How Technology Is Changing the Face of Commercial Real Estate – and What It Means for Entrepreneurs

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It’s no secret that we live in an increasingly digital world. Technology plays an integral role in every industry, from healthcare to business to real estate, and specifically commercial real estate (CRE). How exactly is technology changing the way the CRE market operates? What shifts are we seeing and what can we expect to see in the future? How will these transformations impact entrepreneurs hoping to break into the CRE market as tenants? Read on to find out all the answers to these questions.

 

The Impact of Tech Startups On Commercial Real Estate

According to Forbes, thousands of tech startups are launched every year in the United States. These new companies need new homes, which is great news for those working in commercial real estate. However, the boom in new startups also forces CRE brokers to adapt their strategies. For example, while brokers typically favor long-term leases at higher rental rates, many startups don’t have the financial capacity to meet these standards. Instead, entrepreneurs in the tech industry tend to prioritize flexibility (on both length and rates) in lease agreements. As a result, brokers are having to adapt to this need by offering reasonable rent rates and shorter-term leases if needed.

 

Technology: Helping Commercial Real Estate Evolve

In addition to tech startups playing an important role in transforming the face of commercial real estate, technology itself is also having a major impact on changing practices. This is especially true in the wake of the coronavirus (COVID-19) pandemic, which has prompted a significant amount of “post-crisis innovation.” Much like the boom in tech startups, the proliferation of innovative technologies is expected to lead to more flexibility in leasing agreements as well as more affordable rent costs in commercial real estate. Additionally, we can expect to see accelerated communications between tenants and brokers, an increase in virtual leasing, a rise in underwriting, and elevated transparency in negotiations.

 

How Can Entrepreneurs Effectively Navigate the CRE Market?

While the effects of technology are expected to usher in some welcome changes for tenants, there are a couple key recommendations entrepreneurs should keep in mind when navigating the commercial real estate sector.  

You’ve likely heard the expression “knowledge is power”, and this is no exception. If you’re an entrepreneur in the tech sector and you’re looking to secure a commercial lease for your business, then you need to do your research. From the costs to the length of the lease to subleasing limitations, understanding commercial leases is the best starting point for business owners who are exploring their options in the CRE market.

In addition to doing your own research, it never hurts to have an expert in your corner. Consider outsourcing to a professional tenant representative who specializes in commercial real estate. Doing so will give you some much-needed expertise, guidance and peace of mind when negotiating a commercial lease for your business.

It’s evident that technology is prompting some fascinating transformation in the commercial real estate industry, particularly following the COVID-19 pandemic. While these changes present some intriguing opportunities for entrepreneurs in the tech sector, it’s important to be informed and prepared before signing a commercial lease.