5 Commercial Real Estate Tech Trends You Can't Afford to Ignore (But Most Investors Do)
Digital transformation is changing the world. The CRE market is no different.
In a world gripped by an oncoming tech revolution, it’s no surprise that property investors also have commercial real estate digital transformation to contend with.
Smart buildings and the Internet of Things (IoT) are all terms we might have associated with sci-fi just a few years ago, but now they’re all examples of the digitization that is shaping the commercial real estate (CRE) industry.
Today, the real estate sector is starting to sit up and take notice.
In their CRE Outlook Report for 2023, Deloitte found that digital investments (including data centers and cell towers) are the second-most attractive risk-adjusted investment opportunities right now.
The findings led Alan Ni, Deloitte CRE Audit and Assurance Leader, to claim that CRE investors need to explore these enhanced data capabilities now rather than later.
“Actions like these might seem like bold moves now, but they could give some firms an edge when so many others are consolidating or cutting back”, said Ni.
Yet, the world of new digital technologies is a very big one. Where do property investors even start when it comes to deciding where to focus their attention?
The answer lies in having a deep understanding of how commercial real estate digital transformation is affecting the market right now and the trends property entrepreneurs should be aware of. This article aims to provide that.
What is commercial real estate digital transformation?
Commercial real estate digital transformation may sound like a complex term, but all it involves is using new smart technologies to make the property industry more efficient.
Smart devices, data analysis, and automation will all make buying, selling, and managing commercial property much easier, and help investors with their decision-making.
If used well, then everyone within the CRE industry, from owners to tenants, should feel the benefits.
Is real estate going digital?
Evidence suggests that real estate isn’t just going digital, but that it’s already there.
2023 research by JP Morgan cites property technology as the single biggest solution available to CRE leaders when it comes to tackling economic issues like inflation, rising interest rates, and a possible recession.
A wide umbrella, Proptech covers a broad spectrum of new technologies, from machine learning to blockchain technology.
A commercial real estate digital transformation is underway, but what does this use of digital technology look like? Analyzing current trends will help us find out.
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How technology is changing commercial real estate: 5 trends you should know about
Anyone involved in commercial real estate will be aware that digital advancements are about to reshape the industry, but many won’t be sure exactly how.
Here are five digital trends that go into more detail about how this is happening and what we can expect to see over the coming months.
1. VR and AR-powered property viewings
Imagine a world without a need for in-person viewings. Well, soon we won’t need to use our imagination.
Investors can now take 360-degree virtual tours of office spaces and other CRE properties without their desks, saving valuable time and resources. There’s also no limit on the viewing time, so they’re able to carry out a much more detailed inspection of the property without eating up a busy CRE agent’s schedule.
Andrew Cigna, Founding and Managing Partner of CRM investment firm The Above All Group, is one entrepreneur who sings its praises via a recent Forbes article.
“We have been keeping busy offering clients simulated open houses through high-quality 360-degree cameras so that they can go room to room through a VR headset. VR right now is our technology of choice — it’s super easy to use, and people are fascinated by it.”
Augmented Reality (AR), meanwhile, now has the capacity to add digital building information onto a real-world setting. Known as 3D property modeling, AR can build an accurate image of the property’s interior (without fixtures and fittings) from its measurements. All investors need to do is scan the building with their smartphone to draw up a model.
Interactive user experiences like the above explain why a third of investors cite property visualization as their top target capability, according to Deloitte.
In a competitive CRE market, VR and AR are giving investors the time and resources to view more properties than ever, without having to leave their desktops or even close their mobile app.
2. Smart technology (powered by the IoT) is transforming property management
In the era of smart devices, it’s no wonder that smart buildings are emerging as a vital tech feature in the CRE industry.
Safer and more energy-efficient, smart buildings are equipped with connected devices and sensors (via an IoT system) that optimize energy use and security through data analysis.
Examples of this include automatically adjusted lighting and temperature settings based on the time of day and number of people in the building. This helps to meet tough ESG sustainability targets, which seem to become more demanding and complex each year.
Building occupants can also access built-in smart devices to manage these settings.
Smart buildings help property owners make data-driven decisions about efficient space usage and interior layout, which increases the comfort and productivity of its occupants as well as cut costs.
IoT devices also allow us to monitor security footage remotely, lock and unlock doors in case of a security breach, and operate video-entrance welcome systems for guests.
CRE entrepreneurs looking to increase the value of their real estate will find fewer more attractive investments than smart technology as we move into the digital age.
3. Data analytics and predictive modeling is reshaping how we invest
Knowledge is power in CRE investing and studying the market to foresee future trends is vital.
New digital data analytics are the first part of this process. These are tools that can scan and assess huge reams of property-related data, also known as “big data”, related to the CRE market, including location, occupancy, pricing, property and land valuations, and leasing information.
Often, they can produce detailed infographics, such as purchasing power heatmaps, that give investors an instant idea of investment hotspots (or “notspots”).
An example of a purchasing power heatmap used by UK grocery store chain Marks and Spencer
Source: Safe Graph
This, in turn, leads to sophisticated predictive modeling, which can forecast future property performance and allow investors to mitigate risk and make data-driven decisions.
An investor who can draw up this information in an instant has a huge advantage. They’ll be able to assess market demand for the property, speed up property appraisals, and even see a suggested bidding price.
As the availability of data continues to grow, the role of data analytics in CRE will become even more crucial for success.
4. Blockchain-powered CRE transactions mean ultra-secure and transparent property deals
Blockchain has been in the headlines over the last few years thanks to its association with cryptocurrency, but its other use cases are proving to have more tangible benefits in everyday life.
In the real estate market, smart contracts are an emerging example of how we can use this tech to carry out transparent and ultra-secure property deals.
Built on blockchain platforms, smart contracts help to:
- Streamline the buying process by automating agreements and reducing the need for intermediaries.
- Record all transaction details on an immutable public ledger that all stakeholders can view
- Slash the time and cost associated with paper-based property deals
These contracts are quickly gaining momentum thanks to the strong confidence among CRE investors.
A recent survey by CRE realtors Savoy Stewart found that out of 544 CRE respondents, 71% believed that smart contracts increase the speed of deals. Two-thirds thought they were more efficient, while the majority of them saw them as cost-effective (63%) and secure (59%).
CRE trust in smart contracts
Source: Savoy Stewart
This momentum is backed up by Deloitte’s findings (from the report mentioned earlier) that more than half of investors report being involved in at least one transaction involving the use of a smart contract.
We may be seeing the first stages of a step into a CRE metaverse, where smart contracts power all real estate deals virtually, with no need for human brokers or paperwork.
5. Artificial intelligence is helping us improve workflows and secure funding
We’ve all heard about huge AI advances this year, but in the commercial real estate industry it’s bringing about dynamic changes in two key areas.
In property management, it’s helping owners improve the workflow of day-to-day maintenance.
AI-powered chatbots can handle tenant inquiries and provide real-time assistance, reducing the need for human intervention. Machine-learning algorithms help property managers make more informed decisions by optimizing maintenance schedules, predicting equipment failures, and streamlining energy usage. Improved building performance and cost savings are the result of this.
AI is also helping to secure finance. Investors are all too familiar with waiting around for approval from fussy lenders who demand business plans and credit scores of 800 or more: a delay that can be deadly for property deals.
This could soon become a thing of the past. A new wave of smart lenders now uses AI-powered assessment tools to quickly approve financing, often within 48 hours, allowing investors to secure property deals ahead of rivals. Their speed also allows buyers to work on multiple deals at once if they so wish, especially as they often don’t need to put any of their own money down.
In a world where phrases like ‘optimization’ and ‘efficiency’ are thrown around regularly in the AI conversation, CRE investors are seeing the very real benefits of this disruptive new technology as they seek to stay ahead in a fast-moving real estate market.
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