I’ve been reflecting a lot on the impact of COVID-19 on commercial real estate lately. My conclusion? This year has been dreadful, but 2021 can be better—and digital could be the key. Based on what I’m hearing in the market and what we wrote about in our 2021 real estate outlook survey report, it is clear we are seeing an acceleration of pre-pandemic trends that is unlikely to abate and has catapulted industry executives into a period of extended, significant and arguably positive change.
So, which digital trends are likely to have the greatest impact in 2021?
The clinical definition of a digital twin is the digital representation of a living or nonliving physical entity, which for commercial real estate could be a digital copy of a commercial building or another physical asset. Like those used by NASA (great example in the movie “Apollo 13”), digital twins can be incredibly sophisticated models that can help keep tabs on how a building operates, uncover potential issues for remediation, run pandemic safety scenarios and fuel a host of other insights. The uses for and benefits of digital twins in real estate are vast and will rightly be part of this decade especially as the ways in which we use real estate continue to evolve in response to COVID-19.
End-user direct engagement
There are many compelling reasons to have closer and more direct engagement with real estate end users, whether they are retail shoppers, office occupants, medical office patients or multifamily residents. Data is key to guiding this engagement and is generally derived from apps and assessing how users ultimately interact with physical spaces. Even in the age of data privacy laws, low-level and anonymous data can still provide a wealth of knowledge on end-user habits and preferences to direct smarter strategies that can better serve the people consuming real estate—again, something that is critical during a time where usage habits are shifting dramatically and potentially permanently.
Data & analytics
Not to sound dramatic, but data and analytics may be the most important digital trend for the commercial real estate industry to focus on over the next decade. I firmly believe that this period will be the golden era when we see widespread aggregation and leverage of trusted data on owned assets. By combining trusted internal data with interesting external data sets, investor “house views” can be better honed to spot opportunities and risks. If you think you can get through this decade without demonstrating the ability to use and leverage data and analytics, you will need to think again because this digital trend will undoubtedly become table stakes for the industry.
Speaking of what I’m bullish on, “digital maturity” is high on the list as a topic for boards, senior advisers and management teams. Regardless of where a company finds itself on the maturity curve, it’s important to formulate a point of view on digital maturity, what it means to the organization, where it is on the continuum, where it wants to be and how quickly it intends to get there. While some commercial real estate firms are actively thinking about these questions, it’s concerning to me how many are not. And for them, digging into digital maturity should be a board-level agenda item to prioritize this year.
Of course, commercial real estate is not a single, homogeneous thing—something that I’ve increasingly had to explain to industry outsiders in response to sweeping assumptions across property types. Every segment of the commercial real estate market is unique and changing in its own distinct way, so industry executives will also have to determine how these digital trends can benefit their markets and help their business survive and thrive this year.
John D’Angelo is a managing director with Deloitte Consulting and leads the real estate industry sector for Deloitte Consulting in the US. With over 33 years of experience as a management consultant to the global real estate industry, John has helped some of the biggest names in real estate leverage technology and use data to optimize and transform their operations.