This article is in two parts: part A – review of 2019’s bets, part B – CRE predictions for 2020.
“by the end of 2019 it will be very unusual if office or industrial tenants of more than 300 sqm are wandering the web unassisted and undirected”
Sadly none of the envisaged “high tech, high touch”… Unlike the marketing advancements evident in other B2B high customer lifetime value industries, we have not seen this happen in CRE.
“…for top CRE professionals, industry outsiders’-guilty-until-proven-innocent suspicions will be replaced by respect”
Like a massive laundromat, the soft African economy will continue “washing out” unscrupulous and unprofessional players in the industry (along with, sadly, some of the good guys). Result: this “survival of the fittest” will deliver a higher concentration of top professionals, an improvement in service level expectations, and our customers’ customers being better educated and more discerning.
No hard metrics on this, so it’s hard to accurately gauge sentiment. But the sense is that the public is starting to understand that the noble and complex asset class of CRE is different to residential property.
As an aside, horror stories of unethical behaviour still reach us. For example: brokerages telling tenants that they alone can get clients reduced rentals, or brokerages marketing vacancies on platforms at below market prices, or brokers even trying to on-lease space at a higher rental (and pocket the difference), on top of a commission.
“…As advancements in technology and data allow deal makers to be more efficient, we anticipate fewer, more empowered deal makers doing more deals
In simple terms: we see efficient professional deal makers “eating more” of the pie, while the small remaining pool (of less efficient and less professional) deal makers “eat less”. Deal making in CRE is hyper-competitive – if you don’t have the tools your competition has, you will get left behind.
Fortunately we have data here. From
the major leasing deals (i.e. more than 1,000 sqm) are being closed by respected CRE industry professionals
“CRE businesses have two options, and one choice: do “busywork” or earn higher profits”
As savvy CRE businesses “switch on” technology efficiencies, such businesses:
How? By outsourcing expensive high-risk/low quality data capture and management, automating of previously time-consuming manual processes, discarding of expensive in-house solutions, and replacing a disparate, disconnected hodge podge of systems with one-stop-shop tools.
Savvy CRE businesses chose to reduce “admin” by 1) activating cheap, high quality vacancy feeds, 2) redeploying back office staff into higher value roles, and 3) re-evaluating the business case for defocusing and expensive internal tech projects (known as NIH syndrome)
Tech will sweep in a like a white knight to save the day
Today’s CRE industry is made up two roles. 1) Those workers in the trenches, doing the actual work. And 2) those tech businesses, working equally, if not more, hard, managing data and building efficiency tools to support the workers.
We bet on strong and wider adoption of tech by the industry. We bet on improved availability of reliable market intel. Of Millenial workers driving the demanding for, and getting, tools. Of the CRE industry catching up on other industries (e.g. adoption of data switches, diffusion of industry-standard data protocols, shift from pen-and-paper/Excel to custom tooling).
The wholesale, industry-wide adoption of tech did not happen. Two reasons:
Forget about the buzzwords of AI, ML, Blockchain, IoT, AR.
Not in Africa, not in 2020, not in CRE.
Brokers are NOT going to be removed by tech. Good brokers will still be here – for this reason
(Repeat) 2020 will be the year that the CRE industry stops ignoring the efficiencies of automation and data. Why? Two factors combining: 1) solutions maturing, and their value becoming undeniable, 2) these tough financial conditions (and relative success of more innovative competitors) will force businesses to be rational about the cost savings and competitive advantages that tech delivers.
Thirdly – late addition: COVID-19 is literally forcing technology adoption onto businesses. From Zoom / Google Hangouts / Microsoft Teams to the adoption of cloud-based software, if you wish to do business today, you need to be tech savvy.
(Repeat) Businesses will stop being reactive / passive about getting tenant leads (including renewals). If you’re not out there building relationships with tenant decision makers, your competitor is.
At least two of the following innovations will be live by year end:
Sadly COVId-19 is going to be detrimental to those business with exposure to office or retail. Changes in mindset around WFH/remote working and the adoption of related technologies will probably change the demand for office space forever. Retail will be hurt in the near term by the reduction in revenues of tenants providing non-essential services (as defined). These are dark times for the world, and for our beloved industry in general.
The below are specific to South Africa (desperately hoping these CRE predictions for 2020 are wrong!)
<– If interested, our original 2019 article is here.
As tech moves faster, it’s more difficult to predict the future. But we do hope our (positive) CRE predictions for 2020 are accurate…
In summary, artificial intelligence and its buzzword friends are reliant, as a precondition, on mature solutions that ensure data is stored predictably, at high quality. These don’t yet exist/are still being built. The exit of brokers has been crystal-balled for so long – but it ain’t going to happen – for the good reasons detailed above in 2020#2. We feel duty bound to repeat the inevitable adoption by the CRE industry of tech, and not-waiting-for-the-phone-to-ring customer acquisition bets. Both are surely a when-not-if. As for the various exciting tech game changers listed in 2020#5 – we are desperately trying to be part of the solution!
Good luck out there. For those on the right side of the tech efficiencies wave, we are living in exciting times
This is a key number in South African commercial real estate (CRE). After a lot of hard work, we are able to deliver a firm, defensible value to SA – relevant to businesses (who almost all operate out of CRE), policy makers and the industry itself.
For a South African CRE industry buffeted by Covid, weak economic growth and public sector incompetence, is solar power too good to be true? Is solar indeed one of property’s unicorns – a positively geared investment with increasing cash flows – and what are the risks associated with it?
Apple, one of the most profitable businesses in the world, is the king of outsourcing. Its brains reside in California, while its grunt work is spread to specialists all over the world. Is CRE missing a trick? Like the strategic minds at Apple, can it farm back office services to cheaper, specialist hands – and drive greater profitability?
