Commercial Firms to Accelerate Technology Investment or Lose Competitive Position
According to Altus Group's newly released Altus Group CRE Innovation Report
, commercial real estate firms need to speed up investment in technology innovation to efficiently capture and manage increasing levels of capital allocation to the industry.
Their report states nearly one-third of the global CRE industry is still using spreadsheets as its primary tool for asset and portfolio management functions. This means potentially $11 trillion dollars of assets are currently managed in manual spreadsheets, with all their inherent risk of inaccuracies and human error.
In addition, the report also reveals that three quarters of the CRE industry is managing its portfolios in 'data silos.' This unconnected approach to managing information and assets, which often requires cumbersome data aggregation from multiple sources, can significantly hamper the timely data-driven decision-making and reporting transparency that investors are increasingly demanding. Without modern data management infrastructure and systems, investors could judge the industry participants as 'behind-the-curve,' threatening their ability to attract trillions of dollars of additional institutional capital predicted to be allocated to the CRE industry in the next decade.
"It's clear that commercial real estate has a huge opportunity to boost productivity, unleash added innovation and increase profitability by investing in new IT and data-infrastructure solutions," said Bob Courteau, Chief Executive Officer, Altus Group. "With so much institutional capital up for grabs over the next decade, early movers in adopting best-in-class data management and reporting practices have a real opportunity to differentiate themselves from the technology 'have-nots'."
The report, which is based on a survey of over 300 international CRE executives, also highlighted that CRE is under investing in information technology compared to other industries. Taking the relative size of each industry into account, global CRE IT spend, as a percentage of revenue, is estimated at approximately 50% less than Financial Services and the Public Sector (including Healthcare).
The findings of the report also indicate that while the CRE industry still has some way to go in creating an infrastructure that allows for greater data-driven innovation, industry leaders recognize the transformative impact of technology. More than two thirds of the firms surveyed say they would realize a significant impact on investment returns by improving their asset and portfolio management decision-making effectiveness. Additionally, 77% of the firms surveyed say they are prioritizing investment in technology and process improvement to support their asset and portfolio decision making. Other findings from the Altus Group CRE Innovation Report include:
- The risk of not using an integrated software solution is that the process of aggregating data from multiple sources is slow, so top-level data used to make strategic investment decisions is often not timely.
- Data veracity is the largest impediment to companies using more data to drive asset and investment decisions.
- More data or additional metrics are needed to benchmark performance against the market.
- A large majority of those surveyed think that cloud-based and "Big Data" technologies have the potential to transform the CRE industry.