Experts at Wharton Contemplate the Future of CRE
Tech disruption always feel new and scary, but it actually follows the same basic pattern every time it happens. Established players in massive industries assume they’re too big to lose market share to nimbler software companies until it’s already too late. So it was with Amazon and retail, Uber and taxis, Netflix and entertainment -- the list goes on and on.
Is commercial real estate next? Depends what you mean.
The top landlords and brokerages aren’t going to go the way of your local cab company. But CRE pros who don’t embrace technology will find themselves at a competitive disadvantage, closing fewer deals and getting less out of their portfolios than those willing to try new tools. So how can the top organizations in this notoriously slow-to-adopt industry get ahead of the curve?
That’s the question a team of tech, real estate, and marketing experts sought to address in a new think piece out of Wharton. They give CRE owners a framework for how to make technology a core part of their business. But the model might not be a perfect fit for the industry.
Their Solution? The PIVOT Model
The paper’s authors view the new sharing economy as one of the most important trends owners need to understand and capitalize on, citing that most Americans view access to goods as cheaper and easier than actually owning them.
They point out that the sharing economy challenges a core tenet of real estate: the importance of location. Thanks to mobile tools, potential tenants can easily get work done and collaborate with each other from anywhere on the globe. Startups like WeWork have tapped into that by giving customers access to office space without having to deal with the headaches of owning it.
So with location mattering less and less, CRE pros have the opportunity to identify new types of monetization strategies through technology. According to the authors, that means getting a better understanding of the data they have on people--primarily tenants, but others too.
That’s where their PIVOT model comes in. It’s a step-by-step guide to how CRE companies can make stronger, tech-driven offerings:
- Pinpoint: Whether you’re a tenant rep, landlord broker, or owner, you need to nail down what your business model looks like today to figure out how tech will fit in tomorrow. It’s pretty simple. How are you currently making your money? Where can tech help?
- Identify: Take stock of the data you have — more specifically about partners, employees, and tenants. Consider information such as their relationships, buying patterns, and real estate needs. Being able to understand their behaviors and patterns can be extremely valuable.
- Value: Figure out how you can turn that data into insight or a platform that strengthens your business. For instance, the authors suggest building an online network for owners, tenants, and brokers. Think LinkedIn for CRE. That would add value for customers and give you deeper insights into how the people who matter to your business connect with one another.
- Operate: Next, you need to follow through and devote actual resources--time, money, or people--to your new digital initiative. Otherwise, nothing will get done.
- Track: Finally, come up with some KPIs to measure your success. What numbers always need to be going up for your digital efforts to be a success? For the networking tool proposed in step 3, those might be new users or weekly activity.
According to the paper’s authors, following those five steps will put tech at the center of your CRE business and set you up for long-term success.
Would PIVOT really work in CRE?
Without a doubt, CRE needs to become more data-driven, just like every other industry. The industry is way behind on how it stores and leverages data — especially leasing and asset management data. Right now, reports are stuck on static Excel spreadsheets and leasing data is coming in different forms from dozens of brokers. While that may be the status quo, it’s hurting both their productivity and bottom line.
But does the PIVOT model really solve this issue? Since the CRE industry is so behind on tech, it would be an extremely difficult for most industry players to properly tackle these challenges in-house, with or without a five-step model. With the resources they currently have, that would take more like five years… and many missteps. If owners and brokers want to start leveraging their data right now, they need to turn to the experts--third-party companies building tools that are mobile, easy to use, and custom-built for the industry. They can also look to these companies as partners in adoption.
So while the authors are right that data is the future of CRE, they’re forgetting that asset data is just as important as human data, and they’re wrong in thinking CRE companies can build these tools themselves.