Digital Disruption within the Commercial Real Estate Industry

Digital disruption continues to affect many industries. Advanced technology, for instance, is now beginning to change the landscape for many asset classes within commercial real estate (CRE). To that end, today’s real estate investors and developers should consider implementing available technologies that (1) impact the size and use of tenant spaces in order to extend the property’s appeal throughout its lifecycle; (2) automate and create operational efficiencies; and (3) collect data points for analytical purposes. These three key factors will undoubtedly contribute to the transformation of the commercial real estate industry over the next few years.

For example, augmented reality (AR) and virtual reality (VR), two readily available technologies, can be used to show off unfinished spaces in buildings and provide a virtual tour for viewers. A real estate developer of an office building, for instance, can create a physical architectural miniature model of the building, then use AR to create a hologram-like image of the exterior and interior of the space. This enables the end user to experience and envision the potential use of the space and make an informed decision without ever having to visit the location.

Operational efficiencies are also important to ensure profitability with any real estate asset. The use of smart sensors and metering systems for tenant utilities allows property managers and landlords to control costs by providing accurate billing of water and energy consumption using real-time monitoring. Once these sensors are setup throughout a property, the system collects and analyzes consumption data and pinpoints abnormal usage. Cost savings are then realized over time as maintenance crews can repair a tenant’s leaky faucet or faulty toilet before the tenant may report the issue to the property manager.

Landlords can also avoid other unexpected costs, including damage to the building and personal belongings. In doing so, they would realize additional savings on expensive renovations and avoid the hassle of rehousing or relocating tenants. For most commercial and large residential properties, the cost-benefit for outfitting a building with this type of technology can be significant. Plus, these systems often allow integration with other systems, such as billing, making it easy to scale and monitor the data with additional properties in a portfolio.

Retail is another CRE asset class that’s on the verge of utilizing technology more extensively. In an effort to attract higher foot traffic, many retailers are focusing on enhancing the customer experience. In doing so, they’re implementing Internet of Things (IoT) technology made up of four components: sensors/devices, connectivity, data processing and a user interface. Together, this IoT technology facilitates interaction between consumers and the personal experiences offered by the retailer while shopping. Examples are the Bluetooth devices situated around the particular store that send alerts to consumers via their smart phones, based on their proximity. Through this, consumers can receive discounts, notification of special events or other reminders, leading to an increase in the likelihood that they’ll make an in-store purchase.

Another example is JLL’s PinPoint, a geofencing tool that analyzes a consumer’s mobile data points, such as where they stop and look at products while they shop. The software tracks and measures the consumer’s data in real time, supplying retailers with metrics to better locate and position their storefronts.

As technology continues to advance, new applications will come to light. Whether it improves management, energy efficiency or higher space utilization, the more data that a landlord has, the more effective it can serve their tenants.

Contact Schneider Downs ADAPT to get in touch with our experts that can work with your data and transform your decision making and analytics processes.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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