Automation, use of AI and disintermediating business models having major impact on CRE industry; growing number of CRE firms are directly investing in PropTech companies
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TORONTO (January 22, 2019) – Altus Group Limited (“Altus Group”) (TSX: AIF), a leading provider of software, data solutions and independent advisory services to the global commercial real estate (“CRE”) industry, today released the latest Altus Group CRE Innovation Report. The report provides an outlook on technology trends impacting the global CRE industry and highlights the significant acceleration in adoption of property technology (“PropTech”), the effect of disintermediating technologies, as well as a growing trend of CRE firms investing directly in PropTech companies and startups themselves.
According to the report, which is based on a global survey of 400 CRE executives at firms with assets under management (“AUM”) of at least US $250 million representing a total AUM of over US $2 trillion, driving efficiency through automation is a key priority for CRE executives, and the use of AI and machine learning is approaching a critical mass. CRE firms are automating processes or applying AI and machine learning in the following functions:
- 41% of firms are using automation for benchmarking and performance analysis, 39% for scenario and sensitivity analysis and 36% for budgeting and forecasting
- 19% of firms are using AI and machine learning for scenario and sensitivity analysis followed by 16% for accounting and property management
Disintermediation is also driving emerging technology adoption. New business models associated with the sharing economy, co-working and e-commerce are disrupting the CRE industry by cutting out middle steps and processes to create greater efficiencies. The layers and stages of the financing, funding and transacting process create inefficiencies in many core CRE functions. As a result, the rise of disintermediating technology platforms and solutions are having a major impact on the CRE industry.
The report findings suggest that transaction-based platforms such as online property exchanges, lending marketplaces and crowdfunding are now increasingly being used to streamline processes and create a more direct line between buyers and sellers, lenders and owners, and investors and funds, effectively altering the relationships between them at a fundamental level:
- 61% of CRE executives indicated their firms are using or already trying out online lending places, with 23% using them in a significant way
- 60% of CRE executives indicated their firms are using or already trying out online investment marketplaces and crowdfunding platforms, with 22% using them in a significant way
“The combination of new market entrants, new technologies and changing demographics have created disruptive models within CRE. This is having a profound impact on portfolio planning and decision-making,” said Bob Courteau, Chief Executive Officer, Altus Group. “At the same time, this presents new opportunities for organizations who rapidly embrace innovation and PropTech to reduce complexity, increase efficiency and drive performance.”
Additionally, the report also indicates that many CRE firms are becoming PropTech investors themselves, with 53% of CRE firms directly investing in at least one type of PropTech firm. PropTech companies focusing on smart buildings systems, online lending marketplaces, and online investment marketplaces and crowdfunding are the top investment choices for CRE firms.
Other key findings from this year’s Altus Group CRE Innovation Report include:
- Nearly one in ten (10%) CRE executives “don’t really understand blockchain and what it does,” while 37% of executives expect blockchain to start having an impact on the CRE industry within the next two years
- 31% of executives stated that smart city initiatives and projects are already having a major impact on their investment and portfolio decisions
- A large majority of firms have already invested in integrated software solutions for critical CRE functions. However, 60% of executives said their firms are still utilizing spreadsheets as their primary tool for reporting, 51% for valuation and cash flow analysis and 45% for budgeting and forecasting, indicating that despite significant innovation, the industry continues to lag in certain areas
The 2019 Altus Group CRE Innovation Report is based on a global quantitative survey of 400 CRE C-level and senior executives in both front and back office positions at owner operator and investor firms in North America, Europe, Asia-Pacific and Latin America. All firms represented in the survey had a minimum of assets under management of at least US $250 million at the time of being surveyed, representing an approximate total AUM of over US $2 trillion. The survey research, used to form the basis of the report, was conducted by leading international research firm IDC in late fall 2018. A copy of the full report can be downloaded at www.altusgroup.com/cre-innovation-report-2019/.
About Altus Group Limited
Altus Group Limited is a leading provider of software, data solutions and independent advisory services to the global commercial real estate industry. Our businesses, Altus Analytics and Altus Expert Services, reflect decades of experience, a range of expertise, and technology-enabled capabilities. Our solutions empower clients to analyze, gain insight and recognize value on their real estate investments. Headquartered in Canada, we have approximately 2,500 employees around the world, with operations in North America, Europe and Asia Pacific. Our clients include some of the world’s largest real estate industry participants. Altus Group pays a quarterly dividend of $0.15 per share and our shares are traded on the TSX under the symbol AIF.
For more information on Altus Group, please visit: www.altusgroup.com.