deal-making functions

Deal-making functions migrate to proptech

Monday, January 27, 2020

Proptech’s encroachment into traditional deal-making functions has caught the attention of 400 global commercial real estate (CRE) executives responding to Altus Group’s annual survey of the industry’s uptake of digital and data-based tools. They foresee technology-enabled multifamily co-living will be the most significant disruptor to the status quo within the next three years, while trends like office co-working, retail brandbox and industrial flex space cause upheaval in other property sectors.

On the flipside, survey interpreters suggest industry leaders — including approximately 40 Canadian participants — are generally optimistic about the gains in efficiency and deeper dive into the market that proptech can deliver. Insight is drawn from representatives of companies with at least USD $250 million in assets under management, amounting to more than USD $2 trillion in collective holdings across the survey base.

“Several of the most disruptive technologies as identified by CRE leaders — online transaction marketplaces, cryptocurrencies and social media apps — are platform and transaction-based and arguably disintermediary in nature with the intent of connecting processes and people,” the newly released Altus CRE Innovation Report observes. “Technologies viewed to have a high potential for significant cost savings and operational efficiencies are oriented around analytics and automation.”

Notably, only two per cent of CRE executives reported they had not used an online platform for a transaction or deal. Of these, online lending marketplaces were most popular — seeing take-up from 63 per cent of survey participants — while only 49 per cent of respondents used online property exchanges.

Respondents based in the United Kingdom are among the most prolific online deal-makers, while Canadians are generally less enthusiastic than their peers in other regions and slip below the global average in use of three of four types of online platforms. For example, one third of Canadian respondents have used online property exchanges versus 64 per cent of respondents from the UK; 43 per cent of Canadians have used online leasing marketplaces versus 68 per cent of respondents from the UK; 58 per cent of Canadians have used online lending marketplaces versus 80 per cent of UK participants.

Canadian respondents stand out more for their focus on data analytics — reporting fewer impediments related to fragmented data or lack of corporate buy-in than did their peers in other global regions. Even so, 45 per cent of Canadian respondents indicate that issues related to data accuracy are an impediment. Globally, data management challenges are seen to be increasing in step with a rapidly expanding sources of data, but Altus analysts also see signs the industry is committed to sorting through the issues.

“Despite the growing complexity stemming from the proliferation of data, the industry is clearly shifting from a stage of trial and testing to one of practical innovation to solve their current challenges,” maintains Bob Courteau, chief executive officer of Altus Group.

Survey respondents were also generally upbeat about how proptech melds with the CRE workforce — suggesting that jobs are shifting rather than disappearing. While a large majority expect some tasks and professional roles will be eliminated, they also predict new types of jobs will be created. More error-free work accomplished in less time should also free up resources for other kinds of higher-value projects.

Drilling down to commercial real estate’s various disciplines, automation is projected to benefit property management the most and make the least impact on investment and finance. Meanwhile, a practical application of automated valuation models (AVMs) is not expected just yet.

“Applying AVMs to commercial real estate is a challenge the industry is facing given the complexity and numerous variables involved in the valuation of commercial buildings. However, the appraisal industry continues to develop artificial intelligence/machine learning to automate and speed up processes such as reviewing leases and searching for sales comparables,” the report notes.

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