Inflation Insulation: What REITs Need to Know about Staying Competitive amid Inflationary Pressures

Sampath Kumaar Sridharam

Sampath Kumaar Sridharam

February 6, 2023

Rising inflation rates, economic uncertainty, and a decline in the demand for office space are creating fresh challenges for real estate investment trusts (REITs) that are operating in an already challenging marketplace. With the US Federal Reserve hiking interest rates through 2022, it has become increasingly prohibitive for REITs to borrow funds or make portfolio acquisitions. The most viable option for REITs to stay competitive in this environment is to focus on strategic execution and innovation. Additionally, they will need to generate assured income streams to insulate themselves from the fluctuations of an unpredictable economy.

Modular Automation for Significant Business Efficiencies

Keeping in mind that the economy will be sluggish in 2023, many REITs are likely to slash their tech budgets; however, this could prove to be short-sighted as technology can be a dominant tool to innovate and improve business efficiency. According to Deloitte’s 2023 Commercial Real Estate Outlook1, more than 43% of respondents identified process automation as their top target capability for PropTech, followed by 35% for marketplace data and analytics, and property visualization through AR/VR at 33%.

The writing on the wall is clear. Real estate firms need to explore how PropTech tools can help unlock business potential in the long run, and this is where a transformation partner can help. By leveraging a third-party provider’s expertise in functions like risk management and internal audit, property management, tax accounting and reporting, portfolio management and CRE development, REITs will be able to focus on enhancing core services and improving operational efficiency. REIT firms that can ride out the current slump and reposition themselves by adopting technology will see another period of sustained growth in the coming year.

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