Commercial real estate professionals can change the way they do business — or be left behind.
Commercial real estate finally is catching up with other finance industries. Players across the board, from brokers to asset managers and investment professionals and every role in between, are realizing the transformative power of technology. This development is dramatically altering commercial real estate's competitive landscape in a way that's reminiscent of the advice once offered by baseball legend Satchel Paige: “Don't look back. Something might be gaining on you.”
To predict the CRE professionals who will emerge as winners in this new age, it's useful to look at the way technology transformations have played out across other asset classes.
Unleashing the Power
Look no further than the stock market to understand both the inevitability of technology transformation and the value it unlocks. The New York Stock Exchange is a prime example. Thirty years ago, the floor of the NYSE was littered with thousands of people, running around yelling and throwing paper in an attempt to execute trades. These processes were highly inefficient and manual, and information was opaque to most buyers and sellers - ultimately costing everyone money and time.
Today? Technology has transformed the process by which people trade, unlocking mountains of value and unleashing enormous amounts of productivity. Leveraging real-time information, algorithmic trading, and data science, traders can execute deals in nanoseconds. Entirely new products, like mutual funds, have been developed, creating new markets of opportunity and prosperity. Access to technology and real-time information hasn't been nice-to-have for this asset class for decades - it's critical.
The days of data science, artificial intelligence, and algorithms aren't as far away for the commercial real estate industry as some may think. Thanks to the rapid emergence of innovative technologies, CRE professionals finally have access to a broad range of solutions built not just to enable them to weaponize their data, but to fundamentally transform their processes.
It's early days, but we're moving fast. As a simple first step, we're saying goodbye to the multiple spreadsheets used in the past to manage asset and portfolio information, and no longer forced to log into numerous, disconnected systems to get a comprehensive understanding of our leasing pipeline or asset performance. Now, the industry has the information needed to make faster decisions about the opportunities that make the most economic sense, and the processes in place to execute faster.
Information Can Mean Success
It doesn't matter if you're a large institutional firm or a smaller, regional player. The companies best positioned for success are those with modern technology platforms and the skills to leverage the insights they deliver. Information that is well-organized, accurate, and up to date can be used to derive insights such as sources of tenant demand, market trends, and internal team performance. This intelligence becomes an incredibly powerful asset that will enable a competitive advantage that's extremely difficult to beat.
What's more, imagine a world where a technology platform automatically compares your internal data to external market benchmarks and makes recommendations to improve your performance. Are you charging over-market net effective rents? Are you giving away too much in tenant improvements? How many days downtime are standard? This insight eventually will be available via data science and artificial intelligence, and it's not as far away as you think. Those firms in a position to leverage it will have a powerful source of differentiation. However, if you don't have your internal data in order, you won't be able to take advantage.
A Practical Example
A simple example showcases the power of data for one of the most common processes in commercial real estate: signing a lease. At each stage of a deal - attracting prospects, converting leases, retaining tenants, and eventually renewing them - there are hundreds of tasks, communications, and decisions made that can significantly improve your chances of conversion, if tracked and improved with a leasing and asset management technology.
Let's say that when tracking inquiries, tours, and proposals for a specific property over time, you see that while there is no shortage of inquiries and tours, proposals are non-existent. Digging in, you start to see that while your marketing strategies are effective in attracting leads, something about the property itself is turning off prospects. Armed with this information, you can start to make improvements that increase the property's appeal to tenants and strengthen your chances of converting tours to proposals.
The end result? Decreased downtime, increased revenue, and portfolio results that outperform targets. And that's just at one property. Imagine the power of this insight when applied portfolio-wide.
Time Will Tell the Winners
The future is now, and it's moving fast. But, as Satchel Paige suggests, nothing is moving faster than the tech-savvy competitor that's gaining on you.
Foregoing technology is no longer a viable option. In the next two to five years, the winners in our space will be those that have embraced data and incorporated technology strategically throughout their organizations.
Don't sit still. Technology is changing and improving so quickly that those who embrace it now are enjoying a considerable advantage over those who don't. Those who resist or delay are certain to be left behind.