Commercial Real Estate has always been a crucial component of the world’s economy. However, the industry has historically relied on in-person property dealings, failing to keep up with the latest digital technologies in the market. But the COVID -19 pandemic has accelerated the growth of CRE tech adoption.
With the growth of technology, real estate agents can spare themselves from the burdens of huge paperwork. Thereby, saving time and effort which can be utilized for generating leads or closing deals. In this blog, we will uncover how the adoption of technology in CRE will present opportunities and lead to business growth. But first, let’s take a close look at those game-changing technologies.
PropTech in CRE
In today’s world, all businesses are dependent on technology. Although commercial real estate has been somewhat slow in adopting technology, the introduction of PropTech propelled the industry forward.
PropTech, short for property technology, refers to real estate markets using digital technology. As FinTech addresses the needs of the finance industry with technology, PropTech uses digital technology for the property industry.
The main objective of CRE tech adoption is to streamline operations and generate insights to increase efficiency in real estate businesses. Property owners can manage their assets more efficiently using various PropTech tools and platforms. Slowly they are understanding the importance and need of adopting technology in real estate businesses.
Source: EY Research
The ongoing stage of Proptech: PropTech 3.0 focuses on tech like Artificial Intelligence, Big Data, Augmented and Virtual Reality. These technologies help to streamline, automate, and add value to various segments of real estate.
PropTech 3.0 made buildings smarter and streamlined their maintenance and operation. For example, Willow’s digital twin technology collects, analyzes data, and lets companies manage their entire building’s energy usage in real-time.
Whereas the more recent Proptech 4.0 will aim to focus more on sustainability and cybersecurity. Real estate companies are more concerned about implementing green and clean energy solutions as the world fights climate change.
Since everything is connected online via the internet, real estate companies must ensure the safety and security of their information. As a result, even more, private capital will be invested in startups addressing these emerging Proptech markets.
According to JLL’s report, the recent years have seen steady growth in technology-based real estate companies. Over 7800 companies have implemented the following trends that proved to be beneficial for the commercial real estate industry.
The latest trends in CRE tech adoption
1. IoT & Automation
To stay relevant in this tough market real estate companies are taking advantage of CRE tech adoption and automating several areas of their businesses. Sophisticated gadgets or IoT devices automate most of the manual work and help you improve your business.
IoT is based on connecting smart devices to a cloud-based platform via the connection of the internet. It is the main goal of IoT devices to automate different processes thereby saving time and effort for people. A study by Statista found that within 2025 the number of connected devices installed will increase by 5 times.
Using automated data monitoring, you can monitor the complete functionality of the building, and communicate problems quickly. And not only that, with predictive monitoring IoT devices can be used to improve the infrastructures of everything related to real estate.
A study by Johnson Controls and Deloitte found that 70% of respondents believed predictive analytics would lead to industry change.
Furthermore, smart devices provide property managers and technicians with immediate notifications in case a problem arises in the building. By integrating IoT with CAFM and CMMS solution, you can set thresholds for sensors and get notifications when it exceeds them.
IoT devices can also help in improving the efficiency of HVAC systems, resulting in more economical power consumption.
It can also optimize the workplace by identifying less-used rooms and renting them to other teams. Therefore, implementing IoT can result in adding value to the property.
On top of that automation in real estate also improves lead generation and management.
Implementation of automated software can make CRE management more efficient. You can grow your online presence via various marketing strategies like social media marketing, email campaigns, etc.
2. Artificial Intelligence & Machine Learning
Real estate and AI are no longer science fiction. The majority of businesses in today’s world operate by incorporating AI into their business process. For example, Google uses AI to improve its autocomplete in search engines.
There is no doubt about the benefits of implementing AI. Apart from tech corporations, various industries like residential, manufacturing, health, and others have embraced AI.
A study by Gartner in 2021 found that 37% of organizations have adopted AI in the previous year. Also according to that study, it is an increase of 270% from the past four years.
Altus Group, a leading tech provider to commercial real estate surveyed 400 CRE C-levels and executives. According to the survey, most respondents believe that AI will have a strong impact on the commercial real estate sector.
Source: Altus Group Report
Moreover, 70% of respondents believe that besides automating most tasks, AI will also create new job roles in the industry.
Until now, AI has mostly been used to automate and improve service operations, such as contact center automation- AI chatbots. Chatbots are not only for connecting with customers.
If utilized properly AI-powered chatbots can help with real estate business growth with strategic content marketing campaigns.
Implementing AI will aid in streamlining sales and digital marketing for real estate strategies:
- Improved identification of target audiences
- Identifying potential clients
- Recognizing potential buyer’s preferences
- Establishing trust with customers and building relations
AI also manages to improve generating leads for different properties. Artificial intelligence recognizes the best potential deal based on data collected from websites, landing pages, or real estate advertising. For example, Zillow uses an AI-powered CRM tool to identify genuine leads and for advertising real estate.
With machine learning technology, AI can help real estate agents as well clients to search for better properties. AI helps in delivering better search results based on social media activities and previous preferences.
Therefore using AI in real estate digital marketing can improve results and help your business grow and get high returns.
To read more about the implementation and use of AI in commercial real estate click here.
3. Big Data
Along with AI, another technology that provides true insights, enables faster & better decisions making, and improves efficiency while cutting costs is Big Data Analysis.
Besides relying on personal expertise and historical patterns, real estate investors can take benefit from all these using Big Data Analysis.
Use cases of Big Data in commercial real estate:
Property Price Indices –
It helps to get an estimation of the current price and future returns of that property based on location and demographics.
Location Analysis –
Location analysis aka GIS analysis helps to get a deeper insight into the location and neighborhood of a property.
Cluster Analysis –
The performance of real estate varies from location to location. Different cities or neighborhoods might perform differently due to various local factors like regional economic activities or supply.
Property Valuation –
Based on statistics, automated valuation models are used to collect data on a particular property and estimate the market value of that property.
Companies like Opendoor use this technology to bid on properties, allowing property owners to liquidate their assets.
Time-series Forecasting –
Based on conditions such as GDP, inflation, mortgage rates, and other data.
Time series forecasting gives us a sense of what the future scenario for property markets may be.
Better Real Estate Digital Marketing Strategy-
Insights collected from various data sources, and social media activities help to identify and reach a better audience.
Using a data analysis service you can translate your data into sponsored messages.
AI and Big Data have become significant factors in decision-making as well as digital real estate marketing strategies.
4. Augmented Reality & Virtual Reality – AR/VR
The traditional ways of looking up properties are either on sites like Zillow or through a real estate agent and physically visiting the site. This process provides clients with an incomplete picture and is time-consuming.
To solve this problem real estate organizations and executives are embracing augmented reality and virtual reality. Instead of browsing galleries and looking at photos that provide an incomplete picture, virtual reality brings the property to life with a 3D view.
A virtual tour of the property also lets you take a detailed look at the entire property and even the neighborhood. When integrated with augmented reality, it lets you even interact with the surroundings and environment letting you gain a deeper and more true insight into the property.
Post-COVID, the growth of adoption of VR tech in the real estate industry has skyrocketed. Statista reports that in 2021 around 9.86 million AR and VR devices have been sold globally, and this year the number is predicted to close at 14.19 million devices.
They also forecasted that by 2025 the number will supposedly reach over 43 million. Moreover, real estate startups like REX Homes have saved their clients on average about $25,000 compared to traditional real estate companies. This proves that VR technology has a strong future in commercial real estate.
5. Blockchain
Blockchain in real estate has unlimited applications and isn’t restricted to cryptocurrency only. The main feature of blockchain that makes it one of a kind is its transparent ledger system. Other than carrying out safe and secure transactions, adopting blockchain has various benefits such as:
Property Search Through MLS –
Landlords or brokers list their requirements on the multiple-listing services (MLS). In a transparent MLS, all parties can see which listings are available based on their preferences.
A blockchain-based MLS provides brokers with more control over their data. It also increases their trust as listings are more freely accessible.
It also provides clear in-depth details and other information about the property. Clients can easily access these data at a much lower cost.
Lease Agreements Using Smart Contracts –
Smart Contracts based on blockchain automate tasks such as rental agreements and leasing and therefore eliminate the need for middlemen.
By creating a smart contract, transactions and lease terms are transparent. Moreover, rents can be automatically collected by smart contracts depending on the lease agreement.
Fractional Ownership –
Blockchain makes investing in real estate easier by enabling fractional ownership. Blockchain recognizes a digital asset as a token and supports fractional ownership.
Therefore you can invest in a fraction of a property which is more affordable than investing in the whole property. Individual investors can pool resources to purchase bigger properties. And with blockchain, it is easier to keep a transparent and detailed view of the ownership.
Adoption of Purpose-Built technology in CRE
Only 4% of surveyed companies believe CRE tech adoption as a priority, according to a study conducted by EY and CRETech. 61% of respondents have already integrated technology in their respective businesses. Whereas the rest consider technology as a necessity and are integrating multiple technology solutions.
Some CRE firms are even hiring dedicated tech experts to expand tech infrastructure and target tech tools to improve business. Before adopting make sure your team has identified the correct tool suitable for your business.
In another EY survey, it was found that Data analytics has been identified as the most important and useful technology tool. Almost 92% of companies have integrated data analysis technology followed by artificial intelligence, cloud, process automation, digital channels, and construction tech.
Purpose-built technologies must have an intuitive platform that allows CRE officials to easily get a grasp of technology. Furthermore, in addition to reducing the workload, these technologies should also focus on generating and sustaining good returns on investment.
Delay in Tech Adoption & Why It Is Essential To Adopt Technology?
A business based exclusively on physical interactions and paperwork, Real estate always had the reputation of not being overly tech-dependent. But today real estate companies, leaders, and investors have geared up to catch up with the technology to improve business.
Leading CRE organizations believe that adopting technology will automate tasks and eliminate human errors in the process. Furthermore, they also found that technology helps in leveraging data to make better decisions. As a result, it will reduce costs and improve efficiency in the long term.
According to real estate owners, the primary reason for adopting technology is to reduce operational costs, increase efficiency, and access new revenue streams. Today, almost 69% of respondents see technology as a strategic agenda as a high priority. And 61% of the respondents have implemented technology tools in their business.
Although only 28% have adopted multiple technology solutions, 35% are thinking about adopting tech tools. Whereas the rest 4% have no plans about adopting technology. Moreover, most of them have recently adopted technology in their business and are at an early stage.
It was found that there were a couple of major reasons why real estate firms feel hesitant to implement technology. The majority of the respondents feel like they don’t have the skilled personnel to understand the tech integration.
Also, the cost of integrating new technology is a major issue for most with doubtful returns on investment. Moreover, according to 58% of the respondents, it is quite difficult to integrate new technology into the existing infrastructure.
Impact of COVID-19 on CRE
All these reasons for not adopting technology were thrown out the window during the COVID-19 pandemic. The economic downturn opened the eyes of about the benefits of implementing technology. 78% of real estate owners are rethinking incorporating CRE tech adoption tools and devising proper technology strategies.
COVID has the way how the entire commercial real estate industry operates. With various pandemic factors slowing down operations, CRE firms are turning to technology to get their hands on more data.
Apart from COVID, another reason why CRE firms have started adopting technology is to stay ahead of the competition. Real estate leaders have started recognizing the real value of technology. Incorporating CRE technology helps firms differentiate themselves by adopting multiple solutions.
Apart from cost savings, firms will gradually start using internally generated portfolio data sets and analytics to make better decisions. Once investors start noticing profits due to CRE technology the rush for adoption will skyrocket.
But that’s not the end of the problem. To properly incorporate technology in CRE, you must also have an idea of how to incorporate technology into existing infrastructure.
How To Implement Technology To Drive Growth In Business Of CRE
1. Building a technology strategy
The key to a successful CRE tech adoption is having a well-planned strategy that aligns with the organization. With a well-planned technology strategy that aligns with your company objectives, all applications on the business platform can communicate within a fully integrated system.
A well-realized technology strategy helps you to:
- Maximize business results by utilizing horizon technologies
- Make better investments
- Save on operation costs
- Promote reusability and scalability to improve the total cost of ownership,
- Convert to business forecasting models
- Roll out products and policies faster.
Moreover, data analytics is a crucial technology for every real estate company. The majority of respondents prefer data analysis as a tool to improve their business.
2. Ensure proper CRE tech adoption
The main issue or the reason behind real estate firms’ delay in CRE tech adoption. Around 58% of real estate companies, most of the time find it difficult to integrate technology. This is due to an expectation gap between real estate owners and technology providers.
According to a US REIT, the Proptech industry does not have a comprehensive, end-to-end solution. As a result, it does not cover asset underwriting, construction, sales, and acquisition through to actual and forecasted results in the Proptech industry.
However, real estate leaders believe that tools will become easier to integrate as end-to-end solutions are readily available. Moreover, real estate companies must focus on flexibility and scalability and keep their infrastructure up-to-date for future implementation.
3. Have a reliable CRE tech sourcing provider
Make sure your CRE tech tools are sourced through reliable and trustful providers. Tech providers are an equal part of this process and are recognized as a collaborator as well.
The fact that technology providers and real estate owners have begun to work together to create products with commercial potential is encouraging. Furthermore, developing, managing, and customizing products in-house is another way to begin the journey.
What should you keep in mind before CRE tech adoption in your firm?
CRE firms are leaning towards rapid CRE tech adoption to stay ahead of the competition. There are a few things to keep in mind before adopting technology into your business.
1. Automation is the key
The main purpose of CRE tech adoption is to reduce human effort in doing minimal tasks. Automating strenuous tasks helps in saving time and also reduces errors.
Artificial Intelligence is a simple example of automation in commercial real estate sending tenants automated reminders via e-mail about rent payments, lease renewals, etc.
2. Data Analytics play a huge role
Data is a crucial factor in real estate. An important step for a successful real estate investment is the collection and analysis of data. Data provides true insights into a property which enables in making better investments and decisions.
Big Data is a useful technology in commercial real estate that gather previous records and data and analyzes it for the investors to generate good returns.
3. Improving customer relationship management
Customer Relationship Management is one of the most popular segments used by brokers. CRMs are used to organize contacts, automate outreach, generate content at scale, and organize documents. It helps in better understanding the needs of a customer for appropriate adoption of technology.
Benefits Of Implementing CRE tech adoption
- Technology helps save money and time. Previously gathering data was a tedious job that required browsing through tons of paperwork.
- Technology and tools remove human errors and help in making better decisions and investments.
- A proper technology tool will help save you on operational costs.
- With the property searching platform, you get better access to deals that were previously unavailable.
- Virtual tech tools provide you with the opportunity to communicate better.
Mistakes to avoid in CRE tech adoption
- Not having a complete understanding of the technology or how it works. It is important to understand what your goals are and how will implementing CRE tech adoption to help solve them.
- Till now real estate used to conduct its business using the old ways. Therefore, selecting a technology that is not user-friendly can be disastrous. Keeping things simple is always a good idea given that some employees are tech-averse.
- Choosing tech platforms recommended by friends and family
- Not calculating Returns on Investment before selecting a technology.
- Relying on technology too much and forgetting to have a business strategy.
The Lilypads Bottomline
This pandemic was an eyeopener for the commercial real industry. It made us realize the importance of CRE tech adoption. Although the industry has been late in catching up with the latest technology. The real estate industry is poised for a rewarding future as it transforms itself into a more technology-driven sector. In the same way, the world is rapidly changing in terms of technology, and so must commercial real estate.