Technology disrupts commercial real estate

According to a report from Altus Group, commercial real estate firms are beginning to adopt property technology platforms in ways that promise to change the industry in the near future.

The Altus Group CRE Innovation Report surveyed 400 commercial real estate executives at firms with assets under management totalling over $2 trillion, 41% of whom are already using automaton for benchmarking and performance analysis. Thirty-nine percent are using automation for scenario and sensitivity analysis and 36% are using it for budgeting and forecasting.

“Sixty-one percent of CRE [commercial real estate] executives around North America use some online lending platform, and 23% of them are using them in a pretty significant way,” said Ross Litkenhous, global head of business development for Altus Group.

“From a crowdfunding perspective, you’re giving a broad, wide array of investors the opportunity to invest in a piece of real estate, whereas in traditional commercial real estate, you have folks that syndicate money or are tied in with a high net worth individual. Everybody gets a percentage of a deal. From crowdfunding you’re going out to the masses and asking people to invest in a deal through some sort of online platform, which is not the way real estate has been traditionally done. It’s taking evolutionary leap.”

Some of the online lending firms are Lending Tree, Blend, and RealAtom; a couple of the online investment and crowdfunding companies are Cadre and Fundrise; and an online exchange company is Ten-X.

Litkenhous talks about the bell curve, in which innovators lead the way and are followed by early adopters; then the early majority, who are followed by the late majority; and finally they are tracked by laggards, who tend to be conservative in outlook and execution.

“My opinion is we’re between early adopters and the early majority phase,” he said. “What that means is it’s gotten enough mainstream coverage and enough folks who have trusted the technology enough to do deals, and they have seen the value. Now larger companies and larger players are saying it’s been out long enough that it’s time to adopt. In our survey, we saw 53% of our respondents said they were directly investing in one type of PropTech firm.”

The report further stated that the combination of new market entrants and technologies, as well as changing demographics, have created disruptive models within the commercial real estate industry. Moreover, many firms within the industry are investing heavily in property technology to the point that they will influence the industry’s future direction.

“This means significant opportunity for firms who rapidly embrace innovation and PropTech to streamline their systems and processes to reduce complexity. Staying on top of the disintermediating drivers will help ensure CRE executives are well-positioned to leverage the latest available technologies to their advantage,” read the report.

“The combination of new market entrants, new technologies and changing demographics have created disruptive models within CRE. This means significant opportunity for firms who rapidly embrace innovation and PropTech to streamline their systems and processes to reduce complexity. Staying on top of the disintermediating drivers will help ensure CRE executives are well-positioned to leverage the latest available technologies to their advantage.”

by Neil Sharma | 23 Jan 2019  | Canadianrealestatemagazine.ca