Weekly Briefing

Altus Group Report Reveals CRE Industry on the Verge of Significant PropTech Consolidation as Technology Adoption Reaches a Tipping Point

The CRE industry now sits on the cusp of realizing meaningful returns from its technology investments. For the past several years, the acceleration of PropTech has been a major driving force for the modernization of the industry. The rapidly increasing level of PropTech adoption is an indicator that a more complete alignment between emerging technology and the digital transformation in the industry is now occurring.

This innovation shift is not only creating major efficiency gains but also impacting how the industry operates by directly connecting tenants, clients, services and capital. Online platforms, applications and technologies are helping to derive greater value from the abundance of data being generated throughout the industry. In the midst of all of this is the ever-growing prioritization by CRE organizations to drive a data strategy through increased executive sponsorship and involvement.

Automation of processes is also having a profound impact with important implications – from elimination of jobs to shifting job responsibilities and a workforce challenged with new ways of working.

While the industry has greatly benefitted from the expanding innovation agenda and the related explosion of PropTech, a transition is underway from experimentation and early adoption of largely unproven new technology to more of a state of "practical innovation." There is now an overwhelming consensus among CRE leaders of the need for substantial consolidation of PropTech firms industry-wide in order to more effectively deliver the real benefits from rapidly maturing PropTech solutions.

Altus Group, a leading provider of software, data solutions and independent advisory services to the global CRE industry, recently released the latest Altus Group CRE Innovation Report which is based on a survey of 400 CRE executives globally. The report provides an outlook on technology trends and highlights the current digital transformation impacting the global CRE industry.

Platforms and Automation – Transformational and in Full Force

Recent years have seen the introduction of platform-based marketplaces which connect a broad network of market participants (i.e., buyers and sellers, tenants and landlords, lenders and borrowers, and investors and fund managers) and deliver transactional efficiencies as well as the collection and aggregation of data for the benefit of users.

• Online marketplace platforms are gaining significant traction with 61% of CRE leaders saying they will have a major disruptive impact on the industry.

• Lending platforms have experienced the largest level of adoption to date with 63% of CRE firms having used an online lending marketplace for a recent transaction and 79% planning to increase use in the future.

Automation will transform the CRE industry workforce. Not only is it having a profound impact on transactions and deal cycles but also on the nature of how the industry operates. A significant majority (75%) say automation will eliminate jobs, but this was counter-balanced with the view that automation also presents an opportunity to introduce new types of jobs within the industry (71%) and shift jobs towards higher value-add tasks (67%). While CRE leaders recognize both the impact on jobs and the short-term productivity benefits that automation can deliver, a major challenge is to anticipate how it shapes the future of the CRE workforce.

Data Complexity is Growing but Making Progress through Increased Executive Oversight

Data usability challenges continue to intensify as a result of fragmented data sources, data duplication and heightened complexity of overall data management. CRE executives report increased challenges in many key areas related to data management when compared to five years ago.

The industry is relying heavily on data to drive-decision making but is hindered by disparate data requiring greater amounts of time to manage. Conversely, there exists a growing prioritization by CRE firms to address these challenges through dedicated executive ownership and governance related to overall data strategy.

• Almost half (45%) of CRE teams are spending at least 15% to over 25% of their time managing and organizing data (equivalent to two to three months of the year).

• Eight out of 10 CRE firms now have a Chief Data Officer or equivalent senior executive who oversees their organization’s data strategy and data governance. This compares to Altus Group’s 2016 research where 44% of firms surveyed indicated a lack of executive sponsorship.

PropTech Consolidation is Coming

Over the past five years, the PropTech landscape has rapidly evolved with the emergence of thousands of start-up ventures and new technologies – many yet to be proven and still seeking critical mass adoption. While the PropTech landscape has exploded with a huge proliferation of new, enhanced and competing technologies, CRE executives believe the timeframe for these technologies to start gaining traction and deliver results starts now, with PropTech consolidation a necessary outcome.

• 89% of CRE executives said significant consolidation is needed for PropTech to more effectively deliver on the needs of the CRE industry, with 43% saying it is already underway or will occur within 12 months.

• Areas of PropTech most likely to experience consolidation include property management, property transactions and listing services, and financing and lending firms.

Other notable findings from this year’s Altus Group CRE Innovation Report include:

• A large majority of CRE executives (87%) believe global data standards for commercial real estate will eventually be adopted, however, numerous obstacles were identified including a lack of standardized data definitions on a global scale, and privacy and data protection regulations.

• 50% of executives believe 5G wireless will create major disruptive impact on the CRE industry with 81% saying it will support increased adoption and use related to smart city development.

The 2020 Altus Group CRE Innovation Report is based on a global quantitative survey of 400 CRE C-level and senior executives in both front and back office positions at owner operator and investor firms in North America, Europe, Asia-Pacific and Latin America. All firms represented in the survey had a minimum of assets under management of at least US $250 million at the time of being surveyed, representing an approximate total AUM of over US $2 trillion. The survey research, used to form the basis of the report, was conducted by leading international research firm IDC in late fall 2019. Download the full report.

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