A new report finds the majority of CRE leaders are more aware of technology’s impact and increased challenges of managing data
The commercial real estate (CRE) industry is hitting a critical tipping point, as leaders in the industry are recognizing the disruptive impact of Proptech.
According to the CRE innovation report by Altus, it’s the first time in five years that the majority of commercial real estate leaders are acknowledging the shift that many new technologies have the ability to solve current challenges.
Increased data usability challenges are something that more executives reported, compared to five years ago.
“The industry has really woken up to some of the challenges particularly around data, and executive’s ownership of the problem has become pretty widespread across the organizations surveyed,” said Michael Crook, SVP of product marketing at Altus.
While more respondents find managing data more difficult than five years ago, Crook says this actually reflects increased awareness, as opposed to the worsening of a problem.
Data usability issues has also prompted 8 out of 10 firms to have a Chief Data Officer or an equivalent senior executive who oversees the organization’s data governance. That number has almost doubled compared to four years ago.
The report, based on a global survey of 400 commercial real estate executives, found 61% of industry leaders found the online marketplace will have a major disruptive impact on the industry. While online marketplaces are widespread, connecting a number of different networks across multiple platforms, the common thread is the opening up of opportunities to new participants in the industry.
“For a long time, commercial real estate ran on the basis of networks and professional relationships. One of the impacts of these online marketplaces is a leveling of the playing field,” said Crook.
Crook added that although there’s still an important role for brokers who are most familiar with these transactions, what is changing is that the market for any particular deal is getting much wider. Lending platforms have experienced the largest level of adoption with 63% of CRE firms having used an online lending marketplace for a recent transaction and almost 80% planning to increase use in the future.
“Marketplaces that improve liquidity and open investments up to people who don’t have the capital to own an entire building is potentially the next big wave of marketplace innovation,” he said.
While it’s clear most leaders agree on technology’s impact on the industry, there are mixed views on the opportunity and impact automation will have on jobs. Three out of four leaders say automation will lead to the elimination of jobs, but 71% also believe that automation presents an opportunity to introduce new jobs.
In the wake of these changes and the wider acceptance of technology in the mortgage, there are thousands of start-up ventures and new technologies, many of yet to be proven. 89% of commercial real estate executives said significant consolidation is needed for PropTech to more effectively deliver on the needs of the CRE industry.
“With clients pulling software in as opposed to being pushed to adopt it, consolidation needs to happen as more companies are serious about embedding more prop tech within their organizations,” said Crook, adding that this process is already taking place.
Almost half of surveyed executives believe consolidation is already underway or will happen within the next year. Property management, listing services and financing are the areas that most executives believe are likely to experience significant consolidation in the near future.
“This shift in the real estate industry will trigger and accelerate this anticipated consolidation, and it is going to be an opportunity for the best innovators to really rise to the surface and become part of the future of the industry,” said Crook.
