‘The prevailing macro-economic conditions of 2020 leave investment managers little alternative but to embrace technology with much more intent.’
A research collaboration between Saïd Business School’s Future of Real Estate Initiative and real estate venture capital firm PiLabs finds that a majority of real estate investment managers are in danger of falling behind a cultural and technological revolution which is sweeping through the industry.
Despite a wave of PropTech innovation in the last decade which has seen over $100bn invested in PropTech firms, only 25% of real estate investment organisations currently boast an established data strategy.
The report finds that the industry’s most urgent need is for investment managers to structure, standardise and digitalise their existing data in order to accurately position their portfolios and unlock value, a task which the authors state can be accomplished using today’s technology.
Investment managers must also change the way they assess property. Most real estate assets were once ‘non-operational’ – the costs and risks of ownership could be pushed onto the tenant due to long leases. But changes in the way buildings are used is leading to shorter leases, requiring owners to pay more attention to the revenue they can generate. Embracing this change will require investment managers to delve into a world of ‘employees, health and safety, feedback platforms and big data.’ Those that master ‘operational’ real estate will be rewarded with diversification opportunities and added growth.
Real estate investments are increasingly required to meet a high level of environmental, social and governance (ESG) criteria, but the industry has been slow to adapt. ‘Perhaps the biggest issue facing the industry is the need to upgrade the current building stock to meet 2050 net zero targets, with no clear model as to how this can be achieved in a profitable way,’ state the authors.