The pandemic fundamentally shook accounts payable (AP) departments in real estate — forcing remote work and, in turn, accelerating the adoption of AP automation.
How are the AP departments at real estate firms faring as they continue to adjust to changes in processes and workload in 2022?
Real estate firms have two priorities top of mind: How to free their teams for more value-added work and how to grow the business without adding people. They are looking to technology to create the efficiencies they need to excel at both.
Here we explore key trends that are impacting the real estate industry and helping to define these priorities and others in 2022:
1. AP departments at real estate firms are stretched thin
Like most industries, real estate is facing a labor shortage. Typical turnover has accelerated and magnified due to increases in job-hopping brought on by the pandemic, leaving more spots to fill.
Some real estate firms spend days manually logging thousands of invoices into their accounting system. Yet the new generation of AP professionals isn’t willing to do the cumbersome work or take on the risk it exposes, like the risk of incorrectly entering data or making double payments.
In its annual commercial real estate (CRE) innovation report, Altus Group asked CRE executives: “What impact do you think automation in the CRE industry will have on jobs?”
The top five responses were:
In 2022, we’ll see more firms looking to adopt automation in order to take the burden off their teams, make work more fulfilling, and to attract new hires that are necessary for business continuity and growth.
2. Leveraging data to control cash flow
There’s a common myth in real estate AP departments: Doing things manually gives greater transparency. It’s simply not true.
While some firms have feared losing control to AI, the technology, in fact, provides more transparency, control and efficiency. Real estate firms are leveraging the newfound data it provides to better control their cash flow.
With rising material costs and rent payments, for instance, down 2 percent on average compared to 2019, cash has taken on newfound importance.
As teams digitize accounts payables, they can better analyze spend and more accurately budget and forecast for the future. From a payments standpoint, processes that used to take 20 to 30 days from invoice to payment, can be whittled down to three to seven days, further aiding cash management.
In 2022, real estate firms will look at their data and the insights it provides to find property improvement and vendor management opportunities. They will be able to understand profitability levels throughout locations and integrate this info with reporting systems that integrate with AP, AR and accounting systems.
3. Continued reimagining of real estate space
According to an article in the New York Times, 18.7 percent of all office space in Manhattan, home to two of the country’s largest business districts, was available for lease in the summer of 2021. That’s more than double the vacancy rate pre-pandemic. Los Angeles, Chicago and other cities with high concentrations of commercial space are experiencing similar vacancy rates.
What’s happening to office and retail space left unoccupied since the start of the pandemic? It’s still relatively unknown, as the spaces tend to be linked to three to five-year leases and owners are content to wait it out while continuing to receive rent for unused space.
Over the current and coming years, owners face tough, strategic decisions about what to do with the space, deciding, for instance, whether to convert to residential units, flex workspaces to accommodate new hybrid work environments or create entirely new purposes.
Liberating themselves from manual AP tasks and leveraging newfound data and trends revealed by automated solutions will enable them to put their time and efforts into strategizing their next move.