“‘We’ve always done it this way’ doesn’t cut it in real estate anymore. We need to find the best way to do it.” – Emerging Trends in Real Estate, United States and Canada 2020
Innovation and technology are transforming the US real estate industry across asset classes, with two prominent themes emerging. First, real estate operations are increasingly prioritizing the user experience. Second, real estate-focused tech companies are continuing to develop technology to maximize value and operational efficiencies.
“Innovation and technology are transforming the US real estate industry across asset classes including retail, industrial, office, hotels and multifamily.”
In certain instances, these developments can fall into a category described by the MIT Center for Real Estate’s Steve Weikal as “real estate fracking” – that is, “using technology to break real estate use apart and put it back together into something more productive, thus unlocking overlooked asset value.” While not an exhaustive look, here are the some of the effects of innovation and technology on various asset classes.
Retail Shopping malls that formerly housed retail stores and a smattering of fast food restaurants are being transformed into “consumer centers” with mixed uses including fitness, health and wellness, a bricks-and-mortar presence for online brand expansion, pop-up retail shops, food halls and consumer experiences.
For example, Triple Five® Worldwide, owner of the Mall of America® in Minneapolis, is developing a USD250 million water park next to the mall, which already features experiences such as an indoor theme park, movie theater, mini golf and aquarium in addition to retail. Whereas the integration of retail and entertainment has always been a driving force for Triple Five, the proposed water park provides a powerful example of catering to the visitor experience, focusing on attraction and leisure.
In addition, both retail landlords and tenants have the opportunity to continue incorporating technology to reshape the retail experience. Whether by effectively using consumer data to anticipate consumer needs, integrating a retail center app for consumer hire of a concierge service while shopping, or adding digital payment systems to avoid checkouts, the future retail experience will continue to be influenced by innovation and technology.
Industrial E-commerce demands are shaping the use and operation of warehouses, distribution centers and storage facilities. Data and technology allow owners, operators and developers to better understand and predict supply chains and respond accordingly. In an effort to respond to real-time consumer demands and the premium placed on shortened delivery times, there is increased attention on “the last mile” – distribution facilities and return centers located closer to consumer populations.
Similar to other asset classes, industrial buildings are also increasingly incorporating smart building technology to automate certain operational systems. In addition, some e-commerce companies want to integrate advanced technology within an industrial facility – for example, by using robotics and automation to reduce labor costs, or incorporating warehouse design features to enhance operational efficiencies.
Office Real estate operators are creating experiences that more closely focus on how people work, with an increased emphasis on community. Whether through co-working spaces or enhanced dedicated open spaces within a more traditional office setting, tenants are seeking a work experience focusing on connection and user preference. Owners, developers and operators are incorporating new amenities into office buildings to enhance the work experience for tenants: converting rooftops into communal outdoor spaces and adding state-of-the-art fitness centers, on-site dry cleaning, meditation spaces and mother’s rooms.
Office space itself is becoming more flexible, offering tenants and occupants more choice in work setting: traditional and standing desks, sofas and lounge chairs, enclosed office space and common area work space. In addition to informing the tenant experience, technology is providing owners and operators with new operational efficiencies. For example, through the use of artificial intelligence, owners and operators can automate the leasing process (accounting, administration and analysis). Further, using Internet of Things (IoT) solutions to automate heat, air conditioning, lighting, security and other operational systems allow owners and operators to collect and analyze data to better predict maintenance needs and further optimize operations and performance.
Real estate technology companies such as Liquid Space are also providing a platform for users to rent unused office space. A business with empty space it is willing to share can turn that space into additional revenue by renting out such areas as conference rooms or even individual private desks.
As with other asset classes, consumer experience is a driving factor for the changing hotel landscape. A growing number of hotels incorporate co-working spaces and enhanced public spaces, bringing a sense of community to the hotel experience. Operators are also creating new partnerships in the wellness area to further enhance the guest experience: examples include collaborations between Westin and Peloton, and Kimpton Hotels and PUBLIC bikes.
Opportunities continue to emerge throughout the travel process. Technology has allowed consumers to research amenities and review hotel online ratings before booking. Once ready to book, online booking and mobile check-in have eased the front-end process of travel. Further, data and technology allow hotels to create and utilize a personal profile for guests to better anticipate their needs. Additionally, some hotels are implementing artificial intelligence to create customer-facing chatbots for processes such as ordering amenities to guest rooms.
From research to checkout, technology is providing hotel owners and operators with the ability to further cater to the guest experience.
Innovation and technology not only impact the development and marketing of multifamily properties, but also the ways owners and operators interact with tenants. Prospective tenants can research online reviews for such buildings even before touring them – just as they would search hotels online. This makes online marketing critical to successful leasing.
For multifamily buildings, incorporating rooftop spaces and updating shared community spaces and fitness centers to enhance the tenant living experience are a given. Multifamily owners and operators may also ease the lease process in other ways: using online leases with e-signatures; streamlining internal operations with updated management software to track data and provide analytics; and providing Wi-Fi access in common areas or in-unit. Indeed, owners and operators are increasingly
using technology to control security, lighting and thermostats, both for operational efficiencies and to remain competitive with neighboring properties.New technology in areas beyond real estate has similarly impacted on multifamily property operations. For example, e-commerce has prompted owners and operators to develop seamless package receipt and retrieval systems, which may include a locker delivery system, sending tenants an SMS or e-alert on receipt of a package, and allowing tenant access to a delivery locker via key fob.