The pandemic has only highlighted how integral technology is to our day-to-day lives, and it will continue to play a key role in the economic recovery. During Nareit’s REITwise: 2021, Law, Accounting & Finance Conference, panelists joined the general session, “Leveraging Technology to Drive Shareholder and Stakeholder Value,” via video call, further illustrating this point.

“In some ways the pandemic has highlighted the need for technology,” noted Umar Riaz, EY Americas real estate, hospitality and construction advisory leader.

For some sectors, the pandemic has been an accelerator for technology adoption. Multifamily, in particular, has seen this adoption accelerated out of necessity, said John D’Angelo, managing director/U.S. real estate sector lead at Deloitte Consulting, as residents have sought touchless experiences or methods of interacting with management virtually.

Brad Greiwe, co-founder and managing partner at Fifth Wall, said that a lot of the demand for technology is being driven by operational deficiencies. Fifth Wall’s research shows many mature industry groups spend 8-10% of industry revenue on research and development, while real estate spends less than 1%. “That spend is not going to be optional,” added D’Angelo, pointing to the need for the real estate industry to prioritize investing in technology and R&D.

Moderator Sourav Ghosh, EVP, CFO, and treasurer at Host Hotels & Resorts (Nasdaq: HST) acknowledged the industry’s lag in this area. “That evolution, it’s not a matter of if, it’s a matter of when.”

The Challenges of Digital Transformation in Real Estate

Panelists agreed that digital transformation is an intimidating task. It is a long-term process that is more about the actions taken to get there than a singular event, said D’Angelo. “The big key to success is management’s belief that change needs to happen…that it’s either an imperative for the business or that it’s going to drive future success.”

Greiwe added that technology is only one piece of it, though. Often organizations need to undergo a culture shift to take full advantage of the technologies available.

Evan Regan-Levine, EVP, strategic innovation & research at JBG SMITH (NYSE: JBGS), advised that it can be easy to get distracted with flashy technologies, but for digital transformation to be successful it’s important to stay focused on how to utilize technology to drive the success of the core business.

He also shared insight into how JBG SMITH has approached digital transformation. The REIT creates the place that attracts the tenants and invests in the infrastructure that enables positive tenant amenities. They leverage the real estate to help facilitate the technology and make it a benefit to tenants, but their role is not in providing technology solutions per se. “We’re serving as an enabler and placemaker.”

How Data and Machine Learning Can Impact Business Decisions

Capturing data from multiple systems, particularly when combined with machine learning, can help inform business decisions and allow real estate owners to better anticipate the needs of tenants. D’angelo said, “there’s so much value to be gained in capturing the data, making sense of it, and triggering actions based on it.”

Speaking to JBG SMITH’s approach, Regan-Levine said, “it’s sort of the holy grail” to create a centralized source of data. The REIT builds predictive analytics to better understand tenant needs and demand drivers. Aggregated data can help influence development decisions, and a true “common data environment” is the long-term goal to help drive the way the company operates its real estate.

Ultimately, the panelists agreed, it comes down to more investment in technology. The industry needs to think about not only transforming digitally but transforming analytically, Riaz said. “Investing in data analytics is immediate ROI—whether it’s a better, more accurate valuation, better rental deals, or more efficient buildings.”

The Role of Technology in Developing Solutions for Sustainability

Data and technology also play a key role in sustainability initiatives. Tackling climate change and effectively developing solutions to reduce the carbon footprint of real estate, however, will likely require industry leaders to adopt a collaborative approach to effectively scale the technologies necessary to create significant change.

JBG SMITH is seeing an increasing number of investors asking about ESG, said Regan-Levine. He noted it can be challenging to balance the needs of investors, regulators, and tenants, though. Sustainability is a long-term investment, but “the short-term capital investment and that expectation of ESG practices is still a challenge for our industry.”

Greiwe suggested that tenants will start demanding sustainability, and it’s important to think about it holistically. He predicted a shift in what it means to own and operate real estate as sustainability comes to the forefront of consumers’ minds and demand accountability from businesses. Sustainability ultimately creates operational efficiency and brand value, though, and he suggested real estate owners “turn a reactive conversation into a proactive one.”

Ghosh agreed. “It’s not just about ESG technology—you can invest in it—but you can also drive operating efficiency.”

Climate change is an industry issue, and the industry as a whole needs to work together in order to develop scalable, impactful solutions. Riaz pointed to the success of the automotive industry in collaborating to upgrade their supplier base for electric batteries. Now, the technology is so affordable that he predicts most companies will retire their gasoline engines in the next decade.

Panelists agreed that a change is on the horizon. The pandemic has accelerated the adoption of certain technologies and forced many executives to begin rethinking how to utilize and leverage real estate. Regan-Levine said “cities aren’t finished. Real estate as we know isn’t finished. But it is changing.”