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Commercial Real Estate Technology and Your Office Budget

Posted By Bella Pace | Oct 3, 2021 9:00 AM
Commercial Real Estate Technology and Your Office Budget

As the last quarter of 2021 approaches, commercial real estate (CRE) professionals everywhere are gearing up for budgeting season. And as many have already learned, investing in commercial real estate technology is more important than ever.  

Before the pandemic, tenant experience and property technologies dominated real estate investing trends. The property technology industry grew by 1,072% from 2015 to 2019, with venture capital firms investing a lofty $8.3 billion in proptech companies in the United States in 2018.

Today, the pandemic continues to uncover shortcomings in the digital capabilities of the commercial real estate industry. To mitigate these issues, key decision-makers are looking towards technological advances in property management and tenant experience tools as competitive differentiators.

In Deloitte’s latest CRE outlook, 48% of respondents who said their company is using digital technologies such as interactive mobile apps planned to increase investment on digital channels in 2021. In addition, 92% of CRE executives planned to maintain or increase their tenant experience-related technology investments this year.

And property teams have a lot to gain from investing early. To make sure you’re providing the best workplace experiences for your tenants and properties, here are some considerations you should make as you  prepare your budget for the new year.

Working High Quality Technology Into Your Budget

When determining how to budget for tenant experience technology, you need to make sure your strategies remain iterative and flexible. The days of focusing on a single investment, setting it, and then forgetting it are gone. Instead, you need to adopt a data-driven mindset that will empower you to continue learning about your tenants’ changing needs, and prepare you to be able to address those needs on an ongoing basis.  

As hybrid work becomes the norm, building owners and operators are placing renewed effort on engagement initiatives in order to create a workplace experience geared towards employee connections. When thinking about your building’s programming, it is critical to focus on optimizing your budgets. You need to steer away from preset budgets and instead move towards breaking up budgets into smaller events geared towards tenant appreciation and engagement throughout the year. 

How can property owners and management teams achieve this? By asking tenants what they really want. A tenant experience app can spotlight various tenant surveys, polls, or community forums. Opening up this line of communication shows tenants that you’re listening, and gives you the chance to show them that they are heard and valued.

On the building technology side, it’s important to remain flexible in your thinking and to prove your investments with data. Ask yourself: what can certain technology partners provide in terms of value? Will they create efficiencies, thereby saving time and money? Can they help me collect meaningful data on my building occupants to help me formulate future asset strategies? These questions will be essential when choosing the right technologies to budget for and proving their potential impact. 

Areas For Monetization with Commercial Real Estate Technology

As you work to identify which strategies are the most valuable for your portfolio and building communities, it’s important to note that they don’t have to impact your bottom line. We’ve outlined a few areas you can leverage to your advantage when budgeting for tenant experience technology.

Pass Through Fees and CAM 

In most cases, overhead is passed through the common area maintenance (CAM) line item or operating expense (OpEx) within a lease. CRE owners typically invest in tenant experience technology and implement an amenity/activity fee charged back to tenants, in some cases including a mark-up.

Marketplace Revenue Potential 

A growing ecosystem of best-in-class third-party providers and retailers can be brought on-site to contribute to an enhanced tenant experience. These integrations, which can be found in the HqOS Marketplace, have the potential to attract and retain key clients and increase lease renewals. Additionally, you will be able to charge a premium because you are guaranteeing premium workplace experiences.

Striking a Balance

Leading landlords are taking a practical approach to budgeting for technology by factoring in revenue potential and their Operating Expense Ratio (OER = Operating Expenses/Gross Operating Income). The lower your OER, the more you can devote to NOI from proptech and tenant experience technology.

Take it from us: our customers around the globe are already seeing the advantages of implementing property technology across their entire portfolios. To learn more about tenant experience, and how you can work related technologies into your budget, read our latest guide today. 

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