Revolutionize Your CRE Investments: A Guide for Savvy Real Estate Professionals

The Commercial Real Estate (CRE) landscape has undergone significant transformations in recent years, driven by technological advancements, changing consumer behaviors, and shifting economic trends. And need we mention the C word that wreaked havoc worldwide in 2020?

These changes have brought to the fore various real estate investment opportunities and “blue ocean” growth expansions — from the renaissance of traditional office spaces and retail outlets to burgeoning sectors like data centers and logistics hubs.

However, leveraging these opportunities requires a deep understanding of the market’s intricacies, including regulatory frameworks, financial structures, risk management, and more.

If navigating these complexities can often feel like walking through a maze, then it’s totally understandable. This guide will equip you with the knowledge and insights needed to enhance your investments and thrive in the ever-evolving CRE market.

Whether you’re a seasoned real estate investor looking to diversify your portfolio or a newcomer eager to make your mark, this article aims to unlock the wealth of opportunities the CRE market offers.

The Dynamic Landscape of Commercial Real Estate

In 2023, the CRE market has had to contend with a web of challenges, including post-pandemic repercussions, labor shortages, inflation, an energy crisis, supply chain disruptions, and international armed conflicts. These factors have continued to significantly influence market dynamics, affecting everything from property values to investment strategies.

A recent study conducted by MSCI Real Assets on CRE deal volume reveals that commercial property prices are experiencing a decline; however, the rate at which prices are falling is gradually slowing down.

Reports show a 63% year-on-year decline in deal activity during the second quarter of 2023. But if we’re to crunch the numbers against the pre-Covid period from 2015-2019, volume in 2Q 2023 was only 35% lower.

While this doesn’t reflect a bullish market, the current CRE landscape is better than over 60%.

And with regulatory scrutiny at an all-time high, commercial real estate investors must adopt a proactive lending strategy and stringent compliance.

Tools driven by automation, robust data and market analysis, and risk management are now non-negotiables — at least if you want to stay ahead of the curve. Platforms that offer portfolio monitoring and origination intelligence can spell the difference between thriving and sinking in the current CRE landscape.

Technological Advancements are Reshaping the CRE Space

Interestingly, one of the key trends shaping the CRE landscape is the increasing adoption of technology.

According to a Deloitte study conducted by Deloitte, 2 out of 3 CRE executives believe that their business will be significantly influenced by technology in the next five years. Specifically, they anticipate that AI technologies will enhance the efficiency and speed of completing lease administration tasks.

Companies that fail to adapt to technology through budget cuts will miss out on growth opportunities around innovation and efficiency.

Data analytics, machine learning, artificial intelligence, and cloud computing have been massive game-changers as they transform how investors approach and navigate the CRE market. For instance, these deep technologies identify patterns and trends that might otherwise go unnoticed.

CRE technology can also assist in maintaining compliance with regulatory requirements by automating workflows. AI-based automation ensures accurate and timely reporting while reducing non-compliance risk and associated penalties.

No Better Time to Build Your Tech Stack Than Now

While it could be tempting to succumb to the “CRE winter” — cut budgets, let go of staff, and put a hold on technology spending — now is the perfect time to invest in and build your tech stack.

The current market allows savvy investors to focus on long-term strategies and leverage technology as a competitive advantage. The slowdown in originations is the best time to invest in adopting and integrating new technologies, especially as it takes time.

While most of the CRE market “hunkers down,” you should focus on workflow alignment, systems integrations, product onboarding for your team, training, and fine-tuning — right now.

So when the traffic light turns green again, you’re all set and ready to go full steam ahead.

Key Considerations for CRE Professionals

Technology is a must-have in the current CRE market, but it’s not a silver bullet. As a CRE professional, you must be aware of the risks associated with your investments and adapt accordingly.

Here are some key considerations to keep in mind while navigating the CRE investments:

Property Type Selection: More Than Just Location

While location continues to be a critical factor, several other elements also come into play. For instance, the following are equality important:

• Type of commercial real estate property: office buildings, retail space/shopping centers, industrial properties, residential properties like single-family or multifamily and apartment buildings, mixed-use

• Its condition
• Potential for appreciation (or depreciation)
• Vacancy rates

Additionally, conducting thorough due diligence, like understanding the local market conditions and future development plans, can provide insights as to whether a property is worth the investment.

Or you could explore a different asset class, say REITs. Commercial real estate investing is not just about buying investment properties. It could also mean investing in Real Estate Investment Trusts (REITs) or ETFs around the real estate sector, especially if you’re building your equity or fixed-income portfolio and actively into the stock market.

REITs are worthwhile investments as they provide diversification, potentially higher total returns, and lower overall risk. Sounds like a lucrative passive income to us!

Financing: It’s Not Just About the Money

Securing financing for CRE investments can be challenging. Lenders want more than a good credit score; they want a solid business plan, strong cash flows, a management company, and a well-thought-out exit strategy.

Moreover, changes in interest rates, economic conditions, and regulatory policies can also impact the availability and cost of financing.

In recent years, alternative financing sources such as crowdfunding and private lending have gained popularity among CRE investors.

Borrower Analysis: Beyond the Numbers

Assessing the credibility of borrowers is crucial. Apart from financial health, lenders evaluate the borrower’s experience as a property owner, reputation, and property management team. Furthermore, changes in the borrower’s industry or volatility in the real estate market can affect their ability to repay loans.

This information will inform the lease terms and purchase price, for instance.

Introducing Blooma as a Game-Changer

Blooma leverages the power of artificial intelligence (AI) and data-driven insights to empower CRE professionals and transform how they operate.

Blooma’s platform is designed to streamline and enhance the lending process, making it more efficient and effective. It achieves this by harnessing AI and machine learning algorithms to analyze vast data points and offer actionable insights.

Whether evaluating a potential borrower, assessing a property, or monitoring a portfolio, Blooma provides the tools to make informed decisions.

Streamlining Deal Origination

Blooma accelerates the commercial real estate deal origination process by automating many routine loan origination and portfolio management tasks — including document management, data collection, and verification. This allows CRE professionals to focus on strategic decision-making and less on time-consuming manual processes.

The impact of Blooma’s platform on the deal origination process is significant. According to reports, Blooma can reduce commercial loan origination time and costs by as much as 75%, significantly improving time to revenue for private and institutional lenders. And those using Blooma’s system can process up to 50% more transactions.

Portfolio Monitoring and Risk Mitigation

Blooma’s AI-powered platform automates the process of deal monitoring, tracking a wide array of data points in real-time. This includes information about the borrower, the property, and the market conditions.

The system alerts users to any significant changes that could impact the performance of their portfolio, such as shifts in market trends, changes in the borrower’s financial health, or fluctuations in property values. By providing this real-time information, Blooma enables lenders to proactively manage their portfolios and respond quickly to potential risks or opportunities.

Blooma’s platform also streamlines stress testing by simulating different scenarios to assess the potential impact on a lender’s portfolio.

For example, the system can model the effects of changes in interest rates, cap rates, economic conditions, or property values. This allows lenders to identify potential portfolio vulnerabilities and develop mitigation strategies.

Finally, the platform can evaluate a borrower’s creditworthiness based on various factors, including financial health, business track record, and industry reputation.

By providing a detailed assessment of the borrower’s ability to repay a loan, Blooma helps lenders reduce the risk of default.

Optimize Your Commercial Investments with Blooma

Staying ahead of the curve is crucial in today’s competitive CRE market. With Blooma as your technology partner, you can leverage AI-powered tools to optimize your investments and achieve better outcomes.

Whether you’re a lender looking to improve your loan origination process or a borrower seeking financing for your next project, Blooma offers robust solutions to help you succeed in the ever-evolving world of CRE.

Book a demo today.