By Jennifer McLean, CFO,
For much of the real estate industry, new technologies have been viewed as minor annoyances — unnecessary distractions to a well-oiled machine. After all, why allocate capital to a new digital infrastructure when you can just, you know, buy a new building?
However, as the market continues to rebound and competition for investments heats up in the major markets, industry players are searching for a leg up. And with a growing crop of analytical tools, streamlining software and building databases, it should be enough to launch the oft-archaic real estate practice into modern times.
By way of background, approximately 80 percent of standard IT budgets are allocated to maintenance — that is, upkeep of servers, storage and network devices. Meanwhile, only 20 percent is typically allotted to growing the business through analytics, corporate finance management and business intelligence.
Thankfully, there are signs that a paradigm shift is around the corner. In a recent survey of top executives by technology research firm Gartner, the majority of respondents said that their company needed improvement in both “facilitating analysis and decision making” and “ongoing monitoring of business performance.” Perhaps even more telling, the same executives ranked priorities such as business intelligence, enterprise applications, social media and cloud computing as some of their top initiatives. Basic maintenance on voice and data communications systems ranked as one of the lowest priorities.
As CFO of GFI Capital, a multifaceted real estate and investment firm, I’m working to nudge the classic 80/20 IT budget to a 50/50 split between maintenance and business analytics. Indeed, this means allocating significantly more capital to our technology initiatives — a concept at which many C-level real estate executives have historically balked. But, it’s becoming clear that the long-term benefits of creating a sophisticated cloud-based infrastructure to create and share information in real-time far outweigh the upfront costs. While some may be tentative toward such a shift, a five-to-one return on investment on technology initiatives for large-scale project is not unrealistic. In order to sell these initiatives to a company’s top executives, it’s important to remember that, ultimately, technology drives business transformation and bottom line performance.
So, what does this mean for the real estate industry specifically? A great example can be found in the Yardi Multifamily Suite, a comprehensive real estate digital solutions provider that GFI has used to streamline its data creation and sharing. Through the service, our company is able to seamlessly collaborate in real-time on our vast portfolio of projects and utilize data to successfully and proactively manage our business. We’re also able to efficiently track lease performance at our rental properties, instantly price rental rates based on present-day market factors, and manage our energy, utility, and tenant payments through a centralized online portal.
We’ve also tapped the services of RentCafe, a web listing service that provides an in-depth online apartment hunting experience, giving users rich, interactive visuals of available properties from any internet-enabled device. Early returns indicate that the tool has increased visibility for our properties and generated a significant number of concrete leads.
Try as it might, the real estate business landscape will be hard-pressed to avoid this new technological frontier. Without adapting to the modern demands of a wide-ranging approach to data collection, real-time communication and social media, it’s unclear whether a real estate firm can excel in such a frenetic market. Simply put, it’s time to rebalance the technological budget.