The pandemic served as a catalyst for countless major shifts in the way we work, live, and interact with each other. New habits and behaviors formed overnight, while many components of our everyday reality simply ceased to be.
Amidst the remote work revolution and the rise in online shopping, one industry that has been forced to keep up with a particularly rapid pace of evolution is commercial real estate. Near the beginning of the pandemic, panic ensued for many commercial and industrial real estate professionals as the world watched with bated breath to see what would become of the traditional office and retail spaces.
Although the tidal wave of COVID-19 knocked the industry slightly off its balance, there is hope on the horizon. Transformation is crucial to survival, and the brands that will rise from the ashes are those that have stayed flexible and adaptable to the changing nature of the industry.
Transform It Forward with Aviva Fink: Transformation in the commercial real estate industry
Aviva Fink is the Vice President of Growth and Partnerships at Reonomy, a platform that helps commercial real estate professionals make informed decisions by leveraging in-depth data analysis and property intelligence across the U.S. She says many of the changes taking place in the commercial and retail real estate industry were already in the works pre-COVID, but the pandemic has acted as an accelerant, speeding up the evolution by leaps and bounds.
“Some of the changes that were catalyzed by 2020 were changes that the industry was preparing to deal with anyway, it just increased the pace at which those transformations became front and center. People were moving to online shopping, and e-commerce was becoming an increasingly popular form of purchasing, COVID just kind of pushed that over the edge.”
People who may have been reluctant to adopt new technologies prior to the pandemic have been forced to learn new ways of doing things, and behaviors have shifted dramatically, especially in retail. The picture of the commercial real estate landscape has become somewhat clearer in recent months, but the fog hasn’t lifted entirely.
While some questions still hang in the balance, like whether business travel will make a full comeback, Aviva says the industry is generally optimistic about the return of things like hospitality, personal travel, and even office space.
“People have gotten very comfortable with not having to get on planes at the crack of dawn in order to make an important meeting. Will that be a trend that continues? Do people miss a lot of that in-person interaction, or has the virtual meeting really supplanted the need for having to get on a plane? Some of those questions still remain, but I think generally there’s a lot of optimism there, and for good reason.”
Humans are social creatures, so it’s not hard to imagine a complete return to traditional offices, business travel, and regular in-person social activities just as they were back in 2019. But have consumers become too reliant on the convenience of online shopping for the retail industry to see a similar resurgence?
Retail therapy lives on
Aviva says the jury’s still out on the future of the retail space. There’s no doubt that e-commerce has grown rapidly in recent years, but purchasing an item of clothing with just a couple of clicks will never compare to the social, interactive, and experiential aspects of in-person shopping that so many people have come to know and love.
Ultimately, consumer behavior will continue to drive the evolution of retail spaces moving forward. Aviva believes significant changes are still to come in the retail industry, but exactly what form these changes will take remains to be seen.
“The one asset class that hangs in the balance the most is retail. I think retail is interesting in that there’s the social element and the experiential element that people enjoy, which can’t really be replicated with an online experience. But just how much retail space is needed to support a positive and a delightful shopping experience is unknown.”
With all these unknowns at play, how can investors and real estate professionals make informed choices? According to Aviva, leveraging multiple dimensions of data is key for professionals hoping to reposition themselves in a shifting landscape.
Now more than ever, a flexible yet strategic approach is crucial. Making use of as many diverse categories of information as possible will serve as the bedrock of thoughtful investment decisions moving forward.
“That’s what everyone’s grappling with right now: what alternative data sets do I need to leverage to make smart decisions? It’s becoming kind of table stakes, if you’re trying to be thoughtful and data driven about your investment decisions, you’re going to be leveraging multiple dimensions of data to understand consumer behaviors, brand performance, and site location behaviors.”
Aviva cites mobility data, demographic data, and transaction data as examples of the dimensions of data real estate professionals should leverage to build profiles of different neighborhoods, make smart investment decisions, and attract the right tenants. She also suggests looking into other area metrics like the number of graduates with degrees in STEM, the number of patents filed, and any other stats that signal continued growth.
With all this data at our fingertips, brands need to be careful of consumer sensitivity around privacy issues. The controversy surrounding the sharing of data and privacy concerns is another shift that will force brands to adapt and experiment with new strategies to maintain relationships with consumers.
“So much of the ad space and of the way that people think about customer acquisition is based on an oversharing of data, and so now people are getting a lot more sensitive to that. That changes consumer behaviors, which means that the companies are going to have to adapt.”
Aviva says brands will have to get creative about how they collect information from customers. For example, Sephora uses its app to collect data from customers by incentivizing them with discount codes, coupons, and birthday emails, whereas a social media network takes data without providing any tangible benefit to the user in exchange.
Riding the waves of change
The commercial real estate industry is changing, but not everyone is along for the ride. As the evolution continues, the levels of tech adoption still range widely across the playing field, and many industry vets are reluctant to experiment with new methods.
Those who are resistant to change will eventually succumb to the changing tides, Aviva believes, whether as a result of peer pressure or simply the changing of the guard within the industry.
“FOMO or the fear of missing out is something that weighs on everyone, whether it’s in social settings or professional settings, so I think there is a bit of peer pressure that gets people moving. The early adopters definitely pull the rest of the group forward.”
Overall, building a strong network of stakeholders involved in all pieces of the puzzle is an essential component of change management.
“You need to encourage a web of discrete entities to buy into the same vision, and I think that’s a very unique challenge. It means that people who are spearheading technology initiatives really have to be great at relationship building. It’s not just about getting Internal buy-in, which in itself requires good relationship building, but you have to be able to go outside of your organization and help drive change.”
Five key takeaways
Here are five key insights from our conversation with Aviva:
- The pandemic changed the way we interact with brands. Aviva mentioned that although the industrial real estate industry is generally optimistic, questions remain — especially in retail. She believes the brands that will thrive post-COVID will be those that focus on the experiential element of shopping that can’t be replicated online. While consumers have adapted to online shopping over the past year, brands like Apple and Best Buy create a sensory experience for customers will succeed.
- Today, the real estate industry is grappling to determine the alternative data sets they need to leverage to make smart decisions. In a post-lockdown world, behaviors have changed, so managing multiple dimensions of data is vital to be thoughtful of your investments. For example, stakeholders are now leveraging mobility data, demographic data, and transaction data to make more informed investment decisions.
- Controversies around data rights, privacy, and security are changing the way brands interact with customer information. To stay on top, brands will need to get creative about how they collect customer data by building trust directly with consumers. For example, Sephora continues to collect customer data by offering special incentives like birthday gifts or free samples. Third parties like Facebook will take a back seat as they adapt to privacy and personal data collection around hypersensitivities.
- Two key things play a role in technology adoption. First, FOMO or “the fear of missing out” plays a huge part in modernizing real estate — no one wants to be late to the party. Early adopters pull the rest of the industry forward, and while other groups may lag behind, they will eventually succumb to peer pressure. Age also plays a part, as younger professionals entering the industry are more comfortable relying on technology and data to help make important decisions.
- In change management, there are many factors either working for or against you. Relationship building is a key skill to cultivate in the real estate world since all players juggle multiple competing interests at once. The most important thing is to zoom out, keep your perspective broad and ultimately align on a shared vision involving all parties.
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