In response, real estate owners, developers, operators, financing sources and other industry participants are looking to technology as a means to reduce costs, improve operating efficiencies and profitability, improve visibility into the needs and preferences of owners and tenants and identify potential growth opportunities, including potential acquisition targets. In addition, landlords and developers can use the prop-tech tools available to them to create more desirable spaces and creative environments with the balance in hybrid work environments that we have seen after Covid. Prop-tech can now be seen more fairly as a competitive necessity and not a luxury.
CRAIN’S: What new tech developments are most significant for this sector?
DEFEO: Unsurprisingly, much of the focus has been on technology targeting the expense side of the ledger. This includes solutions that are designed to identify and eliminate or streamline the numerous inefficiencies found in real estate, such as processes in project management, development, construction, maintenance and tenant services.
There is also an intense focus, however, on technologies that are designed to target opportunities to grow revenue and market share. These include, for example, solutions that help market participants gather and analyze data to identify market trends, enhance the experience of tenants and other users of real estate, and target potential marketing opportunities and acquisition candidates.
Trends that we see emerging include closer collaboration and integration between real estate businesses and tech companies in the form of joint ventures, consortia and other similar relationships, as well as a potential increase in business combinations between prop-tech entities and businesses focused on real estate ownership, construction, management and development.
In addition, as has been widely reported, nearly 40% of the world’s carbon dioxide omissions come from real estate both as a result of building operations and construction. Private equity, venture capital and other major sources of funding continue to raise and invest an enormous amount of capital targeting environmental, social and governance technology companies that focus on real estate. Investors are anticipating that owners of real estate will need to make significant capital expenditures to reduce their carbon footprint and reduce energy costs.
CRAIN’S: How can real estate investment trusts position themselves for success in this environment?
DEFEO: Like all real estate market participants, REITs should seek out and assess the full range of prop-tech solutions available and under development as part of their strategy to strengthen their competitive position. No two REITs are the same, so the challenges they face and the opportunities presented will call for different solutions. An increasingly dynamic and differentiated market calls for a more innovative and proactive approach to improving profitability and seeking out opportunities for growth. Prop-tech solutions can and should be one weapon in that arsenal.
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