The COVID-19 pandemic has amplified the level of uncertainty and existing challenges in the property development market. This stems from several factors including hesitation in asset classes like the office sector and retail, as well as varying levels of uncertainty in different markets and country, weighing on government response to the pandemic. The Global Property Development Trends Report by Altus Group surveyed over 400 C-level property development executives to examines current challenges facing the global development industry and delivers insight into the key business imperatives needed to build resilience in the ‘new normal’.
Some of the top challenges that development executives are facing currently include project cost escalation, environmental regulations, government policies and process, and trade/labour shortages. With social distancing rules still in place in some regions, the pandemic has had a major impact on construction sites.
To combat uncertainty and enable these developers to tackle these challenges head on, more than half of these firms are planning to use data analytics to mitigate business risk, and one in three are already doing so.
“This thirst for greater transparency and analytics makes sense,” said Scott Morey, executive director at One11, an Altus Group company. “With investors looking at new asset classes and new markets, they want as much information as possible to better understand the current environment.”
Morey says a lot of what we’ve been seeing through the pandemic and what we will continue to see going into 2021 is the acceleration of existing trends (which we’ve heard many times over). One of these major trends is that thirst for analytics. The report points to a renewed urgency for digital transformation, as accurate, timely information is key for enhanced productivity and avoiding costly errors. Already, he says there is new investment in proptech and a belief that developers will progressively look to outsourcing certain functions, which is another pre-COVID trend becoming increasingly apparent.
“Companies like Cherre and Reonomy have been building platform that consume public real estate data and make sense of it, which has significant value,” said Morey.
Both tech firms use a collection of property and market data to help leads in commercial real estate make more informed decisions, which is particularly valuable in today’s environment. As interest grows, so do some adoption challenges; 54% of executives say lack of normalized formats of data is the biggest impediment to their company collecting or using more data to drive decision-making in the development process.
“A huge challenge is getting the data together and putting it in the right format and systems,” Jeff Thomas, development head at KingSett Capital stated in the report. “That’s a huge endeavor on its own. We have spent a lot of time and energy thinking about leveraging data analytics, training and upscaling staff to deal with data, and digital transformation of processes continues to be a focus for us.”
The greatest impediment to adopting technology has always been priority, but Morey says as it scales, it will be more economically viable. At site-level, he also expects the continued wave of technology adoption, including use of drones and digital twin technology, which is in line with survey results. In the U.S., four out of 10 developers have already implemented construction site robotics and more than 22% plan to adopt; 36% are already using drones with close to 39% planning to adopt.
In the report, U.S. developers ranked the most important government actions to encourage and attract real estate going forward; reducing taxes and development charges, expediting approvals/reducing regulation, and partnering with private developers made up the top three priorities.