CRE asset management software is a buzzword that is making waves throughout the commercial real estate (CRE) space. As technology continues to disrupt the CRE industry, you’ll hear opinions from both novices and industry experts about CRE technology. For some, CRE technology is still a foreign concept. And to others, tech adoption is a core component of their organization’s strategy and growth.
It’s true; we’re biased towards asset management technology being critical for modern CRE firms. However, in this blog we’re exploring whether CRE asset management software is a “need-to-have” or “nice-to-have”. Read ahead for our honest thoughts about whether a CRE asset management tool is a necessity.
What is CRE Asset Management Software?
CRE asset management software is technology that enables commercial real estate firms to report, visualize, analyze, and track properties in real-time for accessible, actionable insights that will optimize cash flow for faster returns. It enables firms to effectively manage their assets, streamlines operations, and helps to produce favorable business outcomes. This type of software solution is built specifically for CRE professionals and intended to address the unique needs, challenges, and pain points of the industry.
4 Factors Driving Demand for Asset Management Software
Over the next three years, the commercial real estate market is projected to reset expectations to market-based interest rates and pricing. This shift will affect the actions and strategies around cash flow and cost of capital, impacting asset valuations, deal flow, and transactions. Consequently, the ability to be nimble and quickly adjust your cash flow management strategies with the market will be key.
Although not an exhaustive list, the following four factors play a significant role in the importance of asset management software for CRE firms:
Even prior to 2020, the commercial real estate industry was facing new and evolving political, social, and economic issues that had the potential to impact the market in many ways. Now, along with rising interest rates, widening cap rates, and increasing costs of labor and goods, there is the added pressure of economic instability and the unpredictable nature of recovery.
However, savvy investors and CRE asset managers will remember that this is not the first time the markets have seen such volatility. Historically, the economy has been fairly resilient in times of uncertainty, and situations like these often uncover new opportunities for consideration. An outcome of the pandemic is that both investors and asset managers have witnessed the potential of technology in managing their portfolios and making informed decisions about their investments and properties. CRE tech solutions such as asset management software can be an effective way to monitor asset performance, mitigate risk, evaluate opportunities, and pinpoint areas to increase efficiency or decrease expenses.
Rising Interest Rates
Inflation and interest rates are at an all-time high. As such, the cost to borrow money is increasing. High interest rates can make it difficult for property owners to refinance their loans, leading to increased financial strain. Consequently, investors can’t afford to be as lenient on spending on highly appreciated assets as they may have been in the past. In short, as the cost of capital rises, it becomes more expensive to own and invest in commercial real estate. The data extracted from asset management software can be used to monitor trends in your portfolio and help you combat the effects of rising interest rates for stronger decision-making.
Demand for Actionable Data
More data exists now than ever before, but a vast majority goes unused. In fact, it is arguably one of the most valuable but underleveraged resources at your disposal. This situation is particularly concerning when you consider how data can impact the way that CRE professionals research, invest in, build, and manage properties and otherwise conduct business. Now, there is increasing demand for data and insights in the commercial real estate industry as investors and property managers face increased scrutiny and seek validation for their decisions. Having data and the tools and processes to make that information meaningful facilitates the agility that is needed to respond quickly and effectively to shifts in the market and enables confidence in decision-making.
As Forbes says, “CRE companies have to be at the forefront of technology for many reasons, but the main one is this: It has become the expectation.” Your tenants are expecting it. Your investors are expecting it. Your vendors and contractors are expecting it. Your employees are expecting it. … And your competition is hoping you don’t use it. The commercial real estate industry has slid by for a long time under the guise of history and tradition – players never felt the pressure to be among early-adopters of new and innovative technologies. But today, technology and digital transformation are no longer luxuries or ‘nice-to-haves’ – they are necessary to remain competitive, drive business success, and adapt to the new realities of the marketplace.
Final Verdict: Is CRE Asset Management Software a Need-to-Have or Nice-to-Have?
Our final verdict: CRE asset management software is a need-to-have for modern, forward-thinking CRE firms. That’s because asset management tools enable firms to:
- Automate operational and financial data intake
- Enable intelligent performance analysis and reporting
- Model historic, current, and future scenarios
- Assess & report on cash flow, debt, equity, & entity performance
As the market changes, you’ll want a tool to help you manage yield expectations better, monitor and track performance, understand how your properties are performing in comparison to peers, and more. In short, you want to be able to shift your strategy with the market – not because of it. Unfortunately, spreadsheets are not suited to address common CRE asset management challenges. Neither can they effectively keep a pulse on changes within your portfolio.
Download the Buyer’s Guide for Asset Management Software to learn how CRE tech solutions are powering the industry to transition from outdated programs and processes to automated, scalable operations that can boost business efficiencies and drive cashflow.