In keeping with the latest survey done by the leading Infrastructure companies in Delhi, Globalization, Urbanization and Workforce trends are reforming tenant preferences and an array of AI and other digital technologies are abetting commercial real estate companies to meet those requirements and organize experiences of end-user. The 2020 Commercial Real Estate Outlook survey report included 750 commercial real estate executives from 10 countries to weigh how and to what levels, analytics and emerging technologies are helping the industry leaders in making more informed decision when it comes to location and improving tenant experiences.
By and large, Commercial real Estate (CRE) executives consider geographic market, tenant concentration risks and interest rate uncertainty as their prime challenges. The executives, while maintaining that optimism, have varied views regarding the CRE industry’s performance in 2020 wherein 15% showed utmost confidence, 61% were somewhat optimistic, 14% were neutral and 10% were pessimistic about the future.
The Digitization Challenge
The study found that the preferences of tenants are changing, owing to increasing demand for global and urban sourcing, changing workforce requirements like – workspace and flexible location and advancements in technology such as Internet of Things (IoT) and AI. Designing and offering exclusive experiences isn’t just about connecting with the tenant, it additionally expects extending services to meet the needs of the end-user, who are the daily consumer of that space, for instance – an employee working in a co-working space or a retail shopper.
While most big-shot CRE companies put tenant experience as their top priority, their capability to achieve that digital tenant experience lacks core competency. “CRE companies comprehend the importance to invest in technologies and digitization to drive tenant experience, however the survey report found most of them are not planning to put their resources in them anytime soon,” notes Sahil Gupta, COO, Sundream Group. While 64% of reviewed executives report growing their investments in technology in the course of past 18 months whereas only 56% have plans to incorporate significant efforts in increasing overall technology investments before 2020 ends.
Digital Enhancements to Back Office Operations and Tenant Experiences
The research focuses various ways CRE companies can react to the growing needs for digital experiences, drive decision making and operational performance and concentrate on challenges that will arise out of the increased use of technologies –
1. Fast Track Adoption of Smart Building – Internet of Things or IoT is turning into an undeniably significant component in enhancing end-user/tenant experience. Executives who took part in survey anticipated that smart buildings that are IoT enabled will have an alarming influence on end-user’s leasing decision. 61% of them even believe that leasing a smart building will be more important to tenants than the location. Additionally, 68% accepted that end-users will even be ready to pay 6-10% more to be in a smart building.
By June 2020, 70% of the CRE executives say that 1/5 of their projects will be smart buildings however 30% say their companies will achieve this digitization change by the end of 2020.
The capabilities like IoT can be incorporated in stages, which will minimize risk and would help in making investments over time. Organizations can make dynamically more investments in their existing projects and make them IoT enabled, incorporating smarter systems for security, parking and energy; then having futuristic needs like- adding electric car charging areas or points, predictive maintenance and last but not the least tenant behavior data analysis and predictive capabilities.
2. Recuperate Data Capturing Skills – As per the survey report, most commercial real estate organizations have not yet completely studied how to gather and use information to achieve better decision making, create a differentiated end-user experience and improve operating performance. For instance – 65% respondents say their companies are failing to gather their own data from IoT sensors. “Major reason here might be that most CRE companies have doubts on who owns the data and usage rights of the same,” observes Harsh Gupta, CEO, Sundream Group.
About 2/3 of survey CRE executive consider the developer or the building owner owns the data. The rest of them believe the end-user owns it. The CRE executives who said their companies are capturing data internally, three quarters make use of it in generating insights for decision making, about 40% use the data for future planning or more strategic business decisions and rest use the same for driving operational efficiency.
3. Adoption of AI in the CRE industry – Less than 1/3 of the surveyed executives say their companies are using AI however awareness, importance and worth of using the same is rising. Artificial Intelligence can help companies in evaluating patterns and trends in predicting end-user behaviour and turnover, thus enabling them in making better and well-informed tenant selection decision. Other AI capabilities for CRE companies include evaluating new revenue opportunities, automating leasing process, etc.
4. Reinforce Privacy and Cybersecurity – With increase in the use of digital technologies, the complexity and magnitude of cyber threats becomes the reality of every business. Surveyed executives contemplate vulnerabilities in networked systems of third-party service providers and vendors as the biggest data security risk. For instance – smart buildings owing to the digital technologies collect a lot of data that include building operations, personal data of employees, customers, end-users, etc. All the data is gathered and saved in the systems, which are networked together to the systems of third-part service providers and vendors and all this means an increased risk exposure. There are many CRE companies who outsource their data management work, thus involving one more entity, which further increase concerns regarding data security.
So, when it comes to future of CRE industry, use of digital technologies is quite evident however making it fruitful for both ends (CRE company and end-user) will be the real challenge, the result of which will be out SOON (keeping fingers crossed)
