The rewards of using technology can pose unintended risks
Technology offers plenty of opportunities, but with it comes new and different risks.
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.
Current challenges faced by management teams across the sector include:
For REITs, whether buying tools, developing their own tech-based solutions or potentially acquiring new technology capabilities, demonstrable cost benefits are needed to justify the capital spend.
Acquisitions may provide an opportunity to leverage first-mover advantage, but the rewards must be properly balanced with the potential risk.
Investment in technology can be costly. Not only are there direct costs attributable to the technologies themselves, but there are also organizational issues that must be considered, such as company culture, talent and training, as well as change management.
It’s also important to consider that, in most cases, there is a limited shelf life for new technologies, with most becoming obsolete within two to five years.
Becoming digital doesn’t happen quickly. But, with your internal stakeholders on board, the use of external partners and consultants when needed, and a proper strategic plan in place, the transition can be much smoother.
Overall, when considering risk, there are obvious cyber threats, but there is also the risk of having no plan for becoming a digital enterprise.
REITs have two focus areas when considering cybersecurity:
- The information technology (IT) environment that consists of the corporate enterprise network and the associated business applications
- The operational technology (OT) environment that consists of the BMS and building functions, such as heating, ventilation and air conditioning (HVAC), safety, security, elevators, and lighting
The more specific challenge that REITs face is managing a portfolio of properties consisting of various BMS vendors and models. This is further complicated by BMS not being installed with cybersecurity in mind, but instead focusing on the availability and uptime of the systems they control.
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, such as autonomous vehicles, operating in a shared economy and the further impact of e-commerce on real estate.
Sectors converge and real estate continues to be disrupted by well-known players looking more like tech companies than real estate companies. Hence, 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.