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Perspectives

Robotic and cognitive automation redefining lease administration

QuickLook

Rapid automation advancements continue to make headlines. As automation permeates the commercial real estate (CRE) industry, companies have an opportunity to enhance existing processes and operational efficiency.

June 19, 2019

A blog post by Alakshendra Singh, senior analyst, Deloitte Support Services India Pvt. Ltd.

In this blog, I explore the potential of automation for lease administration, a core back-office operation. Currently, many CRE companies continue to rely heavily on manual leasing processes. A leasing contract is first created in a Microsoft Word document, then relevant data is extracted manually.1 Any change to an existing lease document usually involves substantial manual intervention.2 Many documents—such as lease agreements, deeds, brokerage contracts, vendor payables and credit applications, property management agreements, and property tax assessments—are still maintained in a physical (either scanned or spreadsheet) format.

As a result, the current processes are fraught with cost and time inefficiencies and inaccuracies. Companies find it challenging to perform in-depth analysis, as the data is not structured in the desired format. More importantly, they have limited capacity to capitalize on the insights locked within their documents. The high level of human intervention also increases the probability of fraud and error.

Robotic and cognitive automation (R&CA) could be used to alleviate some of the current process inefficiencies. The complexities of the lease drafting and negotiations can be handled by using context-aware automation, a type of R&CA that reduces the need for human intervention while generating iterative versions of the draft during the negotiation phase.3 Such systems can help save as much as 40 working hours per transaction.R&CA can automate several parts of drafting the lease contracts, as the basic structure of such documents tends to be common. Figure 1 lists out the various activities that can be automated using R&CA.

Figure 1: Potential activities for automation using R&CA

Source: Francisco Acoba, Abby Levine, Alina Tousain, and David Kaplan, “Corporate Real Estate and Facilities Management in the Digital World,” Deloitte, December 22, 2018.

In addition, Artificial intelligence (AI) can be used to perform higher-order processing of the lease documents. Once the lease has been executed, AI can be used for lease abstraction, to extract actionable data from lease documents.5 This data can be used by management to make informed business decisions and identify leases coming up for renewal and competitive rental rates for that geography.6 These solutions can also be used to identify the impact and predictability of cash flows.7

A huge potential for proptechs

Proptechs offering automation solutions are playing an important role in helping CRE companies adopt the same. CRE companies do not have to create automation solutions from scratch. Partnering with proptechs can be cost-effective, as companies can purchase solutions off the shelf. This involves paying the acquisition cost of the solution up front at the time of purchase. Some proptechs also offer another alternative—robots as a service (RaaS).RaaS primarily involves developing an automation solution and hosting the same on a cloud which allows CRE companies to access their functionality remotely.9 The major benefit of using RaaS is that CRE companies can use solutions on a subscription basis, which enables them to scale as per demand.10 This allows cheaper and faster implementation of the technology.11

Currently, automation is used by only 20 percent of CRE companies with another 43 percent considering using automation in the near future.12 This offers a huge potential for proptechs to market and sell their products and service offerings. For CRE companies, it helps them track their leasing data accurately and efficiently, and this information is further used by C-suite executives, partner-investors, occupiers, legal and finance departments.

The benefits of automation extend beyond lease administration to other processes that are rule based, repetitive in nature, and data intensive. Other back office operations such as budgeting and forecasting, portfolio management, and reporting and KYC operations are areas where companies can apply R&CA for enhancing efficiencies and realizing cost efficiencies. Additionally, CRE companies can use automation solutions to keep tabs on compliance to track the implementation of new lease accounting standards set to take effect in 2019 and 2020.13

Currently, automation is used by only 20 percent of CRE companies.

What do you think?

Leasing processes have substantial automation potential. As companies enhance internal efficiencies, they can expand the use of R&CA technologies to other areas such as tenant experience, and portfolio and risk management.

Endnotes

Gabriel Safar, “Is Now the Time for Commercial Real Estate to Embrace Lease Automation?,“ Propmodo, February 14, 2019.
Ibid.
Ibid.
LeaseCalcs website, accessed on 31 May 2019.
Erika Morphy, “How Artificial Intelligence is being used to read leases, Other real estate documents,” CREModels, April 2018.
Ryan Hendrie, “Benefits of data analytics for effective lease management,” InnerVision, February 18, 2016.
LeaseCalcs website, accessed on 31 May 2019
Dustin Strydom, “Demystifying Robots-as-a-Service for the Commercial Real Estate world,” Global Real Estate Experts, November 23, 2017; www.openboxsoftware.com.
Ibid.
10 Ibid.
11 Ibid.
12 Gabriel Safar, “Is Now the Time for Commercial Real Estate to Embrace Lease Automation?,“ Propmodo, February 14, 2019.
13 Ibid.

QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.

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