Stepping into the last quarter of 2021, the global economy appears to be picking up pace and faring better than many expected. The commercial real estate industry, which has undergone huge changes during the pandemic, became witness to trends such as remote work, digitalization and cloud applications.

In its CRE Outlook for the year, Deloitte investigated the effects of COVID-19 on some of the fundamental functions impacting the CRE industry, and underlined how overcoming these challenges could lead the way for new opportunities to build back stronger. 

We bring you our key takeaways from these functional challenges facing the commercial real estate industry – technology, operations, and talent – and how CRE companies can position themselves for growth in the coming years. Let’s get straight into it!

Technology

COVID-19 accelerated and necessitated the use of technology in the CRE industry. Digital transformation and tenant experience are coming to the fore as main objectives amid the pandemic. 

Challenge: 

Even though digital technology has helped improve tenant experience, fast-track important tasks and ensure business continuity, CRE companies still struggle with defining digital workflows and digitizing key business processes. According to the report, 56% of the respondents believe the pandemic exposed frailties in their company’s digital capabilities and impeded their plans to transform. 

So what can CRE companies do to address their digital transformation hiccups? 

Opportunities:

By making digital transformation a priority, CRE companies can tap into a sea of benefits – like happier tenants and advanced business performance. Industry leaders suggest that developing a structured plan with a more proactive approach, including the uptake of various technologies and data analytics, would likely bear substantial results.

• Using IoT-enabled smart devices 

Companies can significantly improve tenant experience by optimizing real-time updates about facilities and developing a sense of community using IoT-enabled smart devices and mobile applications. 

• Leveraging Cloud Tech

Cloud technology could be the cornerstone for a wide range of functionalities as it offers scalability, data storage, and universal access. Some CRE companies have already ramped up their use of cloud-based collaboration and productivity tools like Realstax and Bixby to lower in-house technology costs and increase flexibility.

• Building Partnerships with Tech providers or Proptechs 

REIT (Real Estate Investment Trust) respondents have put a foot forward in this direction, showing more willingness to collaborate with proptechs. On an average, 58% of REIT respondents showed increased intent to partner, compared to 45% of respondents who are developers.

Operations

Cost management and redefining the value proposition of properties became primary goals for the CRE industry during the pandemic. Optimizing the operations function is considered to be essential for companies to build resilience against the volatile business environment. 

Challenge: 

As demand for leased space reduced significantly, CRE companies faced rising pressures to contain costs. Companies are also incurring higher operating costs because of the additional health and safety measures they need to implement across their portfolio of properties.

Opportunities:

To position themselves for longer-term success, companies should consider the following actions. These are crucial to enhancing business resilience and cutting down costs.  

• Streamlining and Restructuring Operations 

This involves an in-depth analysis of business processes, identifying opportunities to restructure and reduce inefficiencies which will allow work to get done faster and more cost-effectively.

• Automating or Outsourcing Non-core Operations 

For CRE firms, non-core operations may be data collection & processing, maintenance, security, supply chain management, and so on. These should be automated and/or outsourced to gain operational efficiency. The pertinent dilemma – to build or to buy, must be taken care of. 

• Deploying Smart building Design and Asset Management Systems 

Companies could increase the value of their properties by deploying smart building design and modernizing asset performance management capabilities to render more relevant services to tenants and end users. This may involve using sensor technologies and predictive analytics to monitor facilities remotely and offer reliability-centered maintenance, implement more rigorous cleaning procedures, monitor HVAC systems, and enable data-driven decision making. 

Talent

The shift to remote working was unprecedented for the CRE industry. Companies had to provide the infrastructure for employees to work effectively from home, or anywhere for that matter, while prioritizing health and safety. 

Challenge:

The pandemic escalated many organizations’ need to reimagine job roles, leadership strategy, talent systems and processes, and culture to attract and retain a skilled and dynamic workforce. 

Opportunities: 

Some key avenues for CRE companies to improve upon and champion positive change in their workforce ecosystem

• Creating an enabling culture

Companies should adopt an enabling work culture and use the workplace to make employees feel valued, build strong relations, facilitate collaboration, and create more human experiences.

• Talent Transformation 

Planning and implementing a talent transformation to adapt to the future of work, and prioritizing diversity and inclusion will provide a competitive edge.

• Three Approaches to the Way People Work 

CRE companies could consider three approaches to the way work is done in the future.

Based on these approaches, companies could be progressives, visionaries, or simply traditionalists. The nature of work in the three types of companies is summed up well by the image that follows!

Conclusion

To state the obvious, the pandemic has altered the way we live and work, and it’s been no different for the CRE industry. It has pushed leaders across the globe to rethink their business strategies and goals, forced companies to prioritize cost containment, and amplified the scope of rewards from digital transformation. At the same time, human connection is becoming more relevant than ever, as in-person interactions have reduced significantly in the last year and a half.  

From here on out, CRE companies are expected to master a balancing act – ensure business recovery, seize new opportunities, cultivate a cohesive workforce and improve tenant experience. This will require proactive leadership and organizational agility, and increased levels of collaboration among various stakeholders, to be able to adapt and thrive in the future of commercial real estate. 

What strategies have you applied to sustain and thrive in the CRE industry this year? Let us know your experience with technology, operations, and talent, and how you are preparing to overcome the challenges posed by the current commercial real estate scenario.