What’s Technology Doing to Commercial Real Estate?

Guest Post by Shlomo Morgulis, Senior Account Executive at Beckerman PR

For years, the narrative about the commercial real estate industry’s relationship with technology was one of missed opportunity. While many business sectors quickly latched onto the technological revolution of the 1990s, commercial real estate professionals by and large maintained the status quo for their day-to-day operations, which on some level kept the industry from realizing the benefits of widespread technology adoption.

In recent years, however, the industry has begun to make significant strides. Whether using general enterprise technologies or tools created specifically for the CRE professional, it is increasingly tapping into the digital world to improve processes and create efficiencies. Many dozens of such tools have been created specifically for real estate professionals, from crowdfunding sites to platforms that help investors and brokers leverage advances in big data and virtual reality. With the industry seemingly ripe for disruption, venture capital has flowed rapidly into real estate startups, which raised $1.42 billion from venture capital firms in 2015, according to RE:Tech.

But does this lose sight of the bigger picture for real estate and technology? There’s no doubt that we’ve seen something of a reversal of the industry’s initial aversion to technologies, and as tech-savvy millennials increasingly fill the ranks of its workforce, we can expect this to continue. But the more significant issue is not whether real estate will embrace technology – it’s how CRE can navigate the changes that technology has wrought on the world at large.

Because the new, digital world has affected every commercial real estate asset class – and the impact has frequently presented real estate professionals with significant challenges.

The effect on the retail sector may be most pronounced and is certainly the best known. With the market entry of e-commerce, many retailers have been forced to reduce their physical footprint, and others have closed, leading to increased vacancies across the country in retail assets of all types.

The hospitality sector has similar challenges, because of peer-to-peer replacements like Airbnb. Despite regulatory hurdles in certain municipalities, there’s no denying that Airbnb is effectively increasing the supply of rooms available in many markets. While a boon to tourists and other travelers, the increase has a negative impact on commercial real estate developers and investors.  

Office can expect its own share of obstacles. Technologies that support telecommuting continue to be developed, which has created a work environment where face-to-face interaction between different business units is no longer universally seen as essential. As mobile technologies continue to grow in the coming years, and especially as office devotees retire and are replaced by a younger tech-oriented cohort, we can expect the telecommuting trend to lead to shrinking corporate footprints.

Of course, it’s not all bad news. Where retail has begun to wither, the industrial sector has picked up. E-commerce and shipping companies need warehouse and distribution centers to house their operations, and there’s a trend toward converting industrial facilities into office space. This has markedly increased investor interest in industrial properties, and in many markets, industrial development activity has picked up significantly to keep up with booming demand.

And where peer-to-peer hospitality options may pose a threat to the hospitality sector, we can expect them to have a positive impact on multifamily. Apartment leasing can be expected to pick up from both “mini-hoteliers” – i.e. people looking for facilities they can lease out nightly on Airbnb – and young people who will be able to afford their own apartments because of the cash flow they can generate by renting them out intermittently.

To put it simply, adopting the best of today’s enterprise and real estate technology is important – but it’s not enough. Given the rapidly changing world around us, come tomorrow, forward-thinking CRE professionals will have more to contend with than just e-commerce and Airbnb. To remain competitive in 2020, 2030 and beyond, it’s key to stay abreast of major trends -- like ride-sharing, autonomous cars and 3D printing -- to determine and grapple with their real estate implications. For the long-term, the key is not adopting technology – it’s adapting to it.   

Shlomo is a Senior Account Executive at Beckerman PR, where he plans and executes strategic communications campaigns for companies across the real estate sector and beyond, including developers, brokers, capital markets advisors, real estate technology platforms and attorneys. 


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