The CDO Stack: Will CRE’s Operational Transformation Stick?

Last summer, I wrote in this column about the Great Resignation’s impact on our real estate industry clients. Specifically, it put pressure on inefficient, people-dependent processes that have long fueled the operations of so many in the industry. I speculated that significant turnover would lead to a wave of operational transformation. Because I’m fond of at least trying to keep myself honest and accountable for the things I speculate about, it seems worth looking back at the last year and at what’s actually happened.

John D’Angelo

First, Great Resignation accurately described what was happening at the time. Many people were leaving the workforce altogether, retiring earlier than planned after having a bit of time to think about life’s priorities and their healthy retirement accounts. Others were, and still are, moving from company to company, perhaps giving rise to a better term, the “great reshuffle.”  Either way, our clients have been impacted by high turnover, the net loss of resources, the rising cost of people, the drain of institutional knowledge and burnout for those left standing.

As I relayed a year ago, at first the industry focused on what could be automated and what could be performed by service providers. After this initial response, commercial real estate companies began thinking more holistically about their operating models. Firms were no longer only concerned about the highly impacted functions but all capabilities required to keep the business running. And over the last several months, those conversations and engagements have emphasized overall company strategy and transformation. Real estate executives are asking great questions about how technology and data could help deliver greater insights to sharpen the core of the business.

Now we’re really getting somewhere.

Over the last year, more and more clients have either started or planned projects to transform their businesses. Given the uncertainty about the domestic and global economies, however, I’m now starting to see companies proceed with greater caution. The urgency we saw just a couple of months ago about transforming operations has seemingly abated. To be sure, some clients are moving ahead with plans, but others have gone silent. I get it—if you’ve been in the industry for more than a decade, you know that it goes through cycles, and the up cycle doesn’t last forever.

Continuing to rely on inefficient operations, rather than investing in a new generation of technology, may feel comfortable, but it is a massively false economy. I’m not so sure that kicking the can down the road again is going to work much longer because people who were assigned to handle the problem no longer seem to be willing.

Although not everyone wants to be a lifelong learner, digital natives realize that learning how to work with decades-old processes and technologies isn’t going to help them in the future. And it’s a big step backward from how they’ve interacted with technology their entire lives.

I’m sorry if I’m revealing yet another inconvenient truth, but if you’re running a real estate enterprise that’s based on antiquated technology and highly manual processes, it will work–until it doesn’t. Don’t kick this can down the road again.

John D’Angelo is a managing director with Deloitte and is the firm’s real estate solutions leader, designing solutions to address client challenges and push the industry forward. With more than 30 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.