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Technology

What’s blockchain? And can we invest in it? CRE jumps of proptech bandwagon

The commercial real estate sector has leapt into the future with both its use and interest in new technology reaching a critical mass, according to a new report.

In its annual CRE Innovation Report, tech services provider, Altus Group Limited found  “significant acceleration’ in adoption of property technology as well as a growing trend of CRE firms investing directly in PropTech companies and startups themselves.

According to the report – which is based on a global survey of 400 CRE executives at firms with assets under management of at least US $250 million representing a total AUM of over US $2 trillion – driving efficiency through automation is a key priority for CRE executives.

The report found that:

  • 41 percent of firms are using automation for benchmarking and performance analysis, 39 percent for scenario and sensitivity analysis and 36% for budgeting and forecasting.
  • 19 percent  are using AI and machine learning for scenario and sensitivity analysis followed by 16 percent for accounting and property management.

Disintermediation is also driving emerging technology adoption. New business models associated with the sharing economy, co-working and e-commerce are disrupting the CRE industry by cutting out middle steps and processes to create greater efficiencies.

The layers and stages of the financing, funding and transacting process create inefficiencies in many core CRE functions. As a result, the rise of disintermediating technology platforms and solutions are having a major impact on the CRE industry.

The report findings suggest that transaction-based platforms such as online property exchanges, lending marketplaces and crowdfunding are now increasingly being used to streamline processes and create a more direct line between buyers and sellers, lenders and owners, and investors and funds, effectively altering the relationships between them at a fundamental level:

  • 61 percent of CRE executives indicated their firms are using or already trying out online lending places, with 23% using them in a significant way;
  • 60 percent of CRE executives indicated their firms are using or already trying out online investment marketplaces and crowdfunding platforms, with 22 percent using them in a significant way
ROBERT COURTEAU

“The combination of new market entrants, new technologies and changing demographics have created disruptive models within CRE. This is having a profound impact on portfolio planning and decision-making,” said Bob Courteau, Chief Executive Officer, Altus Group. “At the same time, this presents new opportunities for organizations who rapidly embrace innovation and PropTech to reduce complexity, increase efficiency and drive performance.”

Additionally, the report also indicates that many CRE firms are becoming PropTech investors themselves, with 53 percent of CRE firms directly investing in at least one type of PropTech firm. PropTech companies focusing on smart buildings systems, online lending marketplaces, and online investment marketplaces and crowdfunding are the top investment choices for CRE firms.

Other key findings from this year’s Altus Group CRE Innovation Report include:

  • Nearly one in ten (10 percent) CRE executives “don’t really understand blockchain and what it does,” while 37 percent of executives expect blockchain to start having an impact on the CRE industry within the next two years
  • 31 percent of executives stated that smart city initiatives and projects are already having a major impact on their investment and portfolio decisions

A large majority of firms have already invested in integrated software solutions for critical CRE functions. However, 60 percent of executives said their firms are still utilizing spreadsheets as their primary tool for reporting, 51 percent for valuation and cash flow analysis and 45 percent for budgeting and forecasting, indicating that despite significant innovation, the industry continues to lag in certain areas

 

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