Post-Covid, Managing Assets Will Be Impossible Without Technology
When the coronavirus pandemic hit, the working world was forced to turn digital almost overnight at a pace that was unprecedented. However, Covid-19 was not the first major global event to impact businesses’ approach to technology, Yardi Regional Director Mike Cook argues.
That was the global financial crash in 2008, which exposed how organisations had thoroughly disparate systems for storing data. In the aftermath of the crisis, businesses scrambled to bring these systems together, to gain insights into how to survive and indeed grow after the crash.
The pandemic has taken the use of integrated, single-technology systems to an even greater level. The sudden need for employees to work at home has been “a massive wake-up call for lots of organisations,” Cook said. If they didn’t have the basic technology in place to handle this, they will have been exposed very quickly.
“In corporate real estate, these two massive events have brought technology and systems to people’s attention, and companies had to react,” he said. “Some organisations had strategies in place already, but those that didn’t will have had to stare in the mirror quite quickly.”
As the impact of the pandemic reverberates for years to come, what will come next, Cook predicted, is even greater understanding that having a single platform for asset management is paramount. Without this, no amount of finger-in-the-air forecasting will allow a property manager or investor to make effective decisions.
How To Manage New Leasing Models
A paper by Saïd Business School entitled Technology and the Future of Real Estate Investment Management found that almost half of commercial real estate firms spend two to three months of the year managing and organising data to drive decision-making. This time can be greatly reduced using a single asset management system, Cook said.
“The whole process of asset management has changed,” he said. “With single systems, you can have end-to-end sight of processes within an organisation of the workflow that you are trying to achieve. From the point of view of a property investor, they are able to see the detail right down to transaction level on one platform.”
Managing leases is only going to become more complex as the impact of the pandemic continues to accelerate change. The growth of the coworking sector was already driving down the length of leases in the office sector, which most in the sector believe will continue following the uncertainty created by the pandemic.
“We are in an era of lease reform post-Covid,” Cook said. “This has become a buzzword for how people won’t want to commit to a long lease. There is an element of risk now that didn’t exist before; a five-year, index-linked, uplift-only lease suddenly becomes an annual lease. Lots of space will be reallocated because it will become flexible space. The churn will likely be higher, and people will have to move faster. An end-to-end software platform that is going to be flexible enough to manage this is going to be essential.”
This change will be particularly profound in the retail sector, Cook said. Mid-pandemic in 2020, L&G announced that it would be shaking up its retail leases with a wide switch to turnover-based leases. As more landlords follow in this vein, a single asset management system can be used for accurate forecasting and deal pipeline management. Not only do tools such as those from Yardi offer real-time information, but they are accurate and transparent, two factors essential in quick decision-making.
“When all the data about an asset is in one system you can apply market assumptions,” Cook said. “For example, a shopping mall manager can look at its tenant mix, where the black holes are, what the footfall is and so on, and apply this to the deal pipeline. In retail there are a lot of risks right now — payment holidays, abatements and so on. This needs to be managed.”
Despite the push of the pandemic, there is still some way to go in technology adoption. While most commercial real estate firms have invested in software solutions, 60% of their executives still use spreadsheets as their primary tool for reporting, according to a survey carried out for Altus Group’s CRE Innovation Report 2019.
The survey also found that 51% of respondents said managing data between applications or internally is the most time-intensive data management activity, while 59% said it was manipulating or transforming data. Using a single asset management system will cut down time exponentially, an understanding that is catching on, Cook said.
“There has been a culture change,” Cook said. “Organisations are telling suppliers they must operate on their chosen system as a prerequisite of working with them, which suppliers are more open to. A large proportion of managing agents’ work is now done in a client system, the same for administrators. The outcome of this has been an awareness that data should be collated from one system, not disparate systems.”
As businesses hurried to improve their technology platforms following the Global Financial Crisis, they are now looking to make the next step to cope in a post-pandemic world. From here, there’s no going back; as commercial real estate embraces the new tools of the digital age, asset management could be set to change forever.
This article was produced in collaboration between Yardi and Studio B. Bisnow news staff was not involved in the production of this content.
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