2017 Commercial Real Estate disruptors

2017 Commercial Real Estate disruptors

CRE owners may believe that smart cities are unlikely to impact the existing built environment, or that the timing is too far out to consider seriously. However, some evolving trends are likely to impact the CRE industry faster than expected. Growing government focus, rapid advances in technology, and innovative solutions to improve urban life should compel the industry to prepare and respond to the changes in the ecosystem.

In our 2017 Commercial Real Estate disruptors, we have identified five themes that CRE owners should consider integral to their business strategy. Most of these themes are enablers, which if used strategically and timely, can equip CRE companies to make their physical space future-ready:

• Future of mobility
• Occupant health and wellness
• Internet of Things
• 3D printing technology
• Demographic data and predictive analytics

CRE business models will need to evolve with the changes in the ecosystem and CRE companies will benefit from reimagining their business strategy. Download our outlook to discover how.

The future of mobility

How can the evolving future of mobility change both the use and supply-and-demand dynamics for CRE? There may be decreased need for parking spaces in central business districts as driverless cars can be “sent” to park in less-dense areas. Sidewalks will likely be freer as new mobility options would reduce curbside parking, and street widths could be reduced based on more efficient management of auto traffic. Autonomous trucks will impact the delivery of goods from manufacturer to both retailer and the end-consumer, disrupting existing logistics networks and, consequently, the demand and location of warehouse properties. CRE owners are also likely to witness a shift in their tenant demography.

Occupant health and wellness

Companies will place equal emphasis on mental, social, and physical health and wellness within the built environment. Why should CRE companies pay attention to health and wellness? First, their tenants are increasing their strategic focus to help attract and retain quality talent. Further, biophilic design considerations can improve tenants’ financial performance by reducing operating costs through higher productivity and lower absenteeism. Lastly, tenants can also use such an enhanced environment to strengthen their corporate brand.¹

1“Health, well-being & productivity in offices: The next chapter for green building,” World Green Building Council, September 2014.

Internet of Things (IoT)

Commonly known as smart or intelligent buildings, IoT-enabled physical space will impact CRE owners in multiple ways. The technology has the potential to allow CRE companies to improve margins through cost savings and operational efficiency as superior building performance will lower operating costs, facilitate predictive maintenance, and increase security. IoT technology can also enable CRE companies to create competitive differentiation and improve topline growth through service innovation to tenants. This can include leveraging sensor data to offer tenants more customized design and experience by capturing and analyzing end-user behaviors.

Footpath technologies can enable office property owners to provide key insights to employee interactions and movements, and help design more customized and comfortable workspaces. In another scenario, mall owners can use the same technology to personalize shopping experience by tracking shopper movement patterns through signals from their cellphones. Industrial CRE owners can likewise use IoT to enable faster and accurate shipments by using smart cart-like robots and meticulous tracking through sensors.

3D printing technology

This technology has particular relevance for engineering and construction (E&C) companies. 3D printing is likely to reduce construction costs, drive operational efficiency, and enhance the quality of construction.

Going forward, CRE owners are likely to be impacted by tenants’ use of 3D printing technology, as it will influence both the demand for space and the way it is used. Demand for retail and industrial CRE spaces will likely be particularly affected, due to the potential use of these technologies for more customized and on-demand production and delivery, reducing the need to hold inventory in large warehouses or retail stores.

Demographic data and predictive analytics

CRE owners can make more informed decisions by using predictive analytics on the expanded sets of demographic data. For instance, it will be useful for companies to know the unique and detailed future demographic profile of a region in which they are either present or plan to invest in the future. Once companies get an idea of the needs and preferences of the prospective inhabitants of a region, they can potentially assess whether the existing CRE infrastructure will align with the requirements of those inhabitants. These insights along with other considerations, such as property ownership and management costs, upcoming developments in the region, and transportation infrastructure, can help decide the location and scale of new developments and redevelopment or redesign needs for existing properties.

Companies can further use demographic data and predictive analytics for their leasing activities as well as for driving tenant engagement and loyalty. They can also use data and analytics to add rigor to existing property valuation methodologies by building in more nuances around location dynamics, building usage by occupants, and so forth, allowing CRE owners to eventually make more data-driven portfolio decisions.