Are You Making the Most of Your Real Estate Tech Dollars?

One big topic that has emerged from Deloitte’s 2022’s real estate industry outlook is technology. There is a sense of optimism around what CRE companies are doing, what they’re thinking about, and what’s likely coming. While there is no shortage of challenges, what lies ahead is as intriguing as ever.

Before we deep dive into technology, I’d be remiss in not pointing out that the leaders we’ve surveyed are an optimistic bunch. I’ll spare you all the details, but almost all believe that revenue will be up slightly or significantly in 2022. And, as I pointed out at the end of last month’s column, the good news is that respondents plan to spend some of that increased revenue on technology—10.3 percent more this year than in 2021.  

John D’Angelo

But, with inflation eating up some of that increased revenue, is it sufficient that the industry’s technology spend this year is up by mid-single digits? Forty-one percent of respondents are considering or committing to innovation initiatives, compared to the 22 percent planning to suspend or postpone those plans. Another way to look at it: For every participant that is putting innovation on hold, two are planning or carrying out a strategy. If you’re keeping score at home, that leaves 37 percent of respondents who are neither thinking about nor rejecting the need for innovation.

And that leads to the next question: Where will those scarce dollars be spent? This is the most interesting piece to me and is also confusing at first. What we’re seeing develop is a kind of peloton of those who have already modernized their technology infrastructure. 

Fifteen percent of companies report that they’re all the way there with respect to a cloud-based technology infrastructure and foundation of data that they say is in “good” shape. Among those survey participants, the budget is going toward AI, data analytics and RPA. For the 60 percent of respondents who said that they’re “at best” on the journey to building a modernized core systems and technology infrastructure—unsurprisingly—investment is focused on migrating to the cloud. It appears to us that the technology peloton comprises those who have already invested in data and the cloud, who are moving on to AI and getting leverage from the data foundation they’ve built in the form of advanced analytics.

In a positive trend, 51 percent of respondents tell us that they’re in the process of identifying potential applications of predictive analytics or that they’re in the early, or experimental stage. But only 22 percent said they’ll be making a significant increase in data analytics spend, which is puzzling. I’m encouraged by the apparent strong interest in AI and analytics but perplexed by the lack of actual investment. 

Perhaps the most interesting and puzzling result from the survey was the apparent high interest in blockchain-based initiatives. When I wrote about blockchain for the September 2021 digital edition of CPE, I expressed surprise that so little seemed to be happening in real estate, despite several promising applications. At that time, I posited that it’s not a matter of if, but when.

This year, respondents seem to be saying that “when” is sooner rather than later. I hope that’s right, as I think the application of blockchain can reduce a significant amount of friction in back-office processes and the ways we capture and exchange data. And that would be a very good thing for our industry.

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 over 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.

Read the February 2022 issue of CPE.