Asset managers call for innovation to tackle market challenges

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Asset managers call for innovation to tackle market challenges

Press Release

16 October 2019

Key findings from Deloitte’s 2019 European Operations and Technology Survey highlight the importance of technological advancement and investment in data analytics for the real estate investment management industry.

Luxembourg, 16 October 2019: Deloitte’s 2019 European Operations and Technology Survey reports a keen interest in innovation from real estate investment managers with document digitalization, the use of big data, and robotic process automation as investment avenues of high importance. All asset managers who participated in the survey consider that asset management, transaction management, and investor reporting would benefit from technological innovation. In keeping with this theme, 83 percent of asset managers surveyed consider that use of technological tools is an important or very important challenge for their organizations.

Historically, the real estate investment management industry has been slow to embrace digital transformation, but it appears the tide is turning. In a rapidly evolving digital landscape, real estate investment managers are looking to new technologies to increase efficiency and further growth.

Through the Survey, we can determine that real estate investment managers are targeting specific cross-industry technological innovation such as digitalization and data analytics as potential enablers of improved performance,” comments Benjamin Lam, Partner Deloitte Luxembourg, and EMEA Real Estate Funds Co-Leader. “Some innovations may be too early in their development, yet the level of interest in innovation is very strong and perhaps reflects the level of opportunity seen in using disruptive technologies to gain competitive advantage.”

The report examines how asset managers are rethinking their operating models and technological capabilities in response to prevailing trends and demands. However, despite intentions to capitalize on state-of-the-art offerings, investment managers are facing a number of challenges in the market which may take priority. These include the fierce competition for retention and recruitment of talent, the pressures of real estate pricing, deal flow, and fees, and the impact of regulation on increased compliance and structural costs.

Embracing digitalization

Overall, the focus areas for innovation are not surprising, as they center on those that will improve processes and efficiency or provide a greater degree of data-driven insight. While there are a number of technological innovations being deployed globally, specific areas appear a priority. Almost all managers in the survey intend to invest in the digitalization of contracts and documents, while 81 percent have already invested or are planning to invest in big data and data analytics. 75 percent surveyed recognized that the increased investment in robotic process automation would have a significant impact.

Compared to other industries, real estate has been slow to implement IT and automation,” comments Benjamin Lam. “However, as larger players become increasingly sophisticated in their use of analytical tools, the limitations of dated technology will become a key differentiator between success and decline.”

Operating model satisfaction varies

Overall, real estate investment managers are satisfied with their existing operating models; out of 392 responses across 15 activities, 83 (21 percent) reported a low level of satisfaction on some aspect. The highest level of satisfaction was with governance and processes (particularly in fund and portfolio management), while data warehousing, asset management, and property accounting showed some room for an increase in satisfaction.

The report shows that dissatisfaction is greater around technology and outsourcing than governance and process. However, 70 percent of those surveyed have invested or intend to invest in the areas of asset management and data warehousing systems which may suggest the industry’s actions to address such challenges.

Market challenges to meet

Despite interest and intention surrounding innovation investment, the industry is facing a number of challenges strongly affecting the market; talent, market conditions, and enforced regulations.

The recruitment and retention of talent is considered as crucial to the success of an organization according to those surveyed, with nearly all rating it as important or most important. As the need for increasingly sophisticated investment vehicles and tighter fee structures occurs, the competition for the best performing staff at all levels, across all disciplines, will become fiercer.

94 percent of asset managers surveyed consider real estate pricing and deal flow as important challenges faced by their organizations. 78 percent of survey respondents marked pressure on fees as an important challenge too. Real estate investment managers are required to be increasingly creative in finding and developing assets to meet expected return targets, thus creating pressure on both pricing and deal flow.

In addition, 15 out of 18 asset managers mark regulation impact as important or most important for their organizations, while increased compliance and structural costs are a significant concern among 72 percent of those surveyed. New regulations, such as the AIFMD, have caused asset managers to make substantial operational changes to ensure adoption of correct guidelines. The challenge is to continue to do so.
Read more about Deloitte’s 2019 European Operations and Technology Survey, here:

About the Deloitte 2019 European Operations and Technology Survey

The survey gathered information from 18 of the leading global real estate investment managers who operate €234 billion European assets under management (AUM), or 47 percent of global assets. It addresses some of the most relevant trends around technology and operations with an outlook over the next three years.

The 2019 European Operations and Technology survey for real estate investment managers portrays an industry that is currently adapting to evolving market conditions, a changing regulatory market, and a fast-growing technological landscape.

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