Bits and bots: CRE trends for 2023 and beyond

November 15, 2022

A look at how treasury innovation, an aggressive Fed and cybersecurity are playing in the long game of commercial real estate.

It’s complicated out there in commercial real estate.

Inflation, interest rates, wages and home prices have soared while the Fed is using monetary policy to manage the economy. A record amount of goods pouring into the United States need more space to be stored and distributed. And financing capital is tightening.

Uncertainty, though, creates unique opportunities for companies and treasury managers who can navigate a rapidly evolving marketplace.

Balancing these volatile economic times and collaborating on solutions dominated the eighth annual U.S. Bank Commercial Real Estate Conference. The pandemic’s impact on properties and cash flow were top of mind among the thought leaders who gathered in person for the first time since 2019.

What are CRE leaders watching?

Developers, investors and property managers face unprecedented headwinds in the marketplace. Prudent ones can weather slowdowns while leveraging emerging technologies to create efficiencies and position themselves to capitalize on future opportunities.  

Here are four trends on which industry leaders are focusing:

1. Streamlining digital payments

The deliberate march from paper to digital continues. Tension remains which has treasury managers constantly searching for digital solutions and ways to improve operations in the payments journey.

“The B2B payment landscape has evolved and, in my opinion, drastically improved over the last few years,” says Dhiren Patel, U.S. Bank senior vice president and head of CRE Deposit & Payment Solutions.

“Banks and FinTechs have tackled many of the core issues in CRE, including how many banks and bank accounts our clients have along with the importance of ERP integration. Solutions like U.S. Bank’s AP Optimizer have combined the best of a bank and a FinTech to assist our clients in their transformation journey.”

Treasury and technology innovations require robust cybersecurity and controls to protect the migration from check to electronic payment types and regulate how that account information is stored and managed.

 

2. Crawling or sprinting through transformation

The next digital wave means investing in – or at least understanding – new technology like APIs (application program interface) or robotic process automation.

Robotic process automation, or the use of bots, creates efficiency by using computing power to process manual tasks such as data entry, freeing up employees to tackle more intriguing and satisfying work. Many clients are utilizing bots to streamline vendor onboarding, bank reconciliation and other treasury tasks.

Application program interface integrates software and creates greater connectivity. Operating systems that can speak to one another in real time expedites payments to suppliers, streamlines reconciliation and provides treasury teams with increased flexibility.

 

3. Accelerating accounts receivable

Getting the right bill to the right party for the right amount is the driving ambition in accounts receivable in CRE. The more automated payment options companies offer to customers, the faster they can get paid and set rules to control collection costs. While multifamily managers have been quick to do so as consumer expectations forced them to, B2B asset classes such as retail, office and industrial are following suit.

It remains a heavy lift convincing reluctant clients who are still skeptical of digital transparency and do not want to fix what isn’t broken. But transformation is inevitable. A robust portal with detailed invoice information such as base rent and CAM, supporting documentation and a viable communication channel can provide value to both parties.

 

4. Ransomware and relentless rogues

A 2019 case study revealed 24 million mortgage and banking documents were available online in an unprotected database for two weeks. A data analytics company with access to the files failed to secure paper documents and handwritten notes with basic passwords.

Fish in a barrel compared to hackers who attack company servers. They will ransack and monetize access before unleashing ransomware to hold a business hostage unless they pay to retrieve their data.

Routinely testing your instant response team creates muscle memory and expertise to contain damage as fast as possible. Basic hygiene includes backing up data and documenting risks.  

Multi-factor authentication and biometric logins provide layered controls that can minimize exposure.

Risk management cannot take a backseat as companies rely more on third parties and the cloud.  

Real world and future world

Economic extremes are complicating commercial real estate. There is no clear path in sight. 

Forecasters predict more pain in 2023 and an inevitable recession. 

But innovation does not wait for bull markets to catch up. CRE treasurers are trying to manage real-world demands and find solutions among future-world promises. To retain talent with innovation, not simply replace workers with it.

The metaverse may not be for everyone. But artificial intelligence, like self-driving vehicles, is here to stay. Just ask any skeptic who scoffed 20 years ago about using their cellphone or watch to pay for things.

“Stop saying the word never,” says Jesse Carrillo, chief innovation officer, The Howard Hughes Corporation. “In our lifetimes, what we thought was never, is happening. It may not be for all of us in the near future, but why not believe that it will be commonplace in 20 years; let’s start building for the next generation.” 

 

To learn more about how digital payments are transforming treasury management in Commercial Real Estate, contact a U.S. Bank relationship manager.

 

U.S. Bank AP Optimizer™ is powered by Paymode-X. Bottomline Technologies and Paymode-X are trademarks of Bottomline Technologies, Inc and may be registered in certain jurisdictions. 

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Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.