CRE’s Gap In Emerging Technologies

Owner-operators and owner-investors are challenged with finding a balance between operational benefits delivered by existing technology and the potential disruptive impact to business models by what’s coming next,” says Altus CEO Robert Courteau.
“Organizations that will lead the way as the next wave of technology arrives are those that seek to change the rules of the game,” says Courteau.
There’s a gap between the impact of emerging disruptive technologies on commercial real estate and CRE executives’ recognition of that impact. That’s among the findings of the Altus Group’s latest CRE Innovation Report showing division among industry leaders at owner-operator and owner-investor firms about the potential of new technologies to drive change.
“CRE firms are facing the challenge of finding a balance between operational benefits delivered by existing technology and the potential disruptive impact to business models by what’s coming next,” says Altus CEO Robert Courteau. “Organizations that will lead the way as the next wave of technology arrives are those that seek to change the rules of the game by disrupting traditional business processes and models, adding greater value and gaining competitive advantage.”
Conducted among 400 CRE executives with a total of more than $2 trillion of assets under management globally, Altus’ study found that respondents who recognized the disruptive potential of six emerging technologies were in the minority. These included smart building technology (35% of respondents), artificial or machine intelligence (28%), big data and predictive analytics (24%), augmented and virtual reality (18%), blockchain technology (14%) and driverless vehicles (9%).
On the other hand, a sizable majority of respondents said their firms have benefitted from technology investments made over the past two years. Eighty-six percent of respondents with AUM greater than $500 million cited cost and operational efficiencies that have resulted from these investments, for example, with firms of of between $250 million and $500 million in AUM not far behind on a percentage basis.
And more than half the respondents saw strong potential in process automation for tasks including debt underwriting and property management. “Debt underwriting, especially for stabilized real estate assets, will eventually be performed almost exclusively by artificially intelligent bots, and not human labor,” the report quotes MetaProp NYC cofounder Zach Aarons as saying. “However, in the meantime, technology will enable human commercial loan officers to underwrite better and faster, creating more value for their companies and themselves.”
The Altus survey also found that just 14% of executives compared their operational expenses against competitors, the market or industry, indicating what Altus calls “a significant performance management shortfall.” However, 69% said they believe there is significant potential to conduct better benchmarking around operational expenses. These result suggest that a deeper analysis of property expenses is an overlooked area in terms of applying analytics and monitoring, and has the potential to unlock greater portfolio value.
Fifty-eight percent of survey respondents said their firms are using significantly more CRE-specific applications now than they were three years ago. Yet 59% also said they don’t have significant integration between major management systems and applications, a mismatch that can hinder their ability to make faster and more transparent decisions. Aggravating this gap is a shortage of technology staff, cited by 50% of respondents.
Among Altus’ recommendations to senior executives at CRE firms: anticipate what’s ahead, and understand what’s already here. “As PropTech helps to transform the CRE industry, it is important for executives to not just keep an eye on how emerging technologies may affect their own firms, but how they may change their interactions with the processes of other segments—such as lending,” according to Altus’ report. “Driverless vehicles, for example, may seem more distant in the future, but this ‘game-changer’ has the potential to fundamentally alter the way people think about the space that we occupy and the locations of our places of work and home.”
The survey of executives in both front- and back-office positions was conducted in September by IDC on behalf of Altus. The full report can be downloaded here.
By: Paul Bubny (GlobeSt)
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