Is the Digitalization of Commercial Real Estate a Blessing or a Curse?
Is the Digitalization of Commercial Real Estate a Blessing or a Curse?
Though CRE tech is gaining ground in adoption, there are still questions and concerns regarding its value and cost.
The ongoing digitalization of every aspect of how we do business today is met with either glee or disdain, depending on how owner-operators perceive the benefits and drawbacks of the transition.
Some of the concerns include high implementation cost, increased complexity of operations, additional staffing requirements, and an extended learning curve. Despite these — and many other — very practical apprehensions, the juggernaut that is digitalization is not slowing down.
On the contrary, its influence is growing markedly in several fields, especially ours.
Let’s look at four areas in commercial real estate where digitalization is having a major impact and how the trend benefits — or detracts from — your NOI and growth.
1. Digitalization of data
Data is the big thing right now in CRE, and sensibly so.
Data drives our decision-making and enables us to assess and monitor our performance, evaluate acquisitions, and forecast future outcomes — including upside at exit — more accurately.
I think few would object to the value in digitizing our finances, and likely fewer are laggards. For budgeting, auditing, and providing transparency to our investors and other stakeholders, going digital is a necessity and expectation that is practically standardized in the 2020s.
Furthermore, analog mediums (i.e., paper) are prone to loss, damage, and errors. And the inherent material waste and environmental damage that result from mass paper usage for leases and other vital documents provide no sustainable benefit.
In contrast, the conversion to digital documents reduces materials costs and waste, and significantly streamlines how we search for, index, and prepare reports. In other words, digitalization turns raw data and information into relevant knowledge — i.e., actionable intel.
Leases are a prime example where documents across an entire portfolio can be scanned using OCR (optical character recognition) and machine learning.
The process transforms that bulk of paper and raw data into a wealth of information to power decision-making in the form of instant reports, such as portfolio-wide rent rolls and on property/tenant performance.
Fortunately, in the long term all the above strategies reduce operational expense, minimize internal staffing requirements, and improve strategic and financial performance.
2. Digital communication, management, and thought leadership
Our understanding of, ability to attract, and relationships with investors and tenants are the underpinnings of a successful commercial real estate enterprise.
The digitization of media, marketing, and communications channels has made it easier to target, connect with, and influence prospective and current stakeholders.
And not only is digitization more efficient from an operational point of view, it’s also much more cost-effective and generates increasing ROI compared to traditional paid media (print, broadcast, direct mail, and the likes).
The engagement we’re able to achieve with our prospects through social media grants us deeper insight into the needs and concerns of our target market.
With that insight, we’re further equipped to create thought leadership content and engage with industry media in a way that speaks directly to stakeholder needs, builds rapport, conveys credibility, and creates opportunity.
Once we’ve formed those relationships, tenant and investor portals keep the lines of communication open, fostering an excellent experience for our stakeholders.
These tools also dramatically simplify administrative tasks, including customer service, rent collection, maintenance management, and reporting.
3. Digital design and building systems
On the design and development side, technology offers clear operational and financial incentives.
The work that would once have taken a vast team of architects, engineers, drafters, and consultants can now be completed in much less time by a more compact team, with reduced expense and fewer errors.
Additionally, with the aid of CAD, BIM (Building Information Modeling), and AR/VR, we’re able to accurately project — and experience — what the space will look like and how much it’ll cost to construct and operate.
The digital tools also allow us to better understand the thermal performance of our builds and discover paths to reduce material requirements.
Once the project has been completed, we can also leverage tech integrated into HVAC, lighting, water, and other systems to monitor and optimize usage — while also providing a healthy, comfortable, productive experience for our users.
Harness the digital transformation
Over the long term, all these aspects of digitization add up to increasing NOI and ROI and the simplification of operations.
With the guidance of experts in the CRE tech space, you can harness the digital transformation to support the growth of your portfolio and enterprise.
While there’s a cost in terms of time and expense to implement new systems, the learning curve is short and the advisement available.
So, despite the pains in transitioning to the digital domain, the operational and strategic benefits are a boon.