CRE Tech Spending Should Continue Through a Recession

The commercial real estate is rapidly changing. At the center of that change is the tenant and end-user experience, given the increasing use of technology and rapidly changing customer preferences, according to Deloitte’s 2020 Commercial Real Estate Outlook.

Jim Berry, Deloitte’s US Real Estate sector lead, thinks the CRE industry needs to move from the mantra “location, location, location” to “location, experience, analytics.” He says the latter two elements are becoming equally as significant in the real estate decision making process.

Deloitte surveyed 750 commercial real estate executives—owners/operators, developers, brokers and investors—in ten countries. In the survey, 64% of respondents said they increased their investment in technologies supporting tenant experience, including internet of things (IoT) technology and mobile apps over the last 18 months.

“There are clear ways that companies today can consider digitizing and personalizing the tenant and end-user experience, including accelerating the use of smart building technologies with IoT devices and activating mobile experiences through specific tailored app development,” Berry says. “Integrating IoT and mobile app technologies, including through video and maintaining a flow of communication with the tenant, are ways to enhance their experience.”

Even if a recession arrives, Berry predicts that companies will continue investing in these technologies because end users are demanding it.

“What was once a ‘nice to have’ or an ability to create a competitive advantage is becoming a must-do or must-have to attract the best tenants,” Berry says. “In our survey, respondents stated that they expect smart buildings to become the norm in the near term, with 44% stating they would be the norm in the next two years and an additional 31% in the next three to five. Thirty-three percent of U.S. respondents specifically predicted smart buildings to go mainstream in the next two years and 40 percent in the next three to five years.”

Artificial intelligence is still in the early stages of adoption by CRE companies with less than one-third of the CRE organizations are using it, according to Deloitte’s 2020 Commercial Real Estate Outlook.

“Those using AI feel that sales and client relationship management, accounting and FP&A [financial planning and analysis], property management, lease administration and CRE development are all top areas that could benefit from it,” Berry says.

Berry points specifically to automating lease administration as a high-opportunity area for AI. “While the lack of standardization of leases creates some obstacles today, the ability to digitize information and then use it in both data gathering and analysis creates the opportunity to make better and quicker decisions and also apply predictive analytics,” Berry says. “Moving away from the manual processes used today will free up valuable resources to do more meaningful analyses of the data.” When discussing AI, Berry expressed excitement about the technologies that already exist. But he expects even more advancement in coming years. “Certainly, continued advancement and the development of new products will continue to occur, as with technology in any sector,” he says.