Many CRE Execs Are Not Ready For Disruptive Technology
Commercial real estate executives around the world are benefiting from technology, but many do not yet see the potential for tech to disrupt their industry, according to a new Altus Group report.
“There’s definitely a little bit of disconnectivity in the industry,” Altus Group Global Marketing and Communications Vice President Jeff Hayward said. “But this has always been an industry playing a bit of catch-up. Overall, the industry has done a really good job over the last three to four years in catching up.”
The annual Altus Group CRE Innovation Report, based on a global survey of 400 CRE executives at firms with assets under management of at least $250M, found a level of indifference when executives were asked to assess the impact of so-called disruptive technologies on their business.
Only a minority of respondents saw a major impact in technology like artificial intelligence, where only 28% anticipated a significant effect. By contrast, 38% said AI will have no impact at all.
"CRE firms are facing the challenge of finding a balance between operational benefits delivered by existing technology and the potential disruptive impacts to business models by what's coming next," Altus Group CEO Robert Courteau said in a news release accompanying the report.
Hayward said the pace of technological innovation may have something to do with the executive disconnect.
“There are clear reservations still on what it will mean,” he said. “In trying to modernize their organization, I’m not sure they are looking five miles ahead."
He said he is not sure they even can look that far ahead.
In the case of AI, Hayward said applications in CRE are numerous. The report says debt underwriting, especially for stabilized real estate assets, will eventually be performed almost exclusively by artificially intelligent bots, and not human labor.
“I think we see a lack of full understanding of what AI is. There’s a lot more AI in today’s technology than we realize,” Hayward said.
The CRE executives seemed less skeptical about automation in the industry. Half of respondents said most major CRE processes and workflows can be significantly or completely automated.
Hayward said automation and performance management are immediate areas where tech can and is changing the industry.
“That was a huge opportunity right in front of them. The executives saw an obvious chance to improve efficiency," he said.
The report had cautious words about the proliferation of cloud- and mobile app-based solutions that are easy to purchase and start using immediately, viewing those as a double-edged sword. While the technology can tackle “specific end user problems without IT vetting”, it could also confuse matters.
“Having too many applications not only makes data integration more complex, it also has the potential to negatively impact a firm’s information flow and decision-making,” according to the report.
The rapid rise of tech in the industry brings with it the problem of people.
At a recent panel on the future of the office, Ivanhoé Cambridge Senior Vice President Jonathan Pearce said real estate brokers should be looking over their shoulders when it comes to technological innovation.
“We’re one jump away from being able to lease office space online. I think that’s coming,” Pearce said.
Another problem is the lack of trained information technology workers to handle all the new tech. Half of CRE executives surveyed in the Altus report indicated their firms have a shortage of IT professionals.
“That continues to be a problem,” Hayward said. “There’s still a very limited pool of IT professionals. To make it a huge benefit, you need good technical people.”
The report concludes that tech in the commercial real estate industry is changing fast and in sometimes unpredictable ways.
“CRE executives are now faced with the challenge of navigating both the risks and opportunities presented by new technologies and prioritizing the areas that can deliver the quickest wins and easiest pivot points," the report states.
Simply put, keep moving forward, albeit cautiously.
“It’s yet to be determined when and how all this plays out,” Hayward said. “There are many variances in play.”