More commercial real estate companies are adding chief technology officer positions within their management structures, as more investors and developers use technology to simplify and reduce the risks associated with due diligence, acquisition, and management of commercial property and debt portfolios.
It’s a trend that will be explored in detail at tomorrow’s Real Estate Finance & Investment Institutional Investor Summit — a three hour event taking place at Essex House in New York.
The CTO role is not a completely new one within commercial real estate, says Peter Shankar, chief technology officer at real estate-focused fintech company EquityMultiple — and one of REFI’s panellists for a breakout roundtable discussion on the subject. “But I do think [the CTO role] has been redefined recently to focus on pretty big changes in the industry,” he says.
“In the capital markets especially, I think the drivers are availability of data, better process automation, and better tools of analysis,” Shankar continues. “I would say the trend started with a wide proliferation of technology to retail consumers; companies like [online real estate database] Zillow play a big part in these shifts, and we’re now seeing the ‘consumerization’ of technology for CRE.”
As for hiring a CTO, the larger commercial real estate enterprises have already caught on, “and the SMB market is wising up,” observes Shankar. “But the real sea change is with new entrants in the market that have a heavy technology focus — they’re eating away at market share,” he adds.
With real estate being so transaction-driven, Shankar believes that any CRE company that undertakes a large volume of transactions, or that needs to scale quickly, will benefit from hiring the right chief technology officer for its business.
He sees the CTO role as providing the same benefits in real estate as it does for non-CRE organizations. “The right CTO brings with them a wide skill set to solve an array of problems with technology, and ultimately to improve the pace of business and reduce cost,” he says. “They should automate the manual, augment or improve company intelligence with data, and surface the right information at the right time.”
Shankar sees the biggest challenge as “shifting the perception that technology is a department. For a CTO to be truly successful, there needs to be a cultural shift in the organization — you have to treat technology as an organization-wide skill set,” he says.
“Assuming all stakeholders [within the business] are aligned, a CTO can become a real partner in revenue generation,” Shankar continues — pointing to financial services and banking, “where both incumbents and new entrants are turning to technology to be closer to the front line in sales, trading and so on.” This is exemplified in that sector by the fact that the role itself is becoming something of a hybrid position that also incorporates responsibilities traditionally associated with the chief operating officer and chief information officer, he observes.
For a CTO working within commercial real estate, there is no substitute for industry-specific knowledge, says Shankar. “If the CTO has roots at a non-CRE research and development level, but accumulated knowledge of the CRE vertical elsewhere — I think that might be a very favorable background,” he adds.
“Lastly, I do think there’s value in ensuring there’s still a little ‘nerd’ in them — perhaps they’re still inclined to hack away at new technology in their spare time, have ongoing programming pet projects, or get their hands dirty with the R&D team.”
Shankar will be participating in a roundtable discussion about the role of the commercial real estate CTO at REFI’s Institutional Investor Summit 2019 in New York on February 7. Also taking part will be Louis Baugier, the founder of real estate technology company Surecave.
The half-day Summit is geared toward institutional investors and fund managers who are active in deals of $25m to $500m throughout the U.S.
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