Imagine using a desktop computer from 1993 to complete your work today. While you certainly could get some things done, it would not have the full capabilities needed to do your job, and certainly not with the efficiency you need to do it well. That’s what the lawyers and other professionals at commercial real estate companies are essentially asked to do when their company only offers traditional word processing software, which has remained relatively unchanged for a quarter of a century.
Commercial real estate as an industry has too long lagged behind while other industries use technological advancements like automation to improve business processes by making them more efficient and streamlined. As commercial real estate organizations solidify their strategic plans for the coming year, one thing is certain: continuing to rely on what worked yesterday no longer works today. Now is the time to bring the sector into a new era.
In order to do that, you must first consider what your employees are producing and the tools they currently use to complete their jobs. One of the common documents that a commercial real estate lawyer produces is a lease, for example. Leases are made up of hundreds of dependent clauses and calculations, where even one change requires updates to numerous places within the lease.
In their current form, as a document created by a word processor, leases are chunks of text strung together. While Microsoft Word might be great for writing and editing many types of documents because it offers flexibility for communicating abstract ideas, it falls short facilitating transactional and other procedural records, like leases, because there is no underlying logical structure that connects interdependent terms. Without this structure, the process of editing a drafted lease requires painstaking attention to detail to ensure that red-lined edits from tenant’s counsel are reflected in any number of places throughout the lease. For your in-house counsel, finding the time to commit that energy to such a monotonous task can be difficult and frustrating.
Even after the lease is closed, these antiquated processes continue to negatively affect your business. Paralegals and lease administrators are tasked with creating a lease abstract. This time consuming task requires pulling out key details and information from the lease and translating stacks of paper documents into actionable information. The data from an abstract must then be imported into enterprise resource planning software, databases, or other online programs for outside departments, like financial information for the accounting team.
A great deal of precious time and resources are spent on this important task, and the inefficiencies are staggering. It takes an average of 90 days to close a lease, a level of inefficiency that would not be acceptable in any other industry. But what if there were a better way to complete this process?
Enter technology. Document automation and digital, data-driven technologies will not only increase the efficiency with which employees can do their work, but it will lead to greater outcomes for stakeholders, from tenants to your employees, and for your bottom line because you can more quickly leverage data to gain timely insights on key industry trends, projections, or outcomes.
If the dependencies can be mapped out and connected, software can automatically keep the entire lease up-to-date and reduce the amount of time it takes to edit. And while generic document automation improves efficiency in that it’s slightly faster than traditional word processors, commercial real estate can go even further by implementing automation technology that is built to handle the complexities inherent in certain processes, such as lease drafting and negotiation. General document automation that some companies use is essentially a questionnaire that may have loose ties to the underlying document. What’s missing is the document context that allows for necessary customization, which reduces the need to return to inefficient tools for the second, third, or umpteenth draft of a lease. Instead, commercial real estate companies should consider what we call context-aware automation, where there is a tight connection between automation and the underlying document itself. Because it allows for customization, this type of automation is applicable beyond leases and can in the future be applied to other types of contracts.
Technological improvements to contracts can also unlock the data within these documents. For leasing, this makes the slow abstracting process essentially obsolete. Currently, that data remains siloed until someone abstracts the lease, extracts that data and then manually takes the information and enters it into a readable format for other software. With the technological advancements available today, companies can automate these processes, cutting hours upon hours of work that leasing employees loathe, with the added benefit that the data within leases can instantly be used and processed by other software applications across other departments.
Ideally, your software vendors, such as MRI, VTS and others, should be able to “talk” to each other. That instantaneous transfer of data results in significant time and cost savings, and can easily be scaled as your company grows and completes more deals. Improving this process gives your leasing team members the chance to focus on tasks that cannot be completed by machines: creative, strategic work that requires critical thought to move your company forward. And we are talking about only one segment of your business. Imagine the benefits multiplied out if you use the right technologies for each task in every department, and what that extra time and money could mean for your business.
Automation is only the tip of the iceberg. Blockchain is another technological application that can and will impact the commercial real estate industry in the near future. While companies are generally experimenting with it now, the main benefit is transparency around data which will make commercial real estate comparable to other markets and allow investors to make knowledgeable, data-driven decisions about investing in real estate using accurate, reliable and publicly available information. While it can be fun to speculate about these types of technology, it will not happen if commercial real estate does not start to embrace technology like document automation that is available today.
Data shows that globally nearly 20 percent of commercial real estate firms are already using business process automation in a meaningful way today, while 43 percent are considering using automation within the next 18 months. The desire to improve antiquated processes exists. It’s no longer a question of if data-driven technology will change the industry, but when.