Although leasing agents, brokers, asset managers and others occupy different roles in the commercial real estate business cycle, all contribute to the goal of capturing and executing new business that maximizes revenue. Doing that successfully, and thus enhancing asset performance and value, requires managing everything from marketing campaigns to leasing and building maintenance as efficiently as possible.
Until a couple of decades ago, managing commercial properties meant aggregating operational and financial data from multiple technology platforms, then transforming it into a usable format before loading it into a database. Since then, advances in commercial property management software have simplified this cumbersome process. Modern systems consolidate all business data on a single connected platform without the degree of custom design previously required.
The transformation of property management technology from spreadsheets and repeated manual data entry to today’s advanced platforms mirrored a tectonic shift in the industry itself. As Deloitte reported in its 2020 commercial real estate outlook, the industry is approaching a “real estate as a service” model that encompasses “augmented and memorable experiences using the physical space and moving away from thinking about just the functional uses. This could require companies to fundamentally rethink location, space requirements, users and user preferences.”
The broker’s evolving role
Furthermore, the very notion of a lease is changing, with the concepts of space, leases and amenities increasingly blending. As Deloitte says, “Today, creating superior experiences is not just about engaging the tenant. It is also about extending services to the CRE ‘end user,’” a cohort that might include shoppers visiting retail spaces, multifamily property residents, office employees and manufacturers needing warehouse space. With the convenience of online shopping readily available, property owners face the challenge of providing stimulating environments that attract tenants and patrons.
Pressure from the shifting paradigms in commercial real estate is especially acute for brokers, who no longer simply buy and sell space but are also charged with creating value by delivering diversified real estate services, curating the experience and leveraging scale. Joseph V. Barna of Cushman & Wakefield/CRESCO Real Estate, quoted in Smart Business in 2019, said, “Commercial real estate brokers have become well-rounded consultants. They’re active in the market every day” and offer “a wealth of knowledge in a given marketplace.” Brokers are also positioned to offer insights on market trends and pricing along with renovation services.
In addition to identifying locations, Barna noted, brokers’ expertise also encompasses a range of factors important to buyers and tenants: access to utilities and freeways; zoning restrictions; and occupancy cost elements like utilities, maintenance and taxes.
Brokers and property owners came to recognize that competing in an increasingly complicated milieu requires exploring “opportunities to replace their losses with new services — high-tech searches for and matches of buyers and sellers, sophisticated deal structuring and other higher level advisory functions aided by technical tools,” University of Wisconsin-Madison professors Kerry D. Vandell and Richard K. Green observed at the turn of the century.
Technology moves to the forefront
Over the subsequent two decades, commercial property owners and brokers engaged new technology to help them recognize and capture those opportunities. Key operational areas they sought to address included:
- Decision-making and efficient pipeline management.
- Effective interaction between external brokers and asset managers.
- Lease tracking from the initial contact to final signing.
- Access for all parties — leasing agents, legal officers, property managers, asset managers and others — to rent rolls, financial reports, contacts and other information required to execute leases.
- Accurate execution of lease abstractions, underwriting and valuation models, due diligence, sales and acquisition targeting, and risk identification.
The technology evolution targeting these areas culminated in the automated, end-to-end and fully mobile cloud-based commercial property management software platforms that stand as today’s industry best practices. Such systems, bolstered in some cases by artificial intelligence capabilities, connect commercial real estate companies to their vendors, general contractors, brokers and other collaborators.
Equally important, the systems’ mobile capabilities let workers in the field who manage leases, construction projects and facilities tie directly to the central data system. Such connectivity gives front office team members a full sweep of operational and financial data. They can use it to reduce risk and increase asset values, historically the responsibility of personnel in back office operations such as accounting and property management.
The bottom line: All commercial property management participants benefit from software that delivers information about available space, existing leases, encumbrances and other key data points in real time while integrating seamlessly with a core property management and accounting platform.
Better visibility and collaboration
A system that harmonizes leasing, deal management, tenant improvements, budgeting, construction management and other operations unites the internal and external leasing processes in a single pipeline. As a result, information in the database doesn’t need to be reentered. Asset managers gain a previously unobtainable degree of lease and deal pipeline visibility into leasing agents’ progress.
Everybody involved in executing leases can tap into the system to see how lease terms might have changed between the letter of intent and the signing. Brokers can centralize deal management across their portfolios and leverage real-time stacking plans. Internal leasing agents can easily see which leases are set for expiration, with completed deals immediately passed to the property management staff.
When a commercial property management company has full visibility into all leasing activities, including vacancies and renewals, it has a better chance of increasing revenue opportunities, reducing vacant space and making its workforce more efficient.
The integration of operations and data promotes collaboration between asset owners and brokers. Brokers with access to an owner’s customer relationship management system can obtain more timely deal pipelines, which also supports forecasting because sufficiently mature deals are automatically included in budget forecasts. The shared workflow enables real-time notification of activity on a space, accelerating deal approvals.
Deal reviews that previously required multiple emails or meetings can be completed with all parties reviewing the same document simultaneously and communicating in real time via a built-in chat feature. Any confusion about which deal or version is under review is eliminated. Being able to address issues immediately paves the way to faster deal completion.
Brokers can pull up property management data at properties or anywhere else, thanks to mobile apps, and complete deals on the spot. Mobile apps give brokers a visual representation of their deals, leases and prospects in the field, helping them capitalize on new opportunities more agilely.
Some solutions include computer-aided design functionality with floor plan visualization features that help brokers make informed decisions based on space availability, market rent data, restrictive lease clauses, stacking plans, floor plans and other conditions.
PS Business Parks instills order
Glendale, Calif. full service real estate company PS Business Parks Inc. offers validation of advanced commercial property management software’s ability to improve deal coordination among executives, leasing directors and property managers who handle a high volume of leasing nationwide.
Previously, deal approval was uncoordinated, with each of the company’s leasing teams following its own approach to the leasing process. This increased risk and uncut efficiency in identifying and executing business efficiently. Today, “having a single repository for all deal-related conversations and tasks solved our disorderly communication process and delivered full transparency,” said Patrick Whalen, leasing director for PS Business Parks. “Our weekly leasing reports are now automated and available to anyone who needs them, which is much more efficient than manual spreadsheets. The new technology made our team a cohesive unit and reinforced our ‘One Company, One Process’ focus.”
PS Business Parks executives can easily communicate to their leasing directors and property managers. And the company’s automated solution “sure beats keeping paper files on 4,500 customers,” according to Whalen.
New consistency for Cousins
Atlanta-based trophy office property owner and developer Cousins Properties also attests to the value of empowering its owner brokers and those of its third-party partners with real estate software solutions that deliver all information needed to identify and execute deals quickly. “We sought a simple, consistent workflow that would help us move fast, which is in our team’s DNA,” said Richard Hickson, executive vice president of operations for Cousins. Cousins opted for a solution that comprises a one-stop-shop for information on expiration reports, rent rolls, stacking plans, customers’ options and risk exposure — which is just about everything involved in calculating portfolio metrics, leasing activity updates and the pipeline.
“Knowing our buildings, stacking plans and vacancies better helps us work faster and be more conversant with our customers while also helping us identify opportunities sooner. Our leasing, asset management and legal teams are communicating more efficiently than before, and that makes us quicker. Our deal management solution also helps us interact more efficiently with our brokerage partners. We’re serving that customer base better as well, and that’s critical,” Hickson said.
Artificial intelligence in real time
One of the most intriguing recent trends in commercial real estate technology is the development of artificial intelligence. AI can elevate an organization by helping it capture, manage and leverage data more effectively. It also boost tenants by giving them better hard data from which to negotiate a lease. Furthermore, AI’s predictive capabilities for business decisions can strongly influence profitability, returns, financial planning and analysis, sales and tenant relations.
More accurate lease abstractions, automated underwriting and valuation models, market demand and value predications, facilitated due diligence, precise marketing, sales and acquisition targeting; and better identification of risks and trends are just some of the benefits that AI can deliver to property managers.
CRE organizations are increasingly using AI technologies to analyze complex data, automate tasks, make smarter tenant-related decisions and discover new revenue sources. They can also use AI to improve their tenant-selection process based on trends in tenant behavior. As Dallas full service commercial real estate firm Henry S. Miller reported in its corporate blog, “The information that AI already enables brokers to offer investors is valuable and extensive. AI can aggregate data to help investors make more informed decisions. That data may include details about a building’s energy consumption, rent and occupancy rates, market performance and more. Brokers and investors are then able to analyze the information and have greater confidence in a real estate investment.”
Predictive tools’ utility in preparing accurate asset value models or project potential development project returns offers property owners and managers an immense competitive advantage. This capability also gives landlords and prospective tenants valuable new insights into local conditions that shape leasing decisions. Smart building security systems leverage AI and machine learning to control property access. As an added advantage, the ongoing technology evolution has helped make many solutions, including those with sophisticated AI elements, available and affordable for companies of any size.
New options for energy efficiency
As Henry S. Miller noted, commercial real estate is expanding the use of artificial intelligence to a variety of operational areas. Energy, which trails only maintenance, repair and operating supplies as a real estate portfolio’s biggest controllable operating expense, represents one of the most productive applications of AI.
Software solutions integrated with the core property management and accounting system extract utility bill data that helps property owners think strategically about energy consumption. Today’s most advanced platforms have evolved to encompass everything commercial property operators need to manage their portfolios’ energy performance: usage and cost monitoring, procurement, consumption alerts, emissions tracking, sustainability planning, utility billing and payment, and budgeting support.
Besides saving money by eliminating labor-intensive activities like invoice processing, modern energy management platforms generate consumption information required for ENERGY STAR® and compliance purposes. It’s also worth noting that many institutional investors incorporate environmental criteria into their decisions, as do some prospective tenants.
Energy management AI technology leverages thousands of real-time data points and algorithms to control heating, ventilation and air conditioning systems, helping property managers optimize a building’s consumption with no loss of occupant comfort. Such solutions do this by identifying the property’s most important performance characteristics and setting priorities with regard to equipment and usage. The collected data “trains” AI systems to make decisions that optimize a building’s energy performance. The more efficient the energy management system, the fewer carbon emissions and higher level of occupant comfort. As another advantage, implementation costs for this type of energy technology decrease as the technology matures.
“Clients can reduce energy costs, increase revenue from demand response incentives and reduce occupant complaints about their work environment. It’s a win for everybody: tenants who can understand their consumption and thus control it; owners who can implement new pricing strategies for purchasing power; and investors who get better returns from efficiently operated properties,” said Matt Eggers, a leader at next-generation energy technology investor Breakthrough Energy Ventures and a former Yardi vice president.
Those who own, occupy, regulate and invest in properties are increasingly relying on AI-enabled systems that manage energy spend and consumption and help catch and correct spikes more quickly. Benefits in property value and building management visibility will multiply even further with the ongoing development of Internet of Things capabilities that enable smart devices such as locks and thermostats.
Enhanced marketing capabilities
Turning to another element of commercial property management software’s evolution, property managers are employing new online property listing technology that facilitates faster, more efficient property sales and leasing. These modules’ integration with the core property management system allows instant information access with no duplicate data entry. Space availability is pushed to marketing websites in real time, making it easier to create leads that attract investors, prospects and acquirers. Searches can be filtered by city, ZIP code and radius, among other criteria. Property managers can also publish client-branded sites for leasing or selling properties.
Owners and brokers can leverage marketing platforms that display client-branded sites for leasing or selling properties, including photo galleries and property tours. Prospects can search by property type, location and property criteria from any device.
Other portals keep pace with the growing demand for online services. They enable tenant self services such as accessing documents, making payments, submitting maintenance requests, entering retail sales data and requesting concierge services from a desktop or mobile device. This promotes tenant satisfaction and improved staff productivity while letting site employees spend more time on high value operations instead of processing payments. Once again, full integration means that all actions are automatically recorded in the property management and accounting platform.
An ongoing evolution
Advances in commercial property management software and other technology will increasingly impact how real estate companies run their properties. The imperative to operate more efficiently assumed even more urgency when the COVID-19 outbreak imposed multiple challenges on virtually every segment of the economy. The software that operates such systems will become even more powerful in the years to come, optimizing portfolios’ marketing, leasing, tenant service and building performance initiatives. Used to their fullest potential, these capabilities can help brokers complete more sales and owners increase rents, lower costs and enhance asset value in dramatic new ways. And the development of AI and new ancillary service modules promises even further enhancements to energy consumption and virtually every other element of property management.
Even before the pandemic, the trend in commercial property management clearly leaned toward a single-platform, mobile-enabled cloud system. Property managers competing against well-equipped competitors in a rebuilding business environment can help themselves by being receptive to new business models and open to new technology that facilitates them. As Deloitte says, “Real estate is no longer just a physical space. The industry is at an inflection point: The ways in which real estate tenants and end users engage with their physical surroundings is evolving rapidly.”
