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How Digital Transformation Will Impact The Commercial Real Estate Market In 2021

How Digital Transformation Will Impact The Commercial Real Estate Market In 2021

The Biden administration has not outlined its plans for the environmental policy for commercial real estate yet, but the 46th president of the United States has pledged to reduce the carbon footprint of US buildings by 50% by 2035.

Carbon Lighthouse, a startup with $67 million in funding, uses artificial intelligence (AI) to lower building emissions in CRE. Their new Efficiency Production service allows building owners to monitor and measure carbon emissions, which they believe is crucial for outdated buildings falling behind in meeting new climate goals.

But in the 2021 Deloitte Commercial Real Estate Outlook report, the data shows that Covid-19 has made a systemic impact on the CRE industry for 2021.

John D’Angelo, U.S. Real Estate Leader at Deloitte Consulting, says the impact of the Covid-19 pandemic on commercial real estate (CRE) is rapidly accelerating the use of technology.

“As CRE companies work to understand and respond to emerging behavior patterns, create safe building spaces, improve operational efficiency and identify asset- and portfolio-level risks and opportunities,” said D’Angelo. “We see the rise of digital twins, direct digital engagement, data and analytics, robotic press automation and digital maturity to drive CRE in 2021 and beyond.”

D’Angelo believes that data-driven decision making will continue to mature as demand and behavior patterns change rapidly and CRE companies work to sense and respond to the opportunities and risks that these changes present. 

“Trying to do this by instinct or gut simply doesn’t work effectively in this environment,” said D’Angelo. “Also, when you look at the adoption of robotic process automation, the CRE industry has been notoriously slow in leveraging technology. Because CRE companies are now working to improve operational efficiency and reduce costs, RPA will play a role in overall digital transformation efforts.”

“It is important to recognize that while the pandemic served as an accelerant, it did not change the trends that were already occurring,” said Berry. “In previous CRE Outlooks, we had pointed to a changing dynamic and need for the industry to seize better opportunities to utilize new and emerging technologies and data analytics to drive a different value proposition that focuses on tenant and end-user experience.

“Today, we continue to see - and what you can expect down the road - is a disruption in the value proposition of CRE,” said Berry. “As memorable as 2020 events have been, 2021 and beyond will be telling, as certain CRE companies begin to step into opportunities to better align their operations with those of the occupier and end-user.”

Berry believes that those actions will usher in a greater emphasis on CRE’s developing and implementing a structured digital transformation roadmap for business and tenant experience for a long term competitive edge.

“We will see CRE’s reevaluating the value proposition of properties by emphasizing experiential value and repositioning assets such as transforming the talent function - job roles, processes, and culture - to prepare for the future of work and balancing business recovery, seizing new opportunities and tenant and employee engagement,” said Berry. “This will likely require a combination of elements, including breaking down functional silos, enhancing leadership and organizational agility, increasing collaboration and engaging in transparent and ethical decision-making.”

Berry says that while the pandemic was an eye-opener, Deloitte sees it as an accelerant of existing trends.

“We see “purpose, location and analytics” as the continued evolution of the value proposition of CRE, said Berry. “It is telling that 56% of CRE respondents to our 2021 CRE Outlook survey said that the pandemic exposed shortcomings in their organizations’ digital capabilities, and only 40% of respondents said their company has a defined digital transformation roadmap.”

“Leaders will be required to walk the tightrope between managing costs and investing in the future,” added Berry. “The decisions made during 2021 will have impacts on those who begin to differentiate themselves and drive this different value proposition.”

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