Tech Takes Center Stage in Deloitte’s 2020 Outlook
- Oct 10, 2019
For the past several years, Deloitte’s annual outlook series has been focusing on the importance of technology adoption in commercial real estate. The latest installment—2020 Commercial Real Estate Outlook: Using Digital and Analytics to Revolutionize Tenant Experience—urges companies to put tenant and end-user preferences at the center of every decision. It even takes the traditional CRE mantra of “location, location, location” and replaces it with “location, experience, analytics.”
“Overall, as an industry, real estate has lagged other industries in making investments in technology. However, we are seeing more focus and a sustained increase in these investments that we believe is being driven by the rapid change in needs and expectations of tenants and end-users,” one of the report’s authors, Jim Berry, told Commercial Property Executive. Berry is a partner of Deloitte & Touche LLP and the leader of its U.S. real estate practice.
The 44-page report is the result of a global survey of 750 CRE C-suite executives from 10 countries across the Americas, Europe and Asia Pacific conducted in June by the Deloitte U.S. Center for Financial Services. The survey included CRE owners, developers, and property managers, private equity real estate investors and managers, as well as CRE brokers and consultants. In addition to asking questions about business sentiments and expectations, the survey asked about preferences, beliefs, actions and challenges regarding key topics such as tenant experience, data utilization, cyber security, and the role of technologies such as Internet of Things (IoT), artificial intelligence (AI) and digital reality (DR).
Berry said the survey found 64 percent of executives surveyed reported they increased their technology-related investments over the past 18 months and 78 percent said they expected their organizations to at least hold or increase those commitments.
“A good example is in the area of data governance where, overall, two-thirds of the respondents plan to increase their investments,” Berry told CPE. “Another proof point illustrating the industry’s sustained commitment to technology investments is that 72 percent of surveyed CRE executives plan to maintain or increase their overall technology investments even if an economic slowdown occurs.”
“This sustained commitment and a move to be more proactive in making technology investments is critical for the industry in achieving digital tenant experience advancements,” Berry added.
The survey found increasing urbanization and globalization are changing tenant preferences, including workforce demands. The results are the need for more flexible locations and workspaces as well as increased use of technology advancements like AI and IoT. The executives acknowledged that IoT and AI technologies can also raise operational efficiency and lower costs.
Some of the key messages in the report include:
- Data control, access and analysis are expected to be more critical as data generation and leveraging data continue to increase.
- AI should be more fully embraced by companies. The report notes AI can enhance operational efficiency, identify risks and opportunities much more quickly than current technologies.
- Collaborate with proptechs to help attract and retain talent as well as retrain and re-skill the current talent pool.
- Cyber security and tenant data privacy are becoming top priorities as the CRE industry has more access to personal data such as user location, communication, behavior and sentiments. Cyber threats are becoming more pervasive.
“The need for tenant privacy and protection will continue to rise as the use of technologies such as the IoT, AI, DR, cloud, and mobile apps increase the magnitude and complexity of threats, Surabhi Kejriwal, real estate research leader at the Deloitte Center for Financial Services, told CPE. “The most interesting development is that, although most lessees are corporations, CRE organizations have incredible access to personal data such as tenant/end-user location, communication, preferences, behavior, and sentiments. Some of the preferences could include work and mobility patterns of tenants/end users and the services they consume.”
Kejriwal said damaging the tenant relationship and increasing turnover are among the potential impacts of a data breach, according to 32 percent of the surveyed executives. Forty-five percent of surveyed CRE organizations have developed in-house cyber resilience capabilities to limit the exposure of private data and potential impact of a data breach. Seventy percent of companies reported increasing technology improvements that are focused on tenant expectations.
Other takeaways in the report include:
- Organizations acknowledge growing demand for smart buildings with more than half of respondents reporting the importance of investing in smart capabilities like controlling lighting and room temperatures. Executives expect smart buildings to become more mainstream within a few years so they say it is important to increase smart building portfolios over the next 18 months.
- AI adoption has room to grow. Adoption is still in early adoption stages in the CRE industry, but 63 percent of respondents expect AI investments to increase and plan to use it in the future.