The UK commercial real estate (CRE) sector faces a pivotal moment in its digital evolution. Perhaps nowhere is this more evident than in the area of core technology¹. In recent years, technology investment has been prioritised out in the asset - for example, through the installation of connected sensors to gather real-time data on footfall to power consumption. By contrast, firms’ investments in core technologies, those at the heart of the business, have been somewhat less generous.

Investing in assets adds to their value, attracting higher paying tenants during the operating cycle and commanding higher prices when those same assets come to be divested. In this way, firms feel they 'get back what they put in' with such investments. And, at a time of rising costs, this can be an easier option for budget-conscious decision-makers when compared with investments in core technology, which by contrast can be somewhat harder to justify.

Yet, when tools and systems fail to keep pace with the demands of the business, or with changes in the wider market, problems can stack up and inefficiencies can multiply. Consider, for example, a situation where a developer lacks the ability to automate its processes effectively. Such a 'capability gap' could lead to the organisation increasing its reliance on manual processes at a time when more digitally mature peers are freeing up time and resources for higher value tasks. When efficiency and productivity decline, so too does the ability of an organisation to set strategy and run its businesses effectively, with the added drag from legacy technologies slowing everything down even further.

This adds up to a big problem for the industry. In an era of rapidly evolving demands – for everything from hybrid workspaces and secure data centres to purpose-built science facilities and logistical hubs – business leaders are making important strategic decisions every day. To make this process efficient and effective demands data and analytics, all served up in digestible formats to support big decisions. However, absent the tools and capabilities needed to ingest, manage, analyse and action it, all the data in the world, gleaned from the most complex networks of devices, will deliver very little value.

We believe CRE developers now find themselves at a crossroads with their core technology. For a select few, the pressing question is how to make the most of the digital advantage they have built for themselves through years of well-planned IT investment. For others, the challenge is how to mirror the advances made in asset-level technology to address gaps like these in their core IT provision. In this way, developers of all stripes will be able to acquire the modern systems and processes needed to run their businesses efficiently and effectively.

And this, of course, has profound implications for firms’ competitiveness, in what is an increasingly complex and unpredictable market environment. Today’s tech-enabled organisations enjoy a wide range of advantages. Tech-enabled workforces – from top to bottom – are more agile and adaptable. The availability of high-quality data and analytics tools empowers them to turn insights into meaningful action. And they are steered with IT strategies developed in collaboration with the business, aligned to its wider objectives. With so much to gain, and in the shadow of chronic underinvestment in core IT, Deloitte decided to launch an industry survey of senior technologists at UK CRE developers – from CIOs and CTOs to the Heads of Transformation and Directors of Technology.

The purpose of the survey was to better understand where the UK real estate sector is on its technology journey, and where it needs to go next. Through the survey, as well as a series of detailed 1-2-1 interviews, our participants, who together represent more than 40% of the UK’s CRE market by assets, gave us a unique window into the state of play in real estate core technology. Their experiences and pain-points shed light on the issues and urgent challenges facing the industry right now. And, through the insights shared concerning resource availability, investment priorities and business challenges, they also hint at the path forward for those firms willing to grasp the opportunities presented by digital transformation.

To achieve this outcome, we recommend all firms consider these seven specific measures:

For many UK developers, technology will be the defining factor in their future competitiveness, helping them to achieve broader efficiencies though automating workflows and a deeper view of the market through data-driven insights. Different firms are at different levels of digital maturity in different dimensions. However, against a backdrop of chronic underinvestment in core IT, what unifies the sector is the depth and urgency of the transformation required. By acting now, we believe that organisations can position themselves to leverage their technology effectively to drive sustainable value for the long-term.

With so much to gain, the time for change is now.

To find out more about the survey and to discuss our findings, please reach out to the business contacts listed below. 

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References

1. Our survey is solely concerned with Corporate IT spend at the heart of the business. We define this as the financial investment an organisation makes in its technology infrastructure, systems, people and services to support core operations. This would include certain non-core items – such as salary costs for IT FTEs working exclusively on portfolio and platform-related projects – that would typically be billed back to a portfolio or platform. Since we are not seeking to evaluate technology investments in portfolios or platforms at large, all other non-core spend is considered out of scope.

2. The term 'Goldilocks Zone' is typically used to refer to the habitable zone around a star, where conditions are neither too hot, nor too cold for liquid water to exist. Planets in the 'Goldilocks Zone' are regarded by scientists as potentially suitable for sustaining organic life. The term is used here to describe spaces along our digital maturity curve that are similarly “just right” for firms, being mature enough to support their specific requirements without demanding unnecessary complexity and cost.