IT Spending in Commercial Real Estate Growing Slowly

The combination of a strong economy and continuing low interest rates offer ideal conditions for the growth of the commercial real estate (CRE) sector in the U.S. and Canada in 2018. Yet the growith of IT spending among CRE firms is lagging behind that of other sectors this year.

For the first time this year, as part of the Computer Economics annual survey of IT spending and staffing metrics, we were able to solicit responses from a sufficient number of commercial real estate firms to produce a full chapter of benchmarking metrics for the CRE industry. These are available as a commercial real estate chapter in our annual study.

As shown in Figure 9 from our full report, IT Spending Trends in Commercial Real Estate, IT spending for CRE firms is growing just 1.0% at the median, compared to nearly 3.0% for organizations across all industry sectors.

“Despite getting very little new money to invest, our survey shows IT executives in CRE firms are actually more satisfied with their IT budgets than their counterparts in other industries,” said Frank Scavo, president of Computer Economics, an Irvine, Calif.-based IT research firm. “They must either be able to deliver more business value without increasing spending, or they simply aren’t being asked to do more to provide strategic advantage.”

For purposes of this study, our definition of commercial real estate firms includes the following types of organizations:

• Property managers and developers, including those managing retail properties, office buildings, multi-family properties, industrial properties, and other real estate assets.

• Investment firms, fund managers, and asset managers that own portfolios of real estate assets and offer shares to investors. Although many of these firms are organized as Real Estate Investment Trusts (REITs), not all REITs are primarily oriented toward investors. For example, some property management firms are organized as REITs, even though their primary business is property management.

• Commercial real estate brokers, advisors, consultants, or other CRE services firms.

Some firms may operate as combinations of the above. Also, please note that construction firms are not included in our definition, unless they also design, develop, or manage properties. Construction companies are generally contractors to real estate developers and have different IT spending characteristics.

In our full report, we analyze 10 ways in which commercial real estate firms differ from other industries in terms of their IT spending characteristics. These include IT spending as a percentage of revenue, IT spending per user, the mix of IT spending by line item, growth in IT spending, revenue per employee, network distribution, use of cloud systems and mobile devices, and CIO sentiment.

We conclude with recommendations for benchmarking and optimizing the IT budget within CRE firms.

This Research Byte is a brief overview of our report on this subject, IT Spending Trends in Commercial Real Estate. The full report is available at no charge for Computer Economics clients, or it may be purchased by non-clients directly from our website (click for pricing).