EVAR is changing the work routine for development and the collaboration methods between different disciplines.

The vision for the project management platform also includes modules of result standardization and project review checklist. VR/AR could be the tool to examine the quality of design and construction by comparing their work with companies' standards. The project review checklist allows EVAR to have the basic knowledge for the project and indicate the non-standard part which needs to be discussed during the meeting. The list works as a diagnostic report for projects. EVAR is building a VR/AR project management system with VR/AR technologies. This system has the potential to disrupt the structure of the whole organization as in-house architects and engineers might not be needed in the future, making a part of the developer's job automated.

Building a database for projects is also a part of EVAR's future plan. For large developers, it is valuable to collect data from previous projects as it is highly possible that they will build something similar in the future. As the number of projects that have used VR/AR is increasing, statistics such as the quantity of marble that were used for elevator lobby, the most rebuilt area, and record of user's walking route could be collected and used for future reference. The database

-66 - also can help with the standardization process. It will be customized service for different

developers since their goals and policies all vary from each other. Figure 10. EVAR's Vision for its Future Positioning

Developers

Architecural Design

Design Design Landscape Design

Notes: Figure] 0 displays EVAR's positioning strategy. which is to integrate all disciplines on its platform by using VR/AR and work as a project management platform for developers.

The final goal is to connect all disciplines to this developer holding VR/AR platform as shown

in Figure 10, providing higher productivity and decision-making capability. EVAR is an ambitious

startup that seeks to disrupt the development process of real estate projects.

3.5 Company A (pseudonym) - A Company Released a New Mobile

Application for Property Leasing and Sales

3.5.1 Introduction

BK (pseudonym) is a new real estate leasing and sales application launched by Company A in

2018. Its mother company is leading the real estate brokerage market. BK is basically an online property listing platform to connect tenants, brokers, and stocks on the market. Recently, BK added

- 67 a VR module to its original system. The new VR module only has residential properties for now.

Company A is one of the first and biggest 3D modeling and immersive experience providers in the

Chinese real estate industry. Company A established its own innovation division which focuses on developing VR/AR technologies because the CFO of Company A is not satisfied with any existing products on the market. The innovation division invented a set of hardware and software to support the application of VR, including 3D cameras, analytical algorithm, and an interactive sales and leasing platform.

After two years of R&D, the company has reached a large-scale data collection phase. The collection process has three steps. The first step is to use the 3D camera to shoot the space at least from 30 different viewpoints. Each viewpoint needs two shots which have a 60-degree difference in angles, and one shot takes 40 seconds. For instance, a 100 square meter (1076 square feet) apartment can be fully replicated with 30 viewpoints, so it takes approximately 40 minutes to collect a complete set of information to generate the VR model for this apartment. After the shooting, the second step is to process the data with Company A's exclusive data processing algorithm. Company A has already realized a fully automated model generating process. With the collected data, the system is not only capable of building the VR model but it also can optimize the space detail, adjust the final expression, and label the uses of rooms. Each shooting will generate approximately 1.5 Gigabytes data, and it will be uploaded to the server by technicians.

The VR model will be released online 10 minutes after the submission. Although the file is approximately 1.5 Gigabytes, to walk through the whole VR model only costs less than 15

Megabytes for users. One technician with one 3D camera can finish shooting for 10 properties per day. Company A now has approximately 1,000 technicians, so technically, they can shoot 10,000

- 68 - properties per day. The number of technicians is increasing due to the continuous development of

Company A.

BK's VR service includes three parts: virtual property visiting, virtual commentary of brokers, and interactive virtual tour. Virtual property visiting is a new method for clients to do the first step of screening for potential options. Instead of going to different properties, they can inspect their intentions with VR HMD or mobile devices such as cell phone or iPad. By touching the screen, measurements and functions of the room will be shown. Virtual property visiting can save much time for people that might otherwise go to different locations to eliminate options.

The virtual commentary is a short audio guide that brokers recorded for properties that they represent for. Clients can listen to brokers' records, which can be information about the property itself, neighborhood, and surrounding areas, while they move around in the virtual space. The virtual commentary is similar to a museum audio guide.

An interactive virtual tour is a new tool that breaks through the time and space limit for house visiting. Clients can make an appointment with brokers, and connect remotely online with them.

With the interactive virtual tour, brokers can do basically the same thing as they do for a physical house visiting. They can show clients around the place, answer questions, introduce the basic information, etc. Clients can also invite their families and friends to this virtual tour as they want.

Company A has already invested approximately RMB 200 million into the research for VR/AR and the implementation process in two years. It is leading the industry transformation for the sales and leasing market.

3.5.2 Challenges

-69- Six months after releasing BK, Company A's business has covered more than 90 cities in China.

It has developed at an unprecedented speed. Problems emerged along with this amazing developing speed. Because the mother company of Company A is a brokerage agency that is holding an enormous database for properties on the market, it becomes Company A's competitive advantage because it integrates the data into its market expanding strategy. Many allies of the mother company felt the threats, so they turned against Company A by gathering other brokerage agencies, developers and service providers together to build a new platform to compete with

Company A. The pressure from competitors might slow down the rapid development of Company

As Company A is optimizing its mother company's resource, and the scale of Company A may surpass the mother company soon, stakeholders of the mother company were concerned about whether the mother company is trying to transfer its asset to Company A, leads to a decrease in the mother company's return on investment. The mother company has announced that it will transfer investors' equity to Company A in the future, but the concern won't disappear until the transfer has been done. It is important to calm investors down and obtain their trust.

Another big challenge is to ensure the fairness of Company A's business model. Brokerage agencies, developers that are listed on BK's platform all communicate with their clients through

BK's calling or chatting system. It is possible that Company A can acquire their business confidentialities through BK and use them for its own good. It will give Company A and its mother company a monopolistic advantage in the market. What impact BK will bring to the market is uncertain. Users might worry about their privacy, which will lead to reluctance on using this application.

70- Other challenges also include whether the manufacturing of the 3D camera and other hardware can keep up with the company's rapid development, and how brokers charge their commission fee if multiple brokers work on the same client.

The mother company has transferred its high-level management team, core database, and developing priority to Company A to help it overcome these challenges.

3.5.3 Practical Uses

BK has the capacity to increase the efficiency of the brokerage industry. The conventional way to lease an apartment is to go to a brokerage agency and list it. Most clients need to visit the relevant apartment before signing the lease. There are two ways to do it: the first one is to ask landlords or current tenants to wait and open the door for potential tenants; the second way is to borrow the keys from brokers who represent the landlord. Either way is troublesome and inconvenient. Now with the VR module, potential tenants can visit the listed properties anytime and anywhere, reducing the number of disturbances to the landlords and current tenants. For tenants, VR scene can help them narrow down options and save travel time.

For people who are going to move to a new city or buy a new house in another country, a virtual tour is a useful tool. It is impractical for people to travel to another city or country just to check on a potential buying or rental opportunity. The immersive environment provides the possibility to visit the property remotely.

Virtual tours won't be affected by weather, time, traffic, etc. It allows clients to check the VR scene repeatedly and compare different options directly. Data shows that users' average usage time almost tripled after releasing the VR function. Average numbers of checked property per capita increased by 180%. BK is increasing the absorption rate and reducing the time for leasing and

-71- selling process. The city of Chengdu in China is one of the first cities that started this transformation process. More than 30 thousand properties were transformed into VR models. The

VR coverage ratio for newly released housing is 100%. It is 53% for the second-hand market in

Chengdu.

3.5.4 Vision & Goal

The progress of digitalizing and transforming the real estate industry is going slowly because most companies in this industry are traditional. Company A's goal is to become an internet technology company that can accelerate the evolutionary process of the real estate industry.

One goal for Company A to achieve is to build a technology-driven open platform and attract more brokerage agencies and developers to move in. The platform has already attracted more than

500 rental apartment developers and brokerage agencies. Big brands and names can ensure quality resources. With both resources from the mother company and these third-party resource providers,

Company A can acquire enough market share in a short amount of time. It can even spread its business to other product types such as retail and office in the near future.

Company A's long-term plan is to cover more than 300 cities, serve more than 200 million families, connect 1 million brokers online, and spur the sales for 100 brands. The short-term plan is to cover 30 cities, 700 thousand second-hand and rental housing units, and 3,500 new residential projects with the VR module by the end of 2018.

Company A has the potential to replace its mother company and become the biggest database owner of the real estate industry. Other than helping with the sales and leasing process, it is also developing the quality control and data mining modules.

- 72 - Company A has an insightful understanding of the real estate industry, so they can tackle challenges precisely with the help of VR technology. At the same time, the supportive mother company allows Company A to dig deep and thoroughly for its research, which builds a dependable base for its shockingly rapid development. BK's success might bring a large impact on the implementation of the VR/AR technologies for the real estate industry in the future.

Chapter 4

Strengths and Implementations Brought to the Real Estate

Industry by VR/AR

4.1 Design Phase

4.1.1 Enhancing the Design Method

Although architects are not highly supportive of the application of VR/AR in the design phase, the research from MIT Virtual Experience Design Lab showcases the enormous potential and value of VR/AR in the design process. VR/AR could be used as a new media to interpret ideas. As good architectural design always shows clients a hopeful vision of the future, VR/AR could enhance the storytelling ability of designers, provide multi-sensory experiences, and help designers foresee the final product. This new media provides a more efficient approach to convince clients to choose from the design options. As no complete sample can be built for real estate products, an immersive tour is the closest thing to the experience of a finished product.

-73 - Meanwhile, designers can understand design from a 3D spatial perspective by using VR/AR.

The conventional way of design always starts with a 2D sketch or drawing. VR/AR provide a new thinking structure, which aids designers to think in a 3D way from the beginning.

VR/AR might bring a new routine to the design world. First, the enhanced storytelling ability of design outcomes could change the whole structure of designers' presentation flow. Second, the multi-sensory experiences that are provided by VR/AR might blur the boundary of different design specialties, creating a new cross-disciplinary design routine. Third, the new intriguing spatial- based design method might eliminate the conventional 2D sketch process at the beginning of every design stage. VR/AR are disruptive innovations to traditional design routine as their implementation will change the design methodology in several ways.

4.1.2 Simplifying the Communication with Designers and Non-professionals

VR/AR can build more intuitive communication between designers and non-professionals. For example, they could bring a sense of scale for people who need help with spatial cognition.

Understanding scales is even difficult for people who have had professional training, because cognitive bias cannot be avoided. A measurement is just a number, but the experience of it depends on the surrounding environment and human cognition. For instance, a king size bed looks big in a

100 square foot bedroom, but it'll look much smaller when you put it in a stadium. The sense of scale is a very personal feeling which is difficult to explain. With the help of VR/AR, clients can have a better understanding of these abstract concepts, reducing rounds of reworking for designers.

-74 - Figure 11. The Correlation between Different Design Methods' Integrity and Intuitiveness

More intuitive than Construction Drawings VR Integrity =+

- IProvidemore integrated information than 3D Model Renderings

Renderings

Limitation of traditional method 'Renderings

Intuitiveness

Note: Figure 11 displays a diagram that explains how VR could increase the communication efficiency between designers and non-professionals by breaking the negative correlation between integrity and intuitiveness of traditional design methods.

In Figure 11, the horizontal axis shows the intuitiveness of a design method and the vertical

axis indicates the integrity of a design method. The efficiency of traditional design methods is

limited by the negative correlation between intuitiveness and integrity, which means the increasing

of integrity will reduce the intuitiveness of the design. For instance, the more complicated and

detailed a 2D drawing is, the harder it can be for non-professionals to understand and vice versa.

Due to the technology revolution, VR/AR are able to break the negative correlation, and create a

platform that provides both integrity and intuitiveness, and therefore, bring a more robust design.

4.1.3 Creating Interactive Design Options

The traditional way to present the design work is to show clients several options, and hope they can pick one out of these options. As it is difficult to compare three separate options, clients are always discouraged and confused. VR/AR provide a new method to compare design options, as different options can be encoded into the immersive scene. When clients are walking through the whole project, they can change the design elements such as style, height, and material of an object

- 75 - in a second by hitting the controller. It is a more direct way to compare different options, accelerating the decision-making process.

4.1.4 Simulating Real-world Scenarios

VR/AR could simulate real-world scenarios such as weather, daylight, and seasonal change. They provide a more comprehensive understanding of the design. For example, users can experience the seasonal change of landscape and understand how the garden will look in different seasons. Also, the simulation could be used to check whether the slope of the roof is large enough for heavy winter snow. VR/AR are refining the design work with a new level of details.

4.1.5 Controlling Design Quality

VR/AR push designers to present more detailed and deliberate work to clients because nothing can be hidden in the VR/AR world. Blind spots can be detected easily and light is brought to dark corners. This change puts pressure on designers and pushes them to upgrade the design to a more sophisticated level. However, this upgrade is also the main reason for reluctant designers, as it increases the workload enormously. Although the workload for a single designer is increasing, implementing a higher standard can force design to reach a more advanced level, which has significant meaning for the whole design profession.

4.2 Construction Phase

4.2.1 Reducing Rework

The conventional way to detect clashes is to compare different 2D documents from different disciplines such as architecture, MEP, structure. Inspectors need to use their spatial imagination to

- 76 - integrate these drawings, then tell whether there is a clash or not. The effectiveness of this process is fully depending on the experience and care of inspectors. Now, VR/AR models can be combined with BIM for inspection use. Inspectors just need to walk through the digital project model and turn on different layers of pipes or structures to see whether there is a problem. With this intuitive inspection method, clashes and mistakes can be detected beforehand. The pre-built process also can be conducted in the immersive scene. Basically, the construction process of the whole project can be simulated in the digital world before it's been built in the real world, reducing unexpected problems. Demolishing and rebuilding take a large amount of time and budget during the whole construction process, so VR/AR can reduce rework by offering an immersive model with more information integrated than BIM.

4.2.2 Lowering Mockup Room Costs

Other than the cost saved from reducing rework, decreasing the need for mockup room can also be a big strength that is brought by VR/AR. Mockup rooms sometimes are needed for certain projects such as operating rooms in hospitals or showrooms for residential pre-sale. To build one mockup room and demolish it later is a huge waste of time and resources. Digital mockup rooms provide a solution for developers. Users can move things around and change the design of mockup rooms as they can do to the physical one, but faster. For example, to change the wallpaper or furniture in a physical mockup room takes days or even weeks, but the VR mockup rooms only need seconds to switch options. According to (Dunston et al. 2011), a mockup operating room for a hospital could approximately cost USD 0.15 - 0.5 million on average, while VR mockup rooms only cost one-fifth of the physical mockup. Many developers have chosen to build fewer or no mockup rooms, and save a large amount of time and budget by shifting to the virtual world.

-77 - 4.2.3 Improving Safety

Safety training for workers can be done by VR/AR. Some jobs during the construction phase are dangerous such as operating cranes or installing a curtain wall. In an immersive environment, workers will see a realistic scene that is similar to the one they are going to face. The training program can also simulate different contingencies to prepare workers for unpredicted future hazards.

Traffic, weather, and regional specific data can be integrated into a VR/AR model to simulate the working environment under changes of these factors, ensuring a safe construction process.

4.2.4 Meeting Timelines

With the help of 3D scan technology, a construction site can be transformed into a digital VR/AR model. With the algorithm that compares this model with the original BIM or VR/AR model, it can show information such as what stage is the construction is at, what percentage is finished, and whether a clash exists. It can help the contractor to control the whole building process, and make necessary adjustments. For instance, the arrival time of materials can be changed and the work time of subcontractors can be rescheduled in advance.

4.2.5 Increasing Communication Efficiency between Subcontractors

The remote view sharing function of VR/AR HMD enables contractors to increase work efficiency and solve issues faster. The real-time view of the VR/AR HMD can be synchronized with a consultant or specialist's HMD, reducing the time wasted on misunderstanding and confusion. One example would be if an MEP problem is detected in Boston, but the consultant for the MEP system is working in New York. Instead of calling the consultant, explaining the problem, waiting for the

- 78 - answer, and trying to fix the problem, VR/AR remote view sharing can show the consultant the problem as workers in Boston see it, and these workers can fix it by following the real-time instruction from the consultant. With this system, teams in different cities can work together on one project easily and professionals in different disciplines are able to work more closely than before. This function might be able to optimize the use of human capital and other resources.

4.3 Sales or Leasing Phase

4.3.1 Increasing Efficiency for Property Visiting Process

The interactive remote tour that developed with VR/AR technologies brings the property visiting process to a new era. Potential tenants can visit the property anytime and anywhere with their mobile devices and HMD. They can do a basic screening with a VR model, and pay a visit the most satisfactory one. Landlords and current tenants are saved from repeated house visits. Brokers also save the energy and travel time by recording the audio guide for house visits online or showing clients the property remotely. Every party benefits by using VR/AR.

4.3.2 Increasing Absorption Rate and Reducing Vacancy

VR/AR are increasing the number of properties that potential tenants can visit at a certain time.

With no traveling cost, tenants can compare more properties and make the decision faster. For instance, a potential tenant can visit 3-5 properties at most every day because it is impossible to coordinate the landlords and brokers' time perfectly in one day. With the virtual tour, the tenant can visit more than 10 properties in one day, which accelerates the initial screening process. The market will be more dynamic, shortening the time for the whole leasing and selling phase

4.3.3 Creating a Fair and Transparent Platform

-79 - As all the VR models are 3D scans or shoots from real properties, the authenticity of these listings can be assured. Everyone including tenants, landlords, and brokers on this platform can see the same property pool, and all the selling and leasing prices are listed online, creating a relatively fair and transparent market. Brokerage is a business that largely relies on asymmetric information, so

VR/AR might bring disruption to this industry by providing this listing platform.

4.4 Project Management

4.4.1 Reduce Communication and Coordination Cost

VR/AR are perfect tools to coordinate different disciplines. It can lower the professional threshold and make obscure things clear, helping people understand each other. For example, architects will understand how pipes sprawl and engineers will see the effect that MEP pipes bring to space.

Communication will be easier with a better understanding between professionals. For developers, this mutual understanding makes project management easier, and it is going to save them time and money by improving the efficiency of communication and coordination (Maznevski and Chudoba

2000).

4.4.2 Understand the Project Progress

Other than using the 3D scanned construction site to understand the project progress, VR/AR can be used to monitor design progress. As VR/AR models are built based on drawings from different disciplines, it is obvious when some part is missing or unshaped. Instead of the project manager,

VR/AR providers take the place of project managers to become the connection between developers and other disciplines.

-80 - 4.4.3 Integrate Work from Different Disciplines

VR/AR can build an integrated model with drawings from all the disciplines. It can be more detailed than BIM. The ideal integration platform is similar to an online document edit application, in which everyone that has the access to the file can edit their parts, and the whole document is always up to date. VR/AR have the potential to create a platform that has the ability to generate the VR model from the latest design files. Another benefit from integrating the work is to increase the detection rate of clashes and mistakes, which are difficult to be noticed from separate 2D drawings.

4.4.4 Accelerate Decision-making Process

Other than the "by-products" brought by lowering professional threshold and increasing the understanding level, VR/AR can also accelerate the decision-making process by making project review meetings more efficient. Mobile devices provide easy access to VR/AR models before the meetings, which gives attendees a general idea of the project, saving the time normally spent on introducing the project. VR/AR models will replace slides as the media to show project status. By using the remote meeting function of the VR/AR system, decision-makers can avoid traveling to attend these meetings.

4.4.5 Manage Building System After Construction

AR has the ability to look behind walls and ceilings. Combined with IoT (Internet of things), AR models could be used to manage the whole building system after it has been constructed. For example, IoT empowers these systems to connect and exchange data without human interaction.

After problems are detected, AR could be used to locate problems without checking hundreds of

-81- 2D drawings, breaking finishing, and cutting through walls and ceilings. AR models could be used as a digital twin of buildings.

4.4.6 Support Project Standardization

VR/AR models can be used as company standard inspection tools. Company standard such as material choice, budget limits, and layout can be verified by embedded norms when drawings are uploaded and transformed into 3D on the VR/AR platform. Furthermore, this system can be spread to the whole built environment by implanting the city and national building codes into the system.

It might be a big step towards the automation of the real estate industry.

4.4.7 Collect Data

There is one affordance of VR/AR, which is still being undervalued and unexplored, which is the data collecting ability. Most companies and researchers are focusing on the user experience and the increased efficiency part while they all neglected the data that can be collected from VR/AR users' behavior. The data could include the walking routes of their tour, the focusing point of their sights, and the correlation between location and time spent. These data can be used in many areas such as human-centered decision and business strategy study.

-82 - Chapter 5

Recommendations for VR/AR Adoption in the Real Estate

Sector

VR/AR could bring many advantages to the real estate industry. Why haven't these technologies been widely used? The challenges to the supply side of the VR/AR market were documented in section 2.3, but in this chapter, the focus is on the characteristics that might be able to help VR/AR increase demand and then decrease the barriers that keep them from mass adoption in the real estate industry.

5.1 Opportunities for VR/AR Popularization

VR/AR are digital technologies, which means they can be reprogrammed, and their data can be homogenized as bits of 0 and 1. For digital technologies, to become pervasive, the existence of two very important characteristics, convergence and generativity, must be proven (Yoo et al. 2012).

VR/AR have the potential to become pervasive because they can provide a large number of diverse and variable affordances, resulting in convergent and generative innovations.

5.1.1 User Experience Integration

First, convergence could be proven by the ability to integrate separate user experiences, creating products that can carry multiple affordances, and bringing various disciplines together (Yoo et al.

2012). VR/AR are new media, which are very different from all the other media on the market.

None of the other media could bring a spatial context to users, and none of them provide a a multi-

- 83 - sensory experience. VR/AR have innate abilities to integrate different user experiences and contents. Many companies are trying to build a dynamic and versatile platform to take advantage of these characteristics of VR/AR in the real estate industry as mentioned in Chapter 3. The immersion of vision, hearing and touch plus other modules such as remote communication and real-time rendering create enormous opportunities for convergent innovation.

5.1.2 Multi Innovation Collaboration

Second, VR/AR can be the medium to bond all the emerging innovations. Artificial intelligence

(Al), machine learning (ML), and big data analysis can all be incorporated into the VR/AR platform. For an industry that is very complex such as real estate, what these innovations can generate with VR/AR is more than simply adding their efforts together. The synergy from these convergent innovations might bring new opportunities and new affordances to the whole industry.

5.1.3 Malleable Platform Creation

Third, the use of VR/AR can always be reprogrammed, which means new functions can be added to them sequentially. For example, a VR/AR HMD has minimum applications on it when it is purchased, so available software is limited. Practicable applications and models are installed afterward. Platforms have been built to support this procrastinatedbinding feature by many companies (Zittrain 2006; Yoo et al. 2012). Also, many Software Development Kits (SDK) are shared by VR/AR developers, allowing people to add things freely to the platform. Most of the real estate related VR/AR products mentioned in Chapter 3 are created by different SDKs. This open-source platform encourages third-parties to modify and create new uses, accelerating the generative innovation process.

-84 - 5.1.4 Working Procedure Evolution

Lastly, a series of sequential impact will be brought to different aspects of the real estate industry

by using VR/AR, which is named the wakes of innovation in Boland, Lyytinen, and Yoo's paper

(Boland, Lyytinen, and Yoo 2007). Changes of workflow or working methods take place along

with the implementation of these technologies. For instance, by using VR/AR, procedures of

developers' project review meeting changed. Slideshows are replaced by immersive walk-

throughs, and the meeting times are reduced immensely. Many changes have been made to adapt

these new technologies, creating a new work routine and accelerating the industry evolution. The

generativity is revealed in these diverse wakes.

From a macro perspective, convergence and generativity are the prerequisites for digital technology adoption, and they are the main impetus for industry evolution.

5.2 General Challenges for VR/AR Adoption

Challenges always come along with opportunities. Internal and external barriers are balancing out the opportunities VR/AR could bring to the real estate industry, and holding VR/AR back from being adopted. BIM was in the same situation 10 years ago. In research of the adoption of BIM, the top five problems and obstacles are: constant demand to upgrade software and hardware; high investment costs; increasing need to educate employees; lack of interoperability; and a general attitude that traditional methods work well and change is not needed. (Newton, Hampson, and

Drogemuller 2009) As an information model, which is partly similar to what VR/AR provide to the market, the barriers BIM had encountered is valuable and instructive to VR/AR's adoption process. By studying BIM's case and the cases in Chapter 3, several crucial barriers were found.

-85 - 5.2.1 Unknown Adoption Cost

The cost for VR/AR adoption includes the spending on education process for employees and clients, productivity loss during the learning process, and the expense for hiring new specialists.

The cost of the learning process is expensive. If VR/AR can be adopted by the real estate industry, a long education period will be needed. The cost of educational aspects will surpass the hardware cost due to the productivity losses during the learning process. Not many companies, especially companies that focus on small-scale projects, can afford these costs.

New tools also bring challenges to ownership and rules of the conventional firm. New specialized human capital and reorganized workflow might be needed. For example, an architectural design company might need to hire a programmer for VR/AR adoption. The energy and budget that is spent on these changes are also parts of the adoption cost.

The return from the cost of VR/AR adoption is still unknown because many real projects, that are using VR/AR, are still under development and there is no reliable data to be analyzed. Due to the fact that the return cannot be compared to the costs, it is impossible to determine whether the cost is high. Therefore, the opportunity cost for VR/AR adoption is unknown, bringing investment risks.

5.2.2 Unpredictable Risks

As hardware and software costs are expensive, and the benefits of technologies are only known in retrospect, people are prudent about technology adoption. Real estate projects usually take more than two years to be completed. Since the success of using VR/AR cannot be seen immediately by using the new technologies, users don't know if the choice is right until the project has been finished (Tushman and Anderson 1986). There are few studies to support the early stage adoption,

-86 - leading to the lack of sufficient business drivers. Using the VR/AR for real estate projects bring unpredictable risks. Many potential users are still waiting to see the outcome from pioneers' implementation to ascertain the balance between costs and benefits.

5.2.3 No Industry Specific Software

Unity and Unreal are the two most popular modeling tools for the VR/AR scene. They are not designed for the real estate industry, so they are inadequate for the needs of architects or developers.

Also, they don't have sufficient interoperability with software that is used in the real estate industry, creating an inefficient and unpleasant transformation process. Several companies are tackling this problem by developing their own interoperable tools.

5.2.4 Undefined Regulations

Regulations for VR/AR contents such as copyrights, intellectual property, digital rights, and data safety have not been defined due to the fact that VR/AR technologies are relatively new to the market. Without regulations, unclear responsibilities and rights are barriers to mass adoption. For example, if a third-party builds something on an open VR/AR platform, it is not clear who is going to own the rights of this creation. Also, as virtual things can be combined with real-world objects with AR technology, ownership for the digital use of a real building has not been defined, either.

There is no common practice for VR/AR application in the real estate industry. To create a healthy market for VR/AR application, a legal boundary is needed for stable growth.

5.2.5 Conservative Executives

Executives are mostly middle-aged or even older people. Unlike the case of millennials, who are familiar with the rapid development of new technologies, it is hard for middle-aged people and

-87 - elders to accept new technologies in a short amount of time. Some of them think the traditional way of delivering projects works fine, while others don't trust innovations. Also, there are middle- aged people and elders who don't understand how new technologies work. For example, most

HMD are built for video games, so many conservatives misunderstand VR/AR as a toy for young people and refuse to use it for business purposes. Another example is the digital mockup operating rooms. Younger doctors and nurses always have a better understanding of how VR/AR mockup rooms work compared to elder users, resulting in the dissatisfaction from senior doctors and nurses who are not familiar with technologies. This situation will be improved when VR/AR become more pervasive and more millennials and the next generation are taking over the executive positions.

5.3 Organizational Challenges for VR/AR Implementation

5.3.1 Architectural Innovation Adoption

Innovation can be classified into different kinds. Each of them has a different impact on established companies (Sahal 1985). (Henderson and Clark 1990) illustrated this theme in the form of a table which is shown in Figure 12. Figure 12 depicts a framework for four different innovation types.

From the figure, we can see that the column shows the impact of innovations on core concepts, and the role indicates the linkages changes between core concepts and components. Four innovation types are incremental, modular, architectural, and radical. This framework shows how the effectiveness of existing architectural and component knowledge will be impacted by an innovation. Incremental innovation means that the components are improved, while links between the components are kept the same. This kind of innovation is common after a dominant design

-88 - emerged 6 (Abernathy and Utterback 1978) because companies tend to focus on collecting returns

from the dominant design rather than investing more in a mature product. On the opposite side,

radical innovation changes both the core concepts and the linkages. By overturning the linkages,

new business architecture is created inside organizations. Radical innovations usually bring a new

dominant design to the market. This change is less common, but it can still attract enough attention

in an organization. Other than these two types, there are two innovation types that have drastic

changes in either core concepts or linkages. Modular innovation only has overturning changes in

the core concepts that comprise the dominant design, and architectural innovation represents the

disruptive changes in linkages between the core concepts and components. Architectural

innovation establishes a new structure to link existing components together. If we use a cell phone

as an example, changing the size of the screens for new products is incremental innovation which

only reinforces its components. Adding a QWERTY keyboard on a cell phone is a modular

innovation which overturned parts of the core concepts of the cell phone. Replacing the lightning connector 7 with a type-c connector8 for charging could be seen as an architectural innovation as

the core concept behind the change remains the same, but the linkages between components are

changed, destroying the usefulness of all the chargers with a lightning cable. Installing an operating

system into a cell phone and making it a smartphone is a radical innovation as it changes both the

core concepts and the linkages between components of a cell phone. Among these four types of

innovations, architectural innovation is often the one that has been questioned the most. It also encounters the most obstacles during the adoption process due to its inconspicuous profitability and disruptive characteristics. Reinforced and modular innovation, which do not affect the core

6 Dominant design refers to a design that reaches an equilibrium of economy and usefulness, and it is accepted by the mass-market.

' Lightning connector is used by most Apple products to connect with peripherals. Type-C connector is a 24-pin USB connector system.

-89 - concepts, often leads to architectural innovation later as the new components always bring new interaction and synergy to organizations.

To apply this framework to VR/AR, one thing that needs to be mentioned at first is that the lines between the four quadrants in Figure 12 are blurry, which means innovations can be mostly architectural, and at the same time a little radical. VR/AR could be applied to many fields in the real estate industry, but two of the most outstanding affordances for this industry, for now, are the ability to integrate the work from different parties and remote communication, which are definitely changing the workflow of the companies that are using these technologies. For example, the work routine of a developer and its consultants is changed by the integrated platform created by EVAR 9.

VR/AR can be seen as architectural innovation in this case due to the fact that the linkages that brought all the disciplines together as components of a real estate project were disrupted and reconstructed by using VR/AR while the products and their production methods have been kept the same. Also, the linkages between tenants, landlords, and brokers, which are components of the

Figure 12. The Framework for Four Different Innovation Types

Core Concepts Reinforced Overturned

on Incremental Modular S Unchanged Innovation Innovation C &,

fe r Architectural Radical ii Changed C Innovation Innovation =

Notes: Reprinted from Architectural Innovation: The Reconfiguration of Existing, by Rebecca M. Henderson and Kim B. Clark, May 1990, retrieved from https://www.jstor.org/stable/2393549?seq=l#page_scantabcontents Copyright 1990 by Cornell University.

I See section 3.4 for EVAR's case.

-90- sales and leasing market, are destroyed and reconfigured by BK's" intervention, which is another practical case of architectural innovation in the real estate industry.

Other traits such as the ability to show the sense of scale and real-world scenario are only used as reinforcement for original core concepts for now. Since the real estate industry is relatively mature and developed, the capabilities that are brought by these traits are less attractive and competitive to this well-established industry. In other words, the dominant design is working well without these innovations, and whether these benefits are lucrative enough to balance the costs are unknown. However, these incremental innovations might become the trigger for the architectural innovation one day.

VR/AR also can be seen as modular innovations for the real estate industry. For example, the use of VR/AR mockup rooms for hospitals and hotels are modular innovation. Digital mockup rooms overturn the core concepts of physical mockup rooms and keep its linkages with the whole project unchanged. This application is one of the most pervasive uses of VR/AR in the built environment because the value of using VR/AR in this field can be proven immediately by saving the mockup cost. The cost, measured by time and money, is considerable.

Architectural innovations are facing very difficult adoption processes in organizations. First, architectural innovation cannot guarantee the benefits that incremental and radical innovations do, which brings unpredictable risks. Second, the emergence of a dominant design is one of the biggest challenges for architectural innovation(Abernathy and Utterback 1978). After finding the competitive dominant design, companies tend to switch their focus from experimenting different possibilities to improving the existing components, making the needs for architectural innovation

1 See section 3.5 for BK's case.

91 difficult to be spotted by organizations (Abernathy and Clark 1985). Third, architectural knowledge is embedded in workflow, so it is settled and hard to be changed. It might be costly for companies to adopt new architectural knowledge. Architectural innovation rarely happened naturally by itself, so it needs an external force to initiate the process (Henderson and Clark 1990).

On the other hand, adoption of incremental, modular and radical innovation is always stimulated by a lucrative outcome (Hollander 1965; Rosenbloom and Abernathy 1982). Incremental innovation is also driven by maintaining the competitive advantage of the company, while modular and radical innovation is sometimes inevitably driven by the evolution that affects the whole industry. Because the core concept, which is integrating the design outcome from all disciplines, has not been changed much in the real estate industry, VR/AR are hardly radical and modular innovations.

5.3.2 Dilemmatic Competence Impact

The impact of technologies can be categorized into two kinds: competence-destroying and competence-enhancing (Abernathy and Clark 1985; Tushman and Anderson 1986). VR/AR could be both competence-destroying and competence-enhancing innovations for the real estate industry.

For instance, the creation of a project management tool by VR/AR is a competence-destroying innovation due to the fact that using this new tool requires new skills, abilities, and knowledge.

Competence-destroying innovation disrupts industry structure in the same way the architectural innovation does (Tushman and Anderson 1986). On the other hand, replacing 2D renderings with an immersive 3D walk-through and implementing remote brokerage negotiation are a competence- enhancing innovation, as it only improves the performance of existing products. Competence- enhancing innovation usually consolidates the competitive advantage of the company.

-92- Competence-destroying and competence-enhancing innovations lower and increase barriers to enter the market respectively. For the real estate industry, architects, engineers, contractors, and brokers are people who have specialties and don't want the barrier to be lowered. Elusive professional documents create superiority, and they become these professionals' leverage for more profits. Therefore, the pervasiveness of VR/AR is not welcomed by these professionals when these technologies are being applied as a competence-destroying innovation, so their adoption will encounter more resistance in these sectors. On the other hand, developers want this barrier to be lowered to have better control of their projects. Therefore, competence-destroying innovation such as the integrating platform, which is mentioned in the EVAR case, is needed by developers. That is to say, they have a higher willingness to accelerate the adoption process.

In addition, when applied as competence-enhancing innovation such as high-end renderings,

VR/AR will increase the barrier for entering the architectural industry. However, it will not bring more profits to architects, so architects don't feel the responsibility to promote it. Furthermore, high-end renderings might bring some benefits to developers, but these benefits are not a competitive strength that could spur the adoption process from the developers' side.

Although VR/AR could bring many advantages to the real estate industry, from the analysis of the innovation impact caused by VR/AR, not every implementation attempt has the potential to become pervasive. Thus, these are parts of the reasons why VR/AR implementation is going relatively slowly from the organizational point of view.

5.4 Future Prospects of VR/AR

To sum up, Figure 13 shows a vicious circle of the VR/AR implementation in the real estate industry. It starts with the software and hardware suppliers. If the software and hardware are not

-93- adequate for adoption, then fewer companies will use it, because most companies are not willing to use an immature product, which might create unexpected risk, on real projects. If companies don't use VR/AR on real projects, the benefits of using them cannot be proved. Due to the insufficient proof of the merits, other prudent companies won't follow the application route, which will slow down the pervasiveness process. Thus, hardware and software vendors have fewer incentives to invest more time and budgets into upgrading the tools, which brings us back to the beginning of this loop. To implement VR/AR, market forces are the most obvious but inefficient solution, which means passive waiting and slow adoption. To have a more efficient implementation process, it is important to tackle the problems and break this vicious circle. Some general drivers might be the breakthrough point for this circle.

Figure 13. The Vicious Circle of the VR/AR Implementation in the Real Estate Industry

Software and hardware are not adequate for adoption

Absence of Impetus Few Usage Hardware and software Most companies are not vendors has no reason to willing to use immature invest more and upgrade products on real projects the tools if VR/AR are not widely used in the industry.

Unreachable Pervasiveness Lacking the Proof of Benefit If the merits cannot be proved, other The benefit of using VR/AR can not companies won't follow and use VR/AR be proved if companies don't use them on real projects Notes: Figure 13 displays the vicious circle of the VR/AR implementation in the real estate industry. The circle includes five cruxes which form the general challenges for a slow adoption of VR/AR in the real estate industry.

-94- 5.4.1 Demand from Developers

The needs of developers are one of the biggest drivers that can be utilized. There are several reasons to regard developers as one driver. First, from both organizational and general usage perspectives, developers are always the beneficiaries from the VR/AR. VR/AR lower the barrier for project cognition and management, saving developers a great amount of time and money.

Second, due to the fact that developers are relatively in the upstream of the real estate industry, they have the capability to support and instruct the downstream firms such as design, construction, and consultancy companies to incorporate VR/AR into their workflow. When the benefits of using

VR/AR are ambiguous to some downstream firms, developers' requirements might force them to accelerate the adoption process. Third, it's more possible for developers to have capabilities such as capital support or suitable projects to deploy these new technologies. Lastly, they have enough autonomy and flexibility to adjust projects during the VR/AR implementation process, reducing unpredictable risks.

5.4.2 National Supportive Programs & Government Regulation Requirements

Government support means one technology has been considered worthwhile to invest in by a state or country. It is a big signal to show the public which technology has the potential to be widely spread in the future. For example, the 2018 World Conference on VR Industry was held in the city of Nanchang, which was sponsored by the Ministry of Industry and Information Technology and the People's Government of Jiangxi Province in China. The government of Nanchang city has invested RMB 1 billion as the Fund of Funds (FoF) into institutional investors that are investing in VR/AR industry. Meanwhile, several VR/AR innovation industrial base projects have been launched in top and second-tier cities such as Nanjing, Tianjin, Wuhan, Qingdao, and Nanchang.

- 95 - Nanchang VR/AR industrial base was one of the first government-supported VR/AR industrial base projects that was launched in 2016. Several academic institutes such as the Research Center for VR/AR of Nanchang City, Academic Exchange Center for VR/AR of Nanchang City, the Key

Laboratory for VR/AR of Nanchang City, and the VR/AR Education Group were established in this industrial base. Also, a VR/AR theme park is under construction and several angel investors were brought to this industrial base. The goal of Nanchang VR/AR industrial base, in a three years period, is to build the whole industrial chain for VR/AR, at the same time, to finish training for more than 10,000 VR/AR specialists. The base is also using the RMB 1 billion government funding to attract more investors, and the goal is to secure RMB 10 billion investment funding to support the development of VR/AR industry. The VR/AR industrial base is expected to gather more than

1,000 VR/AR companies and created more than RMB 100 billion value of output in 5 years.

National VR/AR programs create a positive environment to incentivize new innovations and opportunities.

Government regulation can force a rapid adoption of innovations. For instance, BIM wasn't pervasive in China for many years, but using BIM for construction is now regulated in some of the

RFP (Request for Proposal) for government land bidding process, which drastically spurs the development of the BIM industry. Many companies have established new departments or hired new specialists to adjust to this variation.

As mentioned by EVAR's founder, the Planning & Development Agency of Chongqing,

Chengdu, and Wuhan have tried VR/AR during the project permit meetings, and they all showed great interests in popularizing these technologies. If the Planning & Development Agency of different cities realize the usefulness of these technologies and initiate this generalization process, it will be a huge step towards VR/AR's adoption in the real estate industry.

-96- 5.4.3 New Business Opportunity

New ideas and usages that are discovered during the development of VR/AR lead to new business opportunities. Startups and new divisions based in traditional companies are creating a dynamic environment for VR/AR adoption. The more people that see opportunities in this industry, the faster they'll come up with a dominant application. New business opportunities, especially lucrative ones can be another driver for VR/AR implementation.

5.4.4 University Education

The expensive learning process is always a huge barrier for VR/AR adoption. One way to tackle it is to incorporate the knowledge of VR/AR into professional university education. For instance, most architectural schools teach AutoCAD as a part of the curriculum, which must have a positive impact on the adoption of AutoCAD. Education for the use of VR/AR should be embedded into the curriculum of the professional university education too. The education should not only focus on the hardware training but also imparting a new way of thinking by implementing VR/AR. As more people are prepared with the knowledge of VR/AR on the human capital market, companies will be less scrupulous about the disruptive change, and embrace the merits of these technologies.

Education also creates a robust base for future executives to understand these technologies

(Rosenbloom and Abernathy 1982).

5.4.5 Benign Collaboration

A cooperative and understanding environment can drive VR/AR implementation forward too. As

VR/AR can be a tool to integrate different disciplines or participants of the real estate industry, a consistent goal that is accepted by everyone is an important precondition. For example, the promotion of VR/AR in the project management process needs the assistance from every

-97- stakeholder and players such as executives, architects, and contractors. The utilization of VR/AR can be optimized within a comprehensive and benign environment, revealing its full potential to the market.

Chapter 6

Conclusion

As technologies that have been under development for 180 years, VR/AR have gone through a long development and implementation period. Despite the various affordances VR/AR have, their usability and necessity are constantly being questioned. In this thesis, we learned that there are two primary barriers that are holding VR/AR technologies from being adopted by the mass-market.

The first one is a technology barrier, which is caused by problems such as insufficient "killer content," an immature platform, and uncomfortable hardware. The second is a market barrier which is due to the noncompetitive hardware price, uninterested consumers, and uncommitted investors. To conquer these two barriers, different implementation strategies need to be applied.

For the technology barrier, VR/AR companies should shift their focus from the relatively small video game industry to a broader lifestyle direction. A pervasive and life quality enhancing application that is necessary for users' daily life can solve the insufficient "killer content" problem.

Meanwhile, one dominant platform needs to be formed by either combining existing platforms or build a compatible one that can be used on HMD from various companies. Some VR/AR companies should be merged or acquired by one large organization so that their research and

-98- innovations that were formed from different perspectives could be shared, creating a synergetic environment and produce better products.

For market barrier, it seems that two of the most important characteristics of R/AR, which are the multi-sensory spatial immersive ability and the remote communication ability, all have their substitutions which provide similar but lower level experiences. For example, a 3D IMAX movie could also provide a multi-sensory immersive experience as VR/AR could, but with a lower level of immersiveness. Also, a video call could be used to communicate with people remotely, but it doesn't have the ability to synchronize callers' perception or put these callers into one shared environment. As these substitutions are much accessible and cheaper than VR/AR, and most people have not seen the value in the differences that VR/AR could provide, VR/AR adoption is taking more time than other general-purpose technologies". To accelerate this adoption process,

VR/AR equipment should become more pervasive. The government should buy VR/AR headsets and give them to the public for free as a supportive program, or VR/AR hardware providers should donate their products to schools, making people, especially young generations, acquainted with these new technologies and consider them as an inseparable part of their lifes from an early stage.

People are less sensitive to the price of a familiar product, which has been proven useful. For example, the first generation the iPhone, which was USD 499, was considered very expensive when it was released in 2007. The latest iPhone series costs approximately USD 1000 on average, which has doubled the original price. However, consumers are less resistant to the price surge because they are familiar with this product and know the experience it could bring to users. By giving away "free samples", companies will sacrifice a certain amount of revenues to set the base

" According to Dr. Andrea Chegut's lecture "Exploring the Frontier of Real Estate" in March 2018, innovation life cycle of a new technology is approximately 25 years.

-99 - for a larger market, and problems such as uninterested consumers and uncompetitive hardware price could be mitigated. Investors are always seeking new opportunities, they are keen but impatient. Newly emerged technologies such as artificial intelligence and blockchain allure investors' attention away from VR/AR, reducing the funding amount for these technologies.

Therefore, VR/AR should quest for collaboration with these new focuses or become a platform to integrate these new technologies. This might revitalize investors interest in the VR/AR industry.

For implementation in the real estate industry, it is crucial to break the vicious circle of adoption failure. There are two kinds of challenges for VR/AR adoption in the real estate sector, which are the general challenges and organizational challenges. General challenges include unknown adoption cost, unpredictable risks, no industry-specific software, undefined regulations, and conservative executives. In the meantime, organizational challenges are caused by VR/AR's impact on organization structures and their disruptive nature, which means the implementation of

VR/AR usually leads to an inevitable change of organization structure. To face these challenges, some general drivers for VR/AR implementation in the real estate industry can be used. First, the strong demand caused by enormous potential benefits and VR/AR's capability to handle contingencies encourages developers to deploy VR/AR even though the hardware and software are still inadequate. Large real estate developers should start to establish teams to tackle the industry-specific hardware and software problems to prepare themselves for a digitizing and autonomous future. Second, national supportive programs will mitigate the risk and large uncertainty of implementing VR/AR. Real estate related companies should actively respond to these programs and try to gain support from the government. Although requirements from planning authorities can force prudent developers to use VR/AR with no exceptions, authorities' regulations always come later, which won't be a timely momentum for VR/AR implementation. Third, new

-100 - business opportunities will activate new rounds of investment, revitalize the market and produce more advanced tools. Market leading real estate companies should invest in real estate related

VR/AR startups to gain the upper hand, at the same time, accelerating the adoption process.

However, according to the market trend showed in Chapter 2, the funding that is put into the

VR/AR industry in 2018 has decreased for the first time since 2013, making it a harder decision for real estate companies to invest in VR/AR startups at the current stage. Fourth, university education enlightens students with useful skills for their future career. New human capital, who have VR/AR embedded in their knowledge structure, will start to work for companies, creating a dynamic work method which uses VR/AR knowledge to solve both new and old problems. VR/AR education in universities and professional training centers should be strongly developed and promoted. The ability to use VR/AR should become as hard a skill as using AutoCAD for future jobs in the real estate industry. Similar to national programs and government regulations, educational plans are always lagged behind the market trend, and these three drivers all need time to come into effect. Also, these external macro-level factors are often dominated by internal intention such as opinions from executives and its economic performance (Rosenbloom and

Abernathy 1982). Therefore, the current main driver for VR/AR implementation in the real estate industry should be the demand from developers, which is more direct and prompt. VR/AR adoption will affect the complicated supply chain in the real estate industry by changing the workflow of several players. These kinds of changes will take a long time unless a major player such as a dominating developer accepts the new routine and changes the market balance.

Although there are many barriers and challenges from both the VR/AR supply side and the real estate industry side, some of these challenges can be naturally conquered by the improvement of

VR/AR technologies and some problems can be automatically solved with the increasing data of

- 101- completed projects. This natural solving process might take several decades. Actions need to be taken to avoid a lengthy and passive adoption process as BIM once had ((Newton, Hampson, and

Drogemuller 2009).

The change of the real estate industry started from digitalizing the design process and automating the manual work in the 1990s. AutoCAD, which transforms the work on paper into digital files, is the first step towards the digitalization. BIM follows as the second revolutionary change which is a step towards the industry informationization. Now, VR/AR have the potential to become the third step that brings the real estate industry into a new automation generation.

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-106 - Appendix A-1

Interviewees List

MIT Virtual Experience Design Lab Cagri Hakan Zaman Research Lead Gensler Kyle Martin Digital Design Manager Suffolk Construction Patrick Medina Collaboration Services Engineer Evolutional Virtual Artist Interactive Entertainment Technology Co. Congyu Xue Founder and General Manager Company T (pseudonym) Bryan Mah Former VD Specialist DAQRI Jason Krute Senior Marketing Manager

Appendix A-2

1 What is the company's main business /What is the lab's current goal? 2 How are VR/AR used in this company/lab? 3 Is there any practical example that can be shared? 4 Who initiated/ What triggered the idea to use or do the research on VR/AR? 5 What are the competitive advantages that the company/could obtain by using VR/AR? 6 During the process of VR/AR implementation and diffusion, what is the biggest obstacle and concern? 7 What are the company/lab's VR/AR implementation strategies for future? 8 What is the company /lab's vision for future VR/AR markets and deployment?

- 107 -