How CRE Deals are changing AND what is ‘phygital’?

Changing CRE deals: in 2022 the commercial real estate industry faced high levels of uncertainty. A whirlwind of rising interest rates, a cooling economy, bank closures and overall volatility made 2023 difficult to navigate. Now, the trends that shaped last year can provide the industry with knowledge of the year ahead.

In terms of acquisition and disposition activity, the most active in 2023 was Multifamily, which accounted for 39 % of overall sales. It was followed by Industrial properties, at 22% of the investment activity, and Office space accounted for only 7% of total deals. And Retail came in at 10%, a large growth from 2021 and 2022 data; while Life Science assets saw a notable decline, from 6% in 2022 to 1% in 2023 data.

Commercial real estate is evolving to combine physical spaces with digital services: The “Future of real estate: the Shift to Phygital”… This phrase means the bridging the digital and data divide.

In addition to more personalized services, a recent Deloitte survey found Tenants want Landlords to use new technologies such as:

• data analytics

• artificial intelligence

• property-monitoring systems: like smart cameras and real-time visitor monitoring

From a recent Deloitte survey of Tenants and Landlords, real estate owners need to build a strong digital foundation to keep and get new tenants, and it starts with having integrated systems. Currently, Tenants have very little visibility in terms of the performance of the building – for example, total water or energy consumption. And Landlords have very little visibility into how Tenants are using their space. This digital and data divide means that space isn’t being strategically managed in a way that would benefit both sides.

Phygital works to provide a better path to sustainability and also for better operational efficiency and security… It can even inform decisions about spatial reconfigurations or if upgrades are needed to improve energy efficiencies according to net-zero goals.

This may seem like a big technological undertaking for Landlords, but with open communication, a Tenant can tell their Landlord how much space they’re occupying and ask for input on how to economize on unused space to minimize energy usage compared to other Tenants in the building.

In 2024, Commercial real estate is evolving to combine physical spaces with digital services; will your clients and Landlords be ready?

At CREAS, we can help you bridge that data and digital divide. Reach out to us if your company needs help! Just email us directly at: corporateREadvisoryservices@gmail.com