TRENDS
Reshaping The Commercial
Real Estate Industry
Top Trends of 2016
BY DREW HOOK
Over the past 30 years, the commercial real estate industry has quietly transformed itself into an institutional asset class where owners manage complex and global portfolios. With the rise of new investment structures and global commercial real estate investors, real estate now represents nearly 10 percent of institutional investment portfolios, or $ 6.7 trillion.
Yet the tools of the trade haven’ t evolved to match. While much of the world has embraced technology innovations like the cloud, mobility and big data, commercial real estate( CRE) is still managed out of Excel spreadsheets and 20-year-old technology platforms.
But that’ s changing. As older systems break down, a wave of CRE tech companies that combine domain expertise with modern software expertise are building new tools for the industry. Here are the four change agents that we see reshaping the industry:
1
Rising Competition on All Fronts A new level of competition is changing the way we invest, fundraise and recruit in CRE. The massive capital influx— buoyed by low interest rates and volatility in the equity markets- has dramatically increased demand, causing prices of commercial properties to reach historic levels. As a result, competition has never been fiercer.
Competition has also risen for fundraising. Institutional investors only want to pick the firms with the absolute best yields. Limited partners are placing greater emphasis on better tools and visibility. There is also a war for talent. As the complexity of the CRE asset class grows, the next generation of leaders requires a different skill set and expects a different, more modern work environment.
2
Demands for Real-Time Data Access There’ s a fundamental shift in expectations around data and analytics. Although CRE has
38 MAY 2016 SA Real Estate Investor www. reimag. co. za