When Heidrick & Struggles surveyed real estate CEOs in 2019 and 2020 on what kept them up at night, the number one answer was “digital and technology issues.” This might not come as a surprise since there is strong evidence that the industry is behind on digitalization. Coming late to the party has its price, and companies are having to respond accordingly.

In its report, Data and Technology Practices Among Commercial Real Estate Firms, Ferguson Partners ­offers hope. “The real estate technology revolution is only just beginning,” the report says, but “while the pace of change can be overwhelming, it’s never too late to get started.”

The scale of the challenge can be daunting. “Historically, the real estate sector invested very little in technology and digital R&D, compared to other industries,” says Heidrick & Struggles. “There’s also not much safe space for a fail-fast.”

Vincenzo Tortis, chief information and digital transformation officer at investment, development and management group COIMA, fears “the majority of real estate companies do not yet appreciate just how dramatic the impact of digitalization on real estate is.” Some “are embedding ‘proptech’ into their organizations, but that is not enough. There needs to be a more fundamental acceptance of the importance of data. Some companies have understood this. But very few, if any, are investing enough.”

Sam Ramadori, chief executive of the proptech company BrainBox AI, who spends his time meeting senior property managers around the globe, says: “When I compare real estate to other sectors like consumers or telecoms, it is clear it has further to go. I would say that it is still early days, but getting better.”

“An exception would be the hospitality part of the sector,” Jennifer Novack, co-head of consultancy Sheffield Haworth’s real assets practice, points out. “The importance of data has long been appreciated there.”

Generally speaking, technology investments have two goals, according to Ferguson Partners: firstly to “increase occupancy, tenant engagement and rental rates, thereby increasing revenues,” and secondly to “more efficiently manage building operations to streamline costs.”

This latter point has an added urgency during the current energy crisis and because “managers increasingly have to respond to investors’ demands for greater environmental performance from real estate” BrainBox AI’s Ramadori observes, and “to the evolving impacts of climate change.”

Increasingly, the real estate sector is using data to forecast and prescribe actions as opposed to just as a reporting tool. “When we get it right,” comments Mary Edmunds, head of human resources for Europe at Hines, technology talent can “deliver exponential results. It is a strategic resource for anticipating changes in the market, our tenants’ needs, as well as knowing where to grow our business.”

Management is responding

Structures are changing to reflect this. The latest 2022 survey sponsored by Ferguson Partners found a key area of growth, focus and expense for real estate investment management was data strategy and technology. According to the survey, nearly 40 percent of firms now have “a technology/data strategy committee” that brings all key functions together to focus on the issue.

In terms of technology leadership positions, just under a quarter of firms now have a chief information officer and another quarter of firms have a chief technology officer. Chief data officers and chief innovation officers are notably less common, however.

These are not always board positions. Serena Althaus, senior managing director and head of European searches at Ferguson Partners, notes that youth is a factor here.

She says: “The vast majority of the technology talent is under 30. This, combined with CEOs’ desire not to have an unwieldy board, often prevents them from incorporating a new hire in the technology space into boards.”

Emily Von Kohorn, co-head of Sheffield Haworth’s real assets practice, agrees. “While the head of technology function is at a C-suite level in other industries, this is often not the case in real estate. Often the head of technology will report into the chief operating officer or the chief financial officer and sit one level below the C-suite.”

COIMA’s Tortis explains: “It is often a challenge for people to decide on the correct reporting structure for technology positions. In our own case we have come to realize that the majority of data we are asking people to input is financial data. So we are going to appoint a chief data officer who will report to the CFO. The governance of data will in future rest in the finance function.”

Finding – and keeping – talent

“Hiring in the real estate sector has certainly slowed since Russia’s invasion of Ukraine,” says Ferguson Partners’ Althaus, “but one of the notable areas of exception is technology.”

Certainly, COIMA is not alone in searching for a chief data officer; Von Kohorn says that is “the hottest role for technology searches in the States.”

But where do chief data officers come from? Althaus often sees “talent coming from the brokerage firms, and it may be in the future we will see it coming from proptech firms who may be struggling with funding and are looking to move in-house with a real estate company.”

“Finding the right tech talent is not easy in this climate. It is important to remember it is not just real estate but business in general that is digitalizing”

Vincenzo Tortis

Chantal Clavier, head European real estate at Heidrick & Struggles, finds that often tech talent is hired from outside the real estate industry. She says: “Very often we seek talent globally to hire the right individual.”

“Finding the right tech talent is not easy in this climate. It is important to remember it is not just real estate but business in general that is digitalizing,” says Tortis.

There are a lot of projects across Europe thanks to the EU’s Recovery and Resilience Facility. He adds: “Cloud talent is particularly short. ‘Tecchie’ people often don’t think of real estate first.”

This doesn’t mean managers can’t find good people. Jon Black Andersen, of Nordic manager NREP, says: “We do see a significant inflow of people with technology backgrounds and experience. A recent example is Jesse Shapins joining us from Google’s SideWalk Labs.”

And Tortis notes: “We have made three significant tech hires in the last 18 months.” He says that “successful hiring and retention is not just about money,” with COIMA’s defined social impact also proving attractive as a career to those with a sense of mission.

Likewise, Shapins will be focusing on NREP’s Danish Railway District (‘Jernbanebyen’) project, and “will take forward plans to transform the site into one of the world’s greenest and healthiest districts.”

All about the money?

Nonetheless, Althaus notes that, due to the shortage of talent, “pay continues to increase exponentially.”

“At the beginning of the period I found that clients were often being unrealistic in matching their budgets with their talent expectations,” says Clavier. “I would often say to them, ‘I can bring you Silicon Valley talent, but can you afford Silicon Valley?’”

While this has changed in recent years, balancing remuneration remains a conundrum. Private equity firms could find that carry gives them an advantage, although Althaus says it is too early to know. Smaller firms tend to be “skinny” and outsource technology, but if this changes it could be an element in giving them competitive advantage in the war for talent.

Clavier agrees that private equity compensation structures can often be “very attractive to high caliber candidates who are thinking longer term.”

Having said that, some candidates tell Clavier that private equity is too high-pressured.
Sheffield Haworth’s Novack thinks private equity’s “preference for an in-office culture can be a disadvantage, as technology talent often prefers a work-from-home or hybrid environment.”

Training and skills

Bringing tech talent onboard can be a challenge. Clavier warns of “tissue ­rejection.”
Margaretta Noonan, chief people officer at real estate technology company VTS, cautions: “Often, companies are working really hard to identify and recruit people but then failing to pay attention to the experience those people have once they join the ­organization, which can result in high turnover.”

Training can help. Noonan says “upskilling [is] needed for both developers and managers. Technical proficiency is a given… but the skills beyond that are the ones that make a difference. These include the ability to collaborate, address ambiguity, showing openness to change and focus among distractions – [these skills] separate the technically proficient from the true stars.”

Tortis points out that when you are engaged in a major transformation, “it is essential in such a process that you bring people with you.” You must make it “clear how technology will add value to their day-to-day roles. Classroom training doesn’t work.”

Three key roles

Chantal Clavier, head of European real estate at Heidrick & Struggles, says the focus is on three senior technology officers at present.

The chief information officer is the role “responsible for making sure all of the internal tech is in place. This is a major issue for many real estate businesses, especially as there is no single system that seems to provide everything they need.”

The chief technology officer tends to be the senior executive responsible for creating proprietary technology within an organization. “There is just not enough software to purchase off-the-shelf, so companies have to invest in their own technology. The person who does this will often only be needed until a certain milestone or goal has been achieved, and as such this can often be a shorter-term role.”

The chief data officer is much more focused on making sure that digitalization has happened across the business and that the apps are in place to connect customers to real estate companies’ technological platforms, making sure that all the necessary data ties in, such as leasing terms and asset-specific data.