Deloitte Center for Financial Services recently released their annual report on the future outlook of the commercial real estate market. The report analyzes responses of C-suite executives from 500 real estate institutional investors globally to get a better understanding of what is driving investors’ decisions both currently and in the future. Topics explored by the report include technology, cyber risk management, talent, and proptechs. The report is subtitled “Agility is the key to winning in the digital age”. But what exactly does that mean?
With the advent of what is amounting to a technological renaissance of sorts in the real estate industry, the ability to be agile, fail fast, and adapt is key. According to the survey, 97% of investors intend to increase their investment in real estate over the next 18 months despite a flattening yield curve. There is one caveat that firms should be aware of though. Where they mean to allocate that investment capital is “leaning toward technology-enabled companies that emphasize tenant and employee experience and newer real estate assets and business models”. CRE companies are going to need to take some risks and embrace new technologies if they want to achieve a competitive advantage in the marketplace and secure some of the available investment capital.
Continue reading for 3 key takeaways from Deloitte’s 2019 Commercial Real Estate Outlook:
Proptechs are becoming more popular with CRE investors
Proptech is a relatively new term that you should expect to hear more frequently in the coming months and years. According to academic Professor Andrew Baum, proptech is defined as “a movement driving a mentality change with the real estate industry and its consumers regarding technology-driven innovation in the data assembly, transaction, and design of buildings and cities”. To put it a little more simply, “It’s a collective term used to define startups offering technologically-innovative products or new business models for the real estate markets”. According to Deloitte’s report, “9 in 10 of those surveyed believe that proptechs will have a moderate to significant influence on the CRE industry”. Investors will give preferential treatment to companies whose business models are changing and adapting to this technology revolution. Taking advantage of the opportunities proptechs provide will be key to growing in 2019.
Cyber Security is a Growing Concern
It is no surprise that cybersecurity is a hot topic going into 2019. More than 90% of organizations have been hit with phishing attacks, and around 1/5 have suffered financial harm. Despite the US government identifying cybersecurity as one of the most serious economic and national security challenges we face in the coming years, studies repeatedly demonstrate that many CRE firms are unprepared to face cyber attacks. Deloitte’s report states that only 1/4 of the respondents were very satisfied with current cybersecurity efforts. It is crucial that CRE firms take a more proactive approach to cybersecurity and make it a priority. After all, one significant attack could be enough to compromise a business.
The technology wave has finally hit CRE, and investor expectations are growing
Of the 500 CRE professionals surveyed, “More than 80% of our survey sample believes that CRE companies should prioritize the use of predictive analytics and business intelligence. In fact, over the next 18 months, nearly 2/5 plan to increase the use of these two technologies to make their investment decisions.” In addition, the need for trust and transparency is growing. Investors want to see where their dollars are going and how they are performing. For CRE sponsors and owners, providing your investors with a modern investing experience will create a competitive advantage currently, but it will eventually become the status quo.
To learn more about the evolution of investor relations and the role of technology is playing in creating a winning investor experience in commercial real estate, download the free Investor Expectations and Experiences eBook!