By: Revathi Greenwood, Americas Head of Research
Technology is disrupting all kinds of industries, from ridesharing and taxis to streaming services in entertainment. Apart from some early adoption in the retail and industrial space – largely due to the disruptive nature of eCommerce – commercial real estate (CRE) has not seen a paradigm shift in implementing new technologies. Most change has been evolutionary, providing for more efficient ways to lease or manage properties.
Broader adoption of technology within commercial real estate often lags behind other industries. Real estate and infrastructure assets are expensive and built more for longevity and a predefined lifecycle than flexibility. To embrace change, players in CRE markets must first be convinced that the technology will be widely deployed and long lasting. But there is no doubt that long-lasting and widespread change is on the horizon with several technologies.
Technology will be to the 2020s what the financial services industry was to the 1980s and 1990s – a growth engine, a disruptor, both a jobs creator and killer.
Technologies potentially transformative to CRE
Ridesharing, autonomous mobile robotics (AMRs) for eCommerce fulfillment and electric vehicles (EVs) will impact CRE first.
Widespread adoption of most other transformative technologies is at least a decade away. Technology adoption typically follows a “hype cycle” curve before widespread adoption.
Following wide adoption, there likely will be a lag in any impact on real estate. This lag should not be viewed as a “wait and see” period; rather, the early adoption cycle should be used to determine where impacts may occur and possible remediation strategies.
The Organization for Economic Co-operation and Development (OECD) estimates 14% of jobs in member countries are 20 years from automation. High-risk jobs include routine and low-skilled ones in retail and industrial. Most office-using jobs are low risk due to their requirement for cognitive, emotional or social intelligence.
Significant differentials by market and asset type exist
Cities best suited to cope with technology disruption are the usual suspects: New York, San Francisco, Boston, Washington, DC, Austin, Los Angeles, and San Jose. Real estate assets likely to see growth include data centers, manufacturing centers for new technologies and remote parking and recharging stations. Successful real estate offerings are likely to be those that straddle uses. High-risk properties are gas stations, bank branches, non-experiential retail, garages (both residential and commercial parking decks) and non–amenitized or commodity offices.
Commercial real estate will have to adapt
The only way for CRE professionals to adapt to changing paradigms brought on by technology advances is to focus on flexibility and efficiencies, particularly flexibility in asset use and design, leases and service offerings and amenities.
Read more in Cushman & Wakefield’s recently released Will Robots Take Over CRE? the first of a four-part series on technology and its impact on CRE.
Revathi Greenwood is the Americas Head of Research for Cushman & Wakefield with overall responsibility for the research platform within the Americas region. She provides leadership to hundreds of professionals who are focused on producing predictive, timely and interpretative analysis on the latest real estate trends.