According to an old German proverb, “there is no such thing as bad weather, only inappropriate clothing.” Turbulent circumstances may inconvenience us, but it is what we do to adjust to new and changing conditions that allows us to succeed or fail, a concept which defines our adaptability. It is perhaps the most essential element of humanity’s dominance as a species, leading us to thrive where other species have failed. For thousands of years, humans have leveraged adaptability to succeed and to rise to the top of world ecosystems. Now, we use this trait in the realm of personal success to reach business and financial goals. Yet by 2014, only 61 of the original fortune 500 companies established in 1955 remained in business. Many simply could not keep pace with the technological revolution and floundered rather than changing their practices to accommodate an ever-evolving society.
It is a time of disruption in CRE, and those who don’t adapt risk being left behind as new technologies, a changing global economy, evolving consumer demands, and investor expectations alter the landscape of the industry. Adaptability is clearly important, but what does it look like in action?
How CRE is staying Ahead of Disruptors
Across asset classes and property types, shifting demands and emerging technologies can make it difficult to predict what might make a project succeed or fail. But some trends are beginning to emerge, offering a blueprint for how businesses can plan to keep up with the pace of change.
Recent disruption in the hospitality industry has led to the industry’s incumbents seeking out-of-the-box ways to compete with these new entrants into the space. Hilton and Marriot have launched branded, hostel-style lodging that mirrors the AirBnB concept in several markets. These brands recognized that their industry was shifting toward less expensive options with more local flavor and are taking the necessary steps to ensure future success that matches the evolving mentality of travelers. This kind of forward thinking requires knowledge of demographics and their habits. For example, hospitality disruption is being led by Millennials who prefer traveling and experiences over material goods. In fact, surveys show that 78% of Millennials would rather spend money on an experience than a product. Hospitality professionals have found a way to adapt their business practices and capture the interest of this demographic.
Perhaps no industry has seen more disruption by the digital age than that of retail real estate. E-commerce gives consumers the ability to make purchases from the comfort of their own home that are shipped to their door, sometimes the same day, leading to closures of well-known big box stores such as K-Mart and Toys R Us. To adapt to the online shopping trend, retailers capitalized on another trend, the experience economy, to draw more foot traffic to locations with retail theaters that give guests an experience with their purchase, and pop-up shops that create artificial scarcity that leads to increased desirability. In turn, CRE professionals adapted their offerings to suit retail tenant demands, thus improving ROI. These adaptations require an awareness of the gaps and shortcomings inherent in the retail shift, in this case filling spaces in the market that e-commerce cannot.
How to Keep Your Firm Adaptable
What can be learned from CRE’s early adaptations? Some traits stand out as useful adaptation strategies that can be more broadly applied across all asset classes.
As trends emerge, take note of which fads gain traction and which fizzle out. Chances are, you will notice patterns in your data that point toward future disruption. This keeps you one step ahead and gives you ample time to improve on current strategies or to develop new ones, preventing you from being blindsided as social and economic tides change. Artificial Intelligence is incredibly useful to research thanks to the actionable insights that can be gained from data analysis that would take a person months to sort through. Tools like IMS’s Key Property Insights leverage AI and accounting software integration to generate reports that can direct change.
Hire Diverse Talent
As the old adage goes, two sets of eyes are better than one. The same concept applies to business perspective. A diverse staff brings an added benefit with it: the ability to think from different points of view and to offer a more complete picture of the investment landscape. Employees from different backgrounds have different areas of awareness that can better serve your firm and prepare you to make well-informed adjustments to your practices. According to a 2018 Boston Consulting Group report, companies reporting above-average management diversity also reported innovation revenue 19% higher than companies with below-average leadership diversity.
It is the age of technology disruption, and as much as tech can seem to work against your business, it can also work for your business. CRE professionals acknowledge that this is a data-driven industry. The best way to ensure data is organized and actionable is through technology. As a sponsor, it’s your responsibility to know and understand your data so it can be applied in ways that improve outcomes for your firm. Over 50% of CRE firms already use data and analytics to shape their decision-making. Stay ahead of the curve by investing in software that will deliver you forecasts and insights. Products like the IMS Platform can propel you to the head of the industry as an adaptive and forward-thinking.
The ability to adjust to new and changing conditions has served humanity well, bringing us to where we are today. We are innovators, using our creative energy to overcome. In CRE and beyond, staying aware of how circumstances are changing around us and leveraging the right tools is the best way to ensure we are adequately prepared to continue to thrive, no matter the state of the landscape that surrounds us.
To learn more about adaptability in CRE, check out our free, on-demand webinar: How to Adapt to Shifting Investor Expectations in the CRE Industry