Technology and the REIT sector
More REITs are now integrating technology into many aspects of their businesses, both to optimize their internally focused operations as well as customer-facing operations. By way of example, companies focused on a customer experience are harnessing the power of technology and using data and analytics to adapt to the needs of their customers based on data collected in real time.
Understanding how to adapt traditional business models to the changing technology landscape has been a worthy exercise for companies willing to make the investment. In some cases, technology is enabling business models that were not previously viable. For those who don’t embrace these advances in technology, it may become a competitive disadvantage.
The rewards of using technology can pose unintended risks
Technology offers plenty of opportunity but with it comes new and different risks. Current challenges faced by management teams across the sector include:
- Operational risk
- Competitive risk
- Cybersecurity concerns
When considering risk, there are obvious cyber threats, but there is also the risk of having no plan for becoming a digital enterprise.
Technology is leading to an accelerated pace of change across real estate markets and competition no longer looks and acts as it did in the past. It is, therefore, important to stay abreast of the newest trends in technology not only to keep pace with competition but also to forge a competitive advantage.
Thinking about tomorrow
Investment in real estate and property technology (prop tech) has dramatically increased in the last five years. Technology companies are increasingly involved in the “real estate as a service” business, and sector convergence will force the real estate industry to consider issues like autonomous vehicles, operating in a shared economy and the further impact of e-commerce on real estate.
As sectors converge and real estate continues to be disrupted by well-known players looking more like tech companies than real estate companies, it’s a good time for REITs to reflect on their digital readiness and the impact of technology on their business and the sector as a whole.
When discussing raw technology, the advantage belongs to tech companies as they were born through digital means while more traditional companies have had to evolve. But there is also an advantage to understanding tradition — specifically, pain points that will always exist in real estate, with and without technology.
The opportunity to leverage technology across a platform will increase as an ever-expanding number of technology-enabled solutions are offered to the real estate industry, and scale is created as more real estate companies adopt them. Many of these will be generic products that can be incorporated into a business at relatively low cost and with only minor modifications.
But businesses will also increasingly look to create products tailored to solve specific issues. This development process can be expensive, but it may offer a unique advantage to the company. For more standard products, technology providers can often retain the ownership of data produced by the tool. For many organizations, it is important to own the data they produce in order to incorporate it into a wider analytics program.
Enhanced data collection
Technology has already enabled real-time data gathering in massive volumes and facilitated the processing of that data at record speeds. Businesses can act on findings almost immediately.
Data is valuable, but data is nothing if the right parameters don’t exist to collect and compartmentalize the information available in order to make actionable decisions. Properly structured analytics help management teams better understand their stakeholders, from heat mapping in malls, occupancy of floors in office buildings at any given time or to better understanding employee engagement.
Robotic process automation, artificial intelligence (AI) and, potentially, blockchain will be tools that help facilitate this platform
Considering that machines store, retrieve and acquire new data at lightning fast speeds and with great accuracy, management teams will be able to improve decision-making across both front- and back-office functions by employing AI and robotics.
Enhanced data analytics will deliver proactive and predictive management, which, in turn, will help keep buildings relevant
Analytics will evolve further to help business better understand the built environment, allowing assets to be tailored to their specific location. The use of technology-enabled tools across a platform that seamlessly integrates technology with real estate in order to optimize the collection and delivery of data will help move organizations up the value chain from a reporting and analytics perspective, and crucially do it all in a safe environment.
Smart buildings evolving toward a more holistic view
Smart buildings discussions have already moved toward a more holistic view, using data and analytics not only to optimize buildings from an operational standpoint but also increasingly to understand the occupants. The speed of evolution will likely accelerate in an unprecedented age of rapidly advancing technology, where every-day decisions can be analyzed and optimized given the vast amounts of data that the built environment, devices and online interactions collect and transmit.
Internet of Things (IoT) devices will need to be integrated with legacy BMS networks
At the core of smart buildings are the IoT devices that can collect data and transmit it to the cloud for near real-time analytics. The integration of IoT devices with legacy BMS networks will, therefore, be essential. This will drive a need for integration and expansion of the OT systems and BMS networks.
Technology may ultimately impact valuation
Implementing technology across a platform is an expensive process, particularly if products are created in order to solve the many challenges that are unique to each different real estate subsector. Balancing the cost benefits will remain a critical issue, and prioritizing the areas with the greatest need remains essential.