“The only thing that’s certain about predictions is that many of them will be wrong”
— Why Success Always Starts With Failure By Tim Harford
Predictions are fun to make but rarely accurate, and future predictions about the state of the commercial real estate sector are especially hard to make considering how rapidly technology is advancing the industry. We simply cannot predict how commercial real estate will evolve in 1, 3, 5, or 10 years from now, but we do know that it will be vastly different. Think back 20 years ago, could you have ever predicted how impactful the internet or the smartphone would be on your personal and professional lives back then? Probably not! In 20 years from now we will probably be saying the same thing about the impact of Artificial Intelligence (AI), Driverless Cars, and Building Information Modeling on the commercial real estate industry.
Since I launched the Lineage Asset Advisors commercial real estate platform in 2015, the worlds of property investment, property management, technology, and communication have changed exponentially. In short, the old foundation is cracking and giving way to a completely new way of owning, operating, and occupying properties. This rapid innovation is making it increasingly difficult for commercial real estate owners to stay adaptable and keep pace with the competitive landscape of smart buildings and the ever-increasing technology demands of tenants, investors, and lenders.
Without having a plan in place, it can be difficult for multi-generational owners to adapt to the rapid changes occurring in the industry, especially when they have been operating their portfolio the same way for many years. Tension and resistance can also arise within the ownership dynamics, can lead to fractured relationships, and can stall much needed capital improvement projects which would otherwise lead to operational efficiency and/or revenue growth.
In our experience, there tends to be a natural inter-generational difference in philosophy with regards to investment in and commitment to innovation. In general, some owners will be drawn to taking bigger investment risks with technology (“new-school”) while others will be more skeptical and conservative in integrating technology across their portfolios (“old-school”). An ownership organization that adopts a healthy balance of the “new-school” and the “old-school” philosophies and integrates clear policies, procedures and goals around investment in modernization will stay nimble and competitive!
Developing and implementing a Building Modernization Plan can be a great way for multi-generational owners to have a clear decision-making process around modernization and technology adoption. These plans establish a framework for whether an owner does or does not invest in a particular technology. The framework is based on their investment, financial and operational goals.
Below is high-level framework for developing a Building Modernization Plan. Please contact us for more details on Building Modernization and decision making around innovation. We are here to help!
- STEP 1 – Interview Stakeholders – Understand Their Motivations to Innovate
- STEP 2 – Perform an Annual Assessment of Your Properties – Operations, Property / Systems, Financial, Market
- STEP 3 – Establish Modernization Goals with Input and Buy-In from All Stakeholders
- STEP 4 – Research, Analyze, & Compare New Property Technology
- STEP 5 – Memorialize Internal Policies & Procedures for Testing and Adopting New Technology
Lineage Asset Advisors is your resource for developing transition plans with your commercial real estate portfolio that are mindful of the family and portfolio dynamics. Our team works with owners on establishing their commercial real estate portfolio goals and helps them implement those goals for the benefit of current and future generations.