The world of technology is nothing new. However, the types of conversations we are having about commercial real estate (CRE) tech are evolving.
In this blog we review the latest discussion experts had regarding the state of CRE technology for investors. Participants in the conversation included Ross Powell, Head of Product (EMEA/MENA) for PM Technologies, JLL Technologies; Yuehan Wang, Global Research Associate for Real Estate Technologies & Innovation, JLL; and Matthew McAuley, Research Director for Global Insight, JLL.
Most notably in their conversation, the experts touched on the findings from JLL’s recent Global Technology Survey.
Adapting to meet industry and tenant needs
The CRE sector has seen several changes in the past few years. Because of that, investors have had to adapt their spaces and create air-tight technology strategies to fit evolving tenant needs.
“One of the key things that has recently shaped today’s conversation is a combination of both the pandemic and the ESG agenda. This has really forced change in technology within the CRE business, especially within the landlord and tenant space,” Powell said.
“What we are seeing now is that combination of flex work, return-to-the-office space, and trying to recreate the pre-pandemic feel of the office space again. And there is a natural conflict now existing between occupier and landlord, and an employer and employee over that return to the space,” he said. “This is creating natural tension in the technology agenda because people are looking for different ways to treat their space again.”
So, with keeping this new way of understanding CRE spaces in mind, investors must begin to accept the help of technology. This does not necessarily mean grabbing at the first tech solution you find, but rather, identifying your gaps and thoughtfully building out a tech-enabled strategy. Because tech is that value driver that many investors will need to lean on to continue to enhance their properties.
CRE tech is no longer a cost center
Continuing the conversation on tech, Wang offered insights supported by the survey. She said, “It is evident that companies are recognizing that real estate technology isn’t just a cost center. But it’s also a key differentiator that’s crucial to meet their wider objectives.”
Wang explained further. “We see there’s this mass majority, 92% of occupiers, that believe CRE technology will help drive their competitive advantage. And how that relates to investors and landlords is that this recognition is translating into a willingness to pay for these advantages.”
She went on to say that an overwhelming majority of occupiers are ready to pay a premium for tech-enabled spaces. And, despite the current challenging operating environment that everyone is experiencing right now, 85% of investors plan to increase their real estate tech budgets over the next 3 years.
Wang suggested that instead of seeing technology as a cost center, companies must recognize that technology can be used to help them identify opportunities – creating more value to drive new revenue, to optimize productivity, and to encourage collaboration.
This is your sign to create a tech integration plan
Even with all of Powell’s and Wang’s insights, there was still a much-needed conversation to be had surrounding the difficulties with tech, specifically with tech integration. Technology is not a quick fix for CRE properties. It requires a well-thought-out plan and integration strategy, along with the right people for it to be successful. And it is in this area that many companies are falling short.
“There are all sorts of technical issues with integration. But primarily what we see is that it’s around the actual change management, the strategy, the organizational components that really provide the basis for success in tech programs,” McAuley said.
“A frequent cause of stalled or ineffective programs that we’re seeing is that lack of strategic direction and aligned approach. Only about 40 of the companies that we looked at in this survey were using cross functional groups to drive tech-related decisions,” he added. “About 30% of the companies identified a lack of digital skills or capacities as their most significant challenge.”
Powell remarked that even if companies have all the budget in the world, there is still a shortage of appropriate tech talent within the real estate space. In fact, the report found that around 70% of companies are planning to increase their hiring and are crucially increasing budgets. Meaning, tech isn’t something you can just grab onto and hope it’ll stick, it’s an enablement system that needs to be monitored and executed every day.
“This is about making premium assets into truly premium assets once again,” said Powell. “It’s also about building that resilient operating model scale.”
Powell warned investors that it’s better to be ahead of the curve than to be behind the curve. “Openness, conversation, and communication is absolutely critical throughout all this. I think the more people accept that technology is going to change things and that that isn’t necessarily a bad thing, the better.”
Wang emphasized Powell’s remarks and gave her final takeaway. “Technology is not something that magically solves your problems. You need to have all these infrastructures – people, organizational setup, and planning – for it to work.”
So, while technology continues to remain a driving force in the CRE industry, it is important for investors to keep in mind that there are many layers to it. From integration strategies to gap analysis to tenant needs, understanding CRE tech is as robust as is its capabilities.
To continue learning about the discussion touched on today or for more insights from the JLL report, listen to the expert’s full conversation below.