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CRE could turn to proptech to help reduce costs

Investor enthusiasm for property technology, or proptech solutions, may have started to dip in recent months, but commercial real estate firms might be turning to it to assist in cost-cutting measures, Bisnow reports.

CRE is facing a number of challenges such as labor shortages, a potential recession and increased building vacancies as a result of the COVID-19 pandemic. Proptech has become an enticing answer to these issues as there are a variety of solutions that can help CRE firms streamline work, become more efficient and reduce costs. Firms that opt not to embrace the technological tools available to them risk falling behind the rest of the industry.

Since the pandemic, CRE firms have had to adapt to more tenants using a hybrid work model. This shift has led to 78 percent of companies deciding to use a majority of the “anchor technologies” that will let them create a more efficient workspace, according to a recent JLL report. The report noted that real estate was the sector fastest to embrace new tech solutions over the next three years. CRE is “planning to rapidly upscale its implementation,” the report said.

“I think right now, firms are nervous,” Ernst & Young Americas Real Estate Leader Mark Grinis told Bisnow. “In three months, I think the fear index is probably going to go up a little bit. People are looking at how to be more efficient.”

CRE industry is on budget watch

Many CRE industry players from developers, building owners and operators and brokerages are paying closer attention to their budgets than they have in years, Bisnow reports. Right now, CRE firms are looking for ways to deliver more value with fewer people.

“In this time period, every dollar is going to count,” Camber Creek partner Jeffrey Berman, whose VC firm focuses on proptech investments, told Bisnow. “Those types of companies (that streamline work processes) are thriving, because any further insight into workflow and operational capacity will be prized. Knowledge is power, without it you’ll have a hard time competing.”

A lot of companies, not just in CRE, feel software solutions, analytics programs, integrated operations platforms and automation can help them save money. The integration and automation market for office work could increase by $32 billion by the end of 2025, according to Garter analysis and projections. That would be a 50-percent growth rate in five years.

Proptech can help CRE manage falling office tenant numbers

Artificial intelligence and automation are potential game changers for the CRE office industry, Bisnow reports. Especially, since there’s a chance that 35 percent of workers will not be returning the office full time, according to CEL & Associates CEO Christopher Lee.

A slow return to the traditional office is good news for proptech companies, which have grown within the last year, even as the venture capital needed to fund their operations has decreased. Fortunately for proptech firms, as venture capitalists have stepped back from investing in the sector, CRE companies are filling the void. For example, JLL Spark, the company’s tech investment division, has invested $340 million in 40 startups, many of which are office related.

The combination of rising wages and labor shortages have forced CRE firms to become more efficient—they are currently aiming to be 15 to 30 percent more efficient when it comes to how much they pay for client acquisition, Kizen CEO John Winner told Bisnow.

“It’s important that CRE firms recognize inefficient workflows and correct them,” VTS co-founder and Chief Strategy Officer Ryan Masiello added. “If not, that is going to cause their portfolio to fall victim to economic pressures.”

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