As margins decrease on traditional real estate investments, industry investors are looking to operational real estate (ORE) to make up the difference, according to Goodwin Law. While ORE is more complex than traditional real estate investing, property technology (proptech) can help simplify the process, the law firm said. Proptech allows investors to find operational efficiencies, locate untapped markets and create customized services that their customers need and demand.
Here are three areas Goodwin Law noted that proptech could take ORE investments, “from good to great.”
Digital data has been critical to proptech innovation. Different types of data can be generated, collected, shared and analyzed during a building’s life cycle with proptech, which creates value for real estate investors.
For example, tech can detect and measure building occupancy and foot traffic; track and report a real estate portfolio’s performance to predict behavioral changes and analyze competitive supply and demand for assets. CRE owners can take this information and shift their management priorities and adjust their maintenance spending.
Additionally, operators in key industries can use data to predict and improve elongated supply timelines, which can reduce costs and environmental impact. Smart warehouses for example, often have a management system that puts all of its data on one platform so supply chain members get a full view of the supply chain.
“Mastering data is increasingly becoming a differentiator as ORE platforms look to maximize advertising and other tenant messaging,” the firm said. “As the meta world merges with the real world, there will be more opportunities for investors and tenants alike to use data to maximize returns.”
More energy efficiency and sustainability
ORE investors, tenants and operators have all been looking for more eco-friendly property construction and development and management strategies as energy prices increase and climate change awareness becomes more prominent.
CRE buildings make up to 30 percent of global production—a lot of that energy is the result of heating, cooling and appliances. Smart building tech has helped decrease inefficiencies and optimize energy consumption. Both practices have lowered carbon dioxide emissions and costs. In some cases, these efforts can be accomplished without altering the building too much.
Proptech also can discover uses for waste materials, which also reduces carbon emissions. Additionally, advanced technologies in communal heating networks can take the heat that energy-intensive operating assets like data centers generate and pass it on to nearby buildings, according to Goodwin.
Internet of Things, customization and automation
ORE’s more operationally intensive nature makes proptech more crucial for investors who want to maintain higher returns. Investors rely on tech to make their workforces more efficient and to manage scalability.
Operators in the hospitality industry can use digital concierge programs in place of on-site concierge personnel to reduce costs, for example. The digital service can provide many of the same services a traditional concierge can, including booking day trips and restaurant reservations, allowing investors to decrease their operational costs and make their systems more efficient.
“The range of proptech solutions available within ORE is increasing exponentially, and certain sectors are likely to look very different in 10, five, or even two years,” the firm said. “We expect new technologies such as generative AI (for example, ChatGPT) to open up new possibilities and create significant disruption for the real estate industry.
That said, ORE investors and operators cannot afford to wait for new technologies to emerge. In this challenging operating environment, it is imperative for ORE investors and operators to adopt proptech now to drive efficiencies and long-term investment returns.”