COMMENT: Over the past year, the dramatic shift already under way in the role of the property asset manager accelerated, influenced primarily by factors well outside the comfort zone of the traditional real estate community.
Greta Thunberg’s admirable crusade has put into sharp focus our collective responsibility for reversing climate change. Whether we like it or not, with commercial buildings accounting for 39% of global carbon emissions, real estate asset managers are at the frontline. In turn, the climate change agenda is forcing us finally to face up to the digital revolution, something that until now many in our industry have found too easy to ignore.
Over the course of the past decade, we have seen technology disrupt business models globally with significant implications for the world of work. The real estate sector has been slow to embrace this digital revolution. But this is now changing, and the climate change imperative is a major driver.
First, self-reflection
Long term structural shifts have triggered a period of self-reflection among all major real estate investors and asset managers, forced to take stock of how they engage not only with their properties but also, critically, with their occupiers’ needs.
Occupiers are looking for higher quality office spaces and a greater investment in the public realm to attract and retain talent, but these spaces must also be supportive of their sustainability agendas and help optimise operational performance.
Alongside this, against the backdrop of a growing climate crisis, investors want more detailed asset-level data to evaluate the sustainable performance of their investments, to ensure the companies they invest in are socially responsible stewards of their capital.
What does this mean for the way that commercial real estate businesses have traditionally operated?
As detailed in our recent Shaping Our Cities report, for which we spoke to a range of real estate constituents including global investors and occupiers, property companies are increasingly moving towards being service providers and should therefore be taking a more strategic view of the user experience.
The role of the asset manager needs to adapt so that they become curators of services for their tenants, including helping to manage their internal ecosystems. To enable this, buildings must be properly equipped with the right technology to collect operational data to support occupiers’ requirements, and also to be able to provide the necessary data for investor reporting.
Then, new thinking
New industry roles are being created to identify the technology opportunities within properties and to implement them. Some companies are hiring chief technology officers and data scientists within their real estate functions to maximise the insight and information that their spaces can provide.
When formalising IPUT’s development strategy, we visited some of the world’s leading office and mixed-use schemes, such as Broadgate and King’s Cross in London and Hudson Yards in New York, among others. We have seen the increased prevalence of digital technology in these cutting edge schemes, in recognition of the growth in demand from both investors and occupiers for more sustainable, efficient, and environmentally friendly properties.
But new developments like these, which offer the incredible opportunity to deliver the most advanced property solutions to occupiers, comprise just a fraction of the world’s real estate.
The annual replacement rate of buildings has historically been about 2% in the US, and 1% in Europe. Most of the buildings around today will still be in use in 2050, so many of these buildings will need to be retrofitted in some way to provide more granular data and support new user experiences.
Technology has a critical role to play in our provision of space as a service, which asset managers will need to adjust to. Some research suggests that the real estate industry is five years behind in its adoption of technology innovation and data collection, and so the challenge is clear – but it’s a challenge that can no longer be avoided.
Niall Gaffney is chief executive at IPUT
