Disruption may be the most overused word of the modern business environment. But the message does not seem to have gotten through to those leading real estate companies across the globe.
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A new report from the Urban Land Institute and PwC contains a datapoint highlighting the potential complacency still exhibited in real estate about the impact technological and social change will have on the industry.
PwC surveyed 1,300 CEOs across the globe on a range of topics, including how concerned they were about disruption to the business.
Just 10% of real estate CEOs said they were concerned about the speed of technological change, compared to an average across all sectors of 38%. Just 7% said they were concerned about the effects of changing consumer behaviour, compared to an average of 26%.
The report anonymously interviewed a number of senior professionals from across the real estate and PropTech worlds, and gave some insights into why real estate leaders might be slow to embrace technological change. The results indicate it is partly about not hiring the right people, and partly about fear of change.
“In terms of hiring, real estate companies are not shaking up the org chart. Too often, they are doing things like making the head of IT the chief data officer or chief technology officer, and they are fundamentally different roles,” one interviewee said.
“Implementing cultural change takes investment, and many CEOs don’t want to spend the money,” one said. “But there is also the issue that many leaders are near the end of their careers and don’t want to implement big expenditure and strategic shifts that might be the last thing they do in their careers, but have no guarantee of bearing fruit.”
What is the potential effect of this failure to embrace change? The report argues that the market is at a turning point where gaining or losing any kind of edge will lead to big winners and big losers.
“Cap rates can’t go down any further, the only way is up, so you have to improve the efficiency of your property and your company,” one interviewee said. “Software is one way of doing this, as are things like energy efficiency and the internet of things, things that make buildings run more efficiently. On the management side, anything replacing spread sheets and allowing greater analytical capability has a big return.”
“Being at the forefront of change and capturing some of this new inflow will give companies an outsize advantage,” another interviewee said. “If you look at Blackstone and Brookfield, they are maybe 5 to 10% better than their peers and they are hoovering up capital. Technology creates outsized winners and that is what will happen in real estate, too.”
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