Social Icons Superfish

REITs Relying on Technology, Sustainability to Enhance Returns

10/15/2012 | By Carisa Chappell

REITs Relying on Technology, Sustainability to Enhance Returns

As the economy continues to struggle to recover, REITs are trying to retain their momentum through technology and sustainability, according to a report from the consulting firm Deloitte on the top issues facing commercial real estate in 2013.

Deloitte said the economic slowdown is hindering growth through traditional outlets, such as new development, leaving many companies to seek alternative growth strategies. Technology can provide one such avenue.

"Given some of the challenging conditions out there that are impacting REITs' ability to grow their top lines, we think technology today provides an opportunity to grow their bottom lines, to drive cost out of the business and to optimize the revenue that they are earning," said Bob O'Brien, vice chairman and real estate sector leader for Deloitte, in an interview with REIT.com.

Although the industry has traditionally lagged other industries in adopting new technologies, commercial real estate companies are increasingly embracing technological innovations such as cloud computing, mobile applications and social media to better reach their end customers and grow their business. Gathering and using data to analyze aspects of their business such as the pricing of leases and how tenants are using their spaces can provide opportunities for REITs to grow their revenues.

Deloitte identified sustainability as another issue that will continue to gain significant traction within the real estate industry in 2013. O'Brien maintained that sustainable practices improve the bottom line and stock performance.

"One of the fascinating things in our report refers to a study that REITs with very well-executed green strategies outperformed other REITs," he said. "Part of that may be the strength of management, but it's also very interesting in how the market perceives REITs with very well-executed sustainability challenges."

Overall, the combination of economic uncertainty, the lack of job growth, the fiscal cliff in the United States and the debt situation in Europe "has really put the shackles on the U.S. real estate industry," O'Brien said. While REITs look for ways to sustain their growth, O'Brien said REITs' access to capital, high acquisition activity and investment returns are positives for the REIT industry.