Back Has our world changed forever - a new approach to commercial real estate
Just as the canals have cleared in Venice, so too has the path for a new approach to commercial real estate
We are living in unprecedented times. However, history suggests that we WILL come out of it at some point in the hopefully not too distant future and we will need to prepare for that day.
You only have to see the impact of the shutdown on the environment to be reminded that even the most badly damaged things can recover. In a relatively short space of time, the canals in Venice are clear and teeming with fish; the carbon hotspots over China have noticeably reduced and, sure enough, Spring is here without any regard for Covid-19. All this after only a month or so of change. One thing is for certain - the world will never be quite the same again. Nobody can yet predict what will change but I am sure that many things will.
We do need to think about the implications for the commercial real estate industry. I believe that there are a number of potential outcomes:
- An increased reliance on technology to shore up and streamline processes. Traditional funds, banks, advisors and brokers will have to embrace the technology advances like never before. Automating processes will become critical and using a tool like PRODA to streamline the processing, validation and analysis of rent roll data will be invaluable.
- The market will shift from being landlord to tenant-led, at least in the short term. It seems likely that there may be a surplus of stock in our major cities as companies sadly fail to survive the current crisis. Additionally, as homeworking becomes more prevalent, demand for office space may be impacted.
- The co-working landscape will definitely change. Many of the providers in this space have an income stream that is predominantly reliant on small businesses, which inevitably will be the hardest hit and the most prone to failure. This casts serious doubt on whether the current model can survive, therefore that whole sector will need to adapt to succeed.
So, what does all this mean? In a nutshell, we need to be planning now. Not when we come back into some kind of new normality, but now!
A much wiser businessman than me once told me “any new solution is only of benefit if it does one of three things: solve something, save something or increase something”.
This is truer now more than ever. Solve a new problem such as collaboration between the increasing number of remote workers; save time and/or costs, increase efficiency, productivity, revenues or profits. The focus needs to be on streamlining and improving mundane, labour-intensive steps in the process, whether that be deal assessment; asset management reporting requirements or lending to name but three.
An accelerated shift to more homeworking is inevitable, which means more empty stock on the market. If the market does become tenant-led in the short-term, then how do we react to it? We have two choices; accept it without changing what we do, all the while mumbling under our breath about how hard done by we are OR, the market could shift to over-servicing the client to make every stage in the occupancy lifecycle, an enjoyable one.
Co-working is possibly going to be the most changed of all the office sectors. The pre-Covid19 model of small, start-up businesses taking up relatively short leases with no guarantees may well not be sustainable in the medium-term for operators and landlords. Investors are going to want to understand the risks of each tenant in much greater detail and therefore the operators may well have to be more selective than previously.
In summary, the world will change in ways we couldn’t have imagined only a matter of weeks ago. We will have to take a more-balanced view of how we operate, bearing in mind the implications on society as a whole and if so, then something really positive can come out of this crisis.
Written by David Oates, Chief Revenue Officer, PRODA Ltd
At PRODA, we are building AI-enabled software to automatically capture, standardise and quality check rent roll data. Our goal is to empower real estate professionals to quickly gain actionable insights from their data and use software more effectively. To find out more, please visit www.proda.ai. You can also get in touch over LinkedIn or at email@example.com.
You can meet Proda at FUTURE PropTech in October at stand number 45.