Will Robots Take Over CRE?, a report released today by Cushman & Wakefield, examines transformative technologies and how they will impact commercial real estate over the next two decades.
The report is the first in a four-part series that focuses on auto-related technologies such as electric and autonomous vehicles and ridesharing; distributed ledgers such as blockchain and cryptocurrency; and technologies transforming supply chains such as drones, 3D printing and autonomous mobile robotics.
Will Robots Take Over CRE? focuses on structural factors that may drive adoption of these technologies and evaluates transformative advances that will affect them, all within the context of safety, security and acceptance; ability to converge with other technologies and infrastructure; and scalability. Each technology is evaluated on a “Hype Cycle” curve that gauges its likelihood of being adopted. Real estate and infrastructure assets are expensive, built for longevity and do not lend themselves to flexibility. Therefore, in order to embrace any change, players in CRE markets must be convinced that the technology will be widely adopted.
The report also addresses the impact of innovation on future employment and identifies cities and real estate asset types best positioned to withstand the change.
Today, technology is a net job creator. Looking forward, certain sectors are at risk, especially manufacturing. A 2018 study commissioned by the Organization for Economic Co-operation and Development (OECD) puts the number of jobs at risk of automation at 14 percent. In the U.S., that is an estimated loss of 13 million jobs. Yet, one study has estimated that one additional job in the technology sector generates about 4.9 new non-technology jobs in the same city (three professional and two nonprofessional positions), as new jobs create additional demand for local services.
“Despite all the doomsayers, new technologies have created more jobs over the last century than they have eliminated,” said Revathi Greenwood, Cushman & Wakefield Americas Head of Research and lead author of the report. “Even so, certain job functions are being decimated by technology, and in some cases robots are indeed coming for your job.”
But not yet, as most of the technologies under consideration are at least a decade away from widespread adoption. Whether that is perceived as a short or long time depends on how ready one is to cope with the aftermath. Of course, many of these technologies will be adopted on a use- or case-specific basis with limited functions and in select geographies. They are unlikely to materially affect CRE in the short term. Once a technology is widely adopted, there is likely a lag in terms of the impact on real estate.
“This lag should not be viewed as a ‘wait and see’ period. Rather, the early adoption cycle should be used to determine impacts and possible remediation strategies,” said Sandy Romero, Cushman & Wakefield Senior Analyst and co-author of the report. “The risk to CRE is that, should underlying patterns of human/business behavior change more quickly than the real estate or infrastructure can adapt, a technology could lead to weaker CRE performance.”
Going forward, cities that invest in training will also be better suited to weather technological shifts. However, once adoption becomes widespread, cities with technologically proficient workers – such as San Francisco, New York, Washington D.C., Boston, Austin, Texas, Los Angeles and San Jose – will be in a better position to benefit from the economic impact associated with these technologies.
For commercial property, successful real estate offerings are likely to straddle uses. CRE players will need to focus on flexibility and efficiencies to adapt. Assets positioned to evolve along with technology will outperform others that do not keep pace. However, such flexibility may be costlier.
Real estate categories likely to see growth include data centers, manufacturing centers for new technologies, remote parking and recharging stations and cybersecurity. Successful real estate offerings are likely to be those that offer multiple/diverse uses: for example, office/hospitality hybrids that offer concierge services, single-family rentals and conversion of retail into office and industrial. Most at-risk categories include gas stations, bank branches, non-experiential retail and garages.
“The only way for CRE professionals to adapt to changing paradigms brought on by technology advances is to focus on flexibility and efficiencies – around asset use, lease and services and supply chains. However, flexibility does come at a cost,” Greenwood said.
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value by putting ideas into action for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with 48,000 employees in approximately 400 offices and 70 countries. In 2017, the firm had revenue of $6.9 billion across core services of property, facilities and project management, leasing, capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.