Five key drivers for commercial real estate investment

Real estate investment priorities were changing even before the Covid-19 pandemic. The crisis is only likely to accelerate the emergence of these five investment drivers.  

Ecosystem

Networks and relationships are vital elements of success in any industry. According to a Harvard study, 85% of success within a professional setting is attributable to the development of new relationships and successful networks.[1] In the real estate industry, clients enter into major, long-term investments which can have significant consequences in their lives. Hence, relationships will remain an integral part of the real estate industry. The development and maintenance of meaningful relationships ensures retention of customers and generation of new business through referrals. The most successful way to ensure on-going business from customers, is to cater to their expectations and, if possible, exceed them. Over time, these customers may well refer new business and cause the least amount of fuss while making the largest investments. However, at present, most commercial real estate (CRE) firms utilise at least one manual method of managing relationships with their clients. Manual methodologies tend to restrict productivity, minimise firm efficiency and result in a negative experience for investors.

Technology

A report from Forbes has identified six technologies that are impacting real estate.[2] Technology has completely revolutionised the manner in which real estate sponsors and investors interact, communicate and handle different aspects of business. A great number of investors have realised the potential of leveraging technology to manage and monitor as one of the key reasons for achieving success within their portfolios. Recent developments in technology have permitted sponsors to cater to the ever-growing demands of investors. Harnessing the power of technology correctly permits firms to mitigate potential future issues and focus their attention on developing the business, whilst also driving efficiencies, culminating in a comprehensive experience for the investor.

Resources allocation

Many organisations lack surplus resources. Whenever investors demand additional project information, attention is diverted from their sponsor for that particular purpose. This is precious time wasted, which otherwise could be spent on enhancing investment values and procuring the best real estate on the market.  According to KPMG, “95% of real estate companies have someone responsible for leading digital transformation and innovation. In 62% of cases, this is a senior employee, however, in 65% of cases, it isn’t a digital or technology specialist.”[3] Technology assists in improving the customer experience while improving process efficiency. Following the implementation of such efficiencies, investors have a better chance of seeing a return on their investment.

Taylor-made communication

In this day and age, personalisation plays a major role in ensuring investor loyalty. The strategy of offering the same thing to everyone is no longer feasible. Consumers hope for a better understanding from companies, and any firm that has the technology to offer personalised services to a consumer is sure to garner higher levels of engagement from investors than their competitors might. Compiling tailor-made email communications allows sponsors to provide dedicated information to the investor.

Data

The industry has adopted the use of a data-driven approach to arrive at decisions with greater emphasis on technology-related processes. CRE investors can make use of data analytics and artificial intelligence (AI) to mitigate risks effectively, as these enable the identification of intricate patterns and potential future opportunities. Streamlined data can be used to overcome risks by efficient decision making, minimised transactional and operational costs and integrated portfolio optimisation. Data is increasingly being seen as the new ‘oil’ in our economies. However, this data needs to be structured and not only accessible to humans, but also machines. Having data in files on a desk or possibly buried within PDFs and emails on a laptop means it is difficult to sort, manage and optimise the use of this data. Technologies such as AI, Blockchain and Machine Learning operate more efficiently by being able to access and use data that is structured.