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Innovation & technology Q&A: Preparing for tomorrow's world
What does your role as innovation & technology strategist entail? I help us drive technological innovation across our global platform, in line with our tomorrow’s world investment philosophy. Our focus includes implementing PropTech solutions within our real estate portfolios, adopting new operating models, leveraging Big Data & AI to support investment and asset management decisions, and research on how Fintech and exogenous technologies like autonomous vehicles will influence the future of real estate.
At Nuveen Real Estate, our goal is to deliver long-term outperformance by ‘future-proofing’ our portfolios, identifying the optimum strategies for tomorrow’s world and aligning our investments with the structural drivers of real estate demand: demographics, sustainability and technology. Integrating innovation and technology into the heart of our investment process is a core pillar in delivering investment excellence to our clients and having a positive impact on the communities we operate in.
Innovation and technology is not a silo, but a strategic, facilitative function that partners with investment, sustainability, research, product and operational teams across Nuveen Real Estate to embed a shared philosophy of innovation across the global platform.
Is commercial real estate being disrupted by the tech sector? Real estate has started to embrace technology a lot more in the last three to five years, but it is yet to feel the full impact of technological disruption which will happen over an extended time frame. However, we are ensuring the seeds of transformation – both business model innovation and technology innovation - are firmly planted. The question is not if, but how the industry will feel the impact.
Historically, real estate has not been the most dynamic or innovative due to barriers such as a risk-averse culture, a lack of alignment between stakeholders, and overall expectations that the future will be rigidly linear. However, in recent years the industry has started to wake up to the fact that the pace of change in all industries is accelerating and that new, innovative approaches are needed to make real estate fit for the 21st century. Real estate has started to ask itself the right questions and consider how to effectively respond. Those that adapt to these structural shifts will succeed in tomorrow’s world, and those that cannot or choose not to will struggle.
What are the main challenges that the real estate industry must overcome in reacting to technology, innovation and disruption? We believe the industry faces two main challenges: the first is navigating the technology-driven shift in the real estate value proposition for consumers. There is a need to re-evaluate what people fundamentally want from their built environment, particularly in the two largest sectors: retail and office. The digital world allows people to work and shop remotely if they choose to, and real estate must differentiate itself by providing an experience or heavily prioritising efficiency. The second challenge is adapting to an accelerated pace of obsolescence. In order to do this, real estate must do more to encourage and reward creativity, forward-thinking and innovation. It is also critical that we place equal emphasis on the structural drivers of long-term real estate demand as much as real estate pricing and the cycle. At Nuveen Real Estate, this approach forms the core of our tomorrow’s world investment philosophy.
Real estate must also learn how to harness the power of digital technologies – whether this means making processes more efficient, enhancing relationships or creating new products. In the short term, this might mean tweaking existing approaches. However, in order to maximise the potential of digital in the medium term, the industry will have to consider how to realign incentives and redesign processes to enable technology, rather than trying to plug the technology into legacy approaches. In the long term, this will ultimately force real estate companies to re-evaluate their role in the value chain, their relationships with other stakeholders in the ecosystem, and what the source of their competitive advantage is.
If we are going to digitise the industry, we must challenge the way we operate across the entire lifecycle of property investment, from research and transaction to management and development.
As a private asset class, granular data on the market itself has always been opaque, with few incentives to contribute to the collection, aggregation and sharing of this data. Efforts to democratise access to this ‘hard data’ (rents, yields, vacancies, square footage, etc.) are underway and, if they succeed, could unlock a lot of value. Equally important, and perhaps on a faster time frame, is how to leverage ‘soft data’, such as mobile phone geolocation data, transport flows, social media data, and so on. Low hanging fruit in this arena includes open data initiatives, where cities and public organisations open up access to the data they collect, including demographic, transport and ownership information.
Asset-level technologies are typically used with the aim of creating sustainable ‘Smart Buildings’. This area is still maturing, but the falling cost of sensors is leading to more granular and useful data being generated, which is driving progress in areas like energy efficiency, optimising productivity and understanding space utilisation. As well as collecting more data on each building, the other component to the Smart Building is the ability to access, interact with and analyse this data. To this end, there are a growing number of digital platforms that sit on top of buildings, enabling both greater operational efficiency (e.g. remote diagnostics solutions that increase energy efficiency) and an enhanced office experience for tenants and end-users (e.g. tenant engagement apps). Smart Buildings are still hard to define and in real estate a ‘one-size-fits-all’ approach is usually not the right strategy, but it is increasingly market practice for retail, office and housing assets to have digital strategies that go beyond simply providing internet to tenants.
Finally, new operating models have proliferated in the last three years, often with significant hype and fanfare. Although there are many fair criticisms of these models and different operators have their own strengths and weaknesses, at their core these new operating models gained traction because they provided a solution for consumer demand that was not being met in conventional real estate. Their core value proposition – typically comprising a combination of enhanced amenity activation, more flexibility, a focus on technology and greater alignment between the ‘landlord’ and the end-user of the space – is a formula that gained real traction in the market and that real estate incumbents now largely recognise as a key lever for value creation. The industry is still in the process of understanding the right mechanics, partnerships and strategies that will enable these new operating models to thrive sustainably, but they are here to stay.
Issued by Nuveen Real Estate Management Limited, 201 Bishopsgate, EC2M 3BN. Authorised and regulated by the Financial Conduct Authority. Nuveen Real Estate is a name under which Nuveen Real Estate Management Limited provides investment products and services. Nuveen Real Estate is an investment affiliate of Nuveen, LLC (“Nuveen”), the investment management arm of TIAA. Nuveen Real Estate securities products distributed in North America are advised by UK regulated subsidiaries or Nuveen Alternatives Advisors, LLC, a registered investment advisor and wholly owned subsidiary of TIAA, and distributed by Nuveen Securities, LLC, member FINRA.