How to transform capital planning for commercial real estate with digital twins

In a rapidly changing economy with rising interest rates and financial uncertainties, commercial real estate investors are navigating increasingly complex capital planning processes for their portfolios. Effective real estate portfolio management involves the strategic allocation of resources to maximize returns on investments, ensure economic sustainability, and mitigate risks throughout a property's entire lifecycle-from proactive planning, to acquisition, to facility management and operations. However, traditional methods of managing these workflows can be inefficient and difficult to manage, particularly with properties and team members spread across multiple geographies.

Digital twin technology offers an innovative solution for commercial real estate investors looking to embed transparency and efficiency in planning cycles for capital expenditures and enterprise portfolio management. A digital twin is an immersive, photorealistic 3D capture of a property that allows you to view and navigate through the space as if you were visiting in person. Using digital twins as an always-on photorealistic reference for your properties can significantly reduce costs and augment traditional asset management platforms with visual clarity, fostering stakeholder alignment across the planning cycle and improving speed to market.

Commercial Real Estate Capital Planning & Investment Challenges

With huge budgets and ROI at stake, commercial real estate investment strategies fluctuate significantly based on the state of the economy. Post-pandemic, investors are navigating macroeconomic conditions related to a turbulent economy and rising interest rates. In addition to these economic dynamics, teams also struggle with internal roadblocks such as decentralized documentation, lack of clarity and access to property specifications, and long-winded capital decision cycles.

The economic downturn has led to a significant decrease in liquidity and reduced demand across the commercial real estate sector. With rising interest rates and bank volatility, investors are finding it harder to secure financing for new investments or refinance existing loans, which is slowing the pace of transactions and new development. Additionally, as businesses close down, implement workforce reductions, or migrate to remote or hybrid work models, many are no longer in need of office or retail space, leading to an oversupply in some markets.

As a result, many commercial real estate owners are adjusting their investment strategies. Some have moved away from high-risk investments in favor of more conservative options, while others have shifted their focus to distressed properties that can be acquired at a discount. Investors are turning to alternative assets such as medical office and healthcare facilities, data centers, and self-storage facilities over traditional office properties, which offer more stable returns in volatile market conditions. Additionally, real estate owners are repurposing existing sites for new use cases-for example, converting a school into multifamily apartments-which is less costly than ground-up construction and generates faster ROI.

Turning inward, many real estate investment teams use legacy asset management systems that lack the flexibility and integration capabilities required to manage complex real estate portfolios in a dynamic and rapidly changing market. Data silos and manual processes can lead to limited oversight, planning errors and inefficiencies, while inadequate documentation makes it difficult to gain insights and make informed investment decisions that keep pace with the market and deliver ROI.

Benefits of Using Digital Twins for Capital Planning

Turbulent market conditions underscore the importance of clearly understanding your portfolio footprint and managing real estate capital effectively. Digital twin technology is emerging as a powerful tool for commercial real estate owners and operators to evaluate, manage, and market their portfolios, properties, and spaces.

Forward-thinking investors are incorporating digital twins into their existing tech stack to centralize portfolio management and streamline space planning decisions for property improvements, repurposing, acquisitions, and dispositions. Incorporating digital twins into real estate capital planning processes can drive a multitude of benefits, including reduced costs, faster decision-making, and more efficient project cycles.

1. Reduce costs and drive transparency. Digital twins enable real estate investors to digitize every property in their portfolios and centralize access for all stakeholders within a secure online library. Maintain a single source of truth and replace in-person site visits with photorealistic virtual walk-throughs, accessible from anywhere, to save time and money on travel. As an added benefit, digital twins contribute to your sustainability agenda by reducing carbon emissions from travel by car or plane.

2. Increase collaboration and team efficiency. Utilize documentation tools, such as notes and measurements, to log existing conditions and improvement plans. Share digital twins across internal stakeholders or vendors for easy evaluation, as frequently as needed, without the hassle of coordinating schedules for a site visit. Comment and tag your partners for feedback and questions directly in your space capture.

3. Simplify capital planning decisions. Bring 3D visual clarity and context to capital planning meetings to orient stakeholders faster, review multiple properties in one sitting, and enable faster decision-making on expenditure plans. Walk stakeholders through the digital twin, complete with annotations to shed light on space plans and budget line items, so they can see the existing space in 3D and better visualize proposed improvements.

4. Expedite time to market. Reduce project delays stemming from missing or inaccurate baseline files by generating accurate floor plans and BIM files directly from the as-built environment. Easily share these with project teams or vendors for faster kickoffs and rough order of magnitude estimates, plus reduce the potential for design errors and surprises during buildout.

Using Digital Twins to Evaluate and Manage Your Real Estate Portfolio

Digital twins can streamline capital expenditure planning processes across several use cases. Whether you're planning a new acquisition, retrofit, remodel, or test fits, digital twins ensure always-on access to dimensionally accurate virtual replicas of your properties.

• Scenario planning and test fits help commercial real estate owners and property managers to anticipate and respond to changes in the market and the needs of their tenants. By considering various potential scenarios, such as changes in occupancy requirements or new technologies that may impact space utilization, teams can create flexible plans that accommodate a wide range of future tenant needs. This reduces the risks and costs associated with tenant turnover and ensures that the property remains competitive. Test fits also help build strong relationships with tenants by demonstrating a commitment to meeting their needs and providing high-quality, customized spaces.

Digital twins help commercial real estate owners evaluate and confirm the condition of the space before the next move-in-anyone on the team can virtually walk through the space as if they were visiting in person and document necessary repairs or improvements. Providing a digital twin for prospective tenants to reference can also help confirm interest and speed decision-making since they can access the photorealistic capture at any time to verify space layout, features, and dimensions. Owners can also leverage floor plans or BIM files, generated directly from the as-built, to use as a baseline for accurate test fit options. Matterport BIM files can be pulled directly into Autodesk Revit to accelerate space planning analysis and configurations.

• Commercial real estate retrofits can increase the value and functionality of a property, while also improving the experience for occupants and reducing operating costs. Many investors are focusing on energy efficiency as a means of attracting tenants interested in "green" spaces, reducing costs, and driving their own sustainability plans. These initiatives may involve upgrading the building's electrical and HVAC systems, installing energy-efficient lighting, or replacing windows and doors. By making these improvements, commercial property owners can increase the building's energy efficiency, which in turn leads to cost savings over time. Others are utilizing retrofits to change the purpose of their building entirely, with the goal of increasing demand in soft sectors-for instance, repurposing a traditional office property to become lab space or multifamily housing.

Digital twins help investors quickly assess the existing site conditions and establish a baseline for planning. If you're raising capital, or considering investing in a project, digital twins make it easy to virtually walk through the property at your convenience and share with your project team for evaluation. You can also revisit the site multiple times if your team thinks of new ideas or focus areas to validate. Project teams can add notes and measurements and collaborate directly within the digital twin, maintaining a central source of truth for all documentation and reducing the risk of errors and rework during buildout. This makes it easy to present project plans to stakeholders during capital planning meetings-they can see the space in 3D and better understand the proposed improvements, without needing to be on-site.

• Space optimization enables commercial real estate owners to make better-informed decisions, improve asset performance, and drive returns. By analyzing space utilization and optimizing layouts to accommodate changing needs and occupancy requirements, commercial property owners can ensure they are maximizing the value of their space. Whether it's identifying areas of the building that can be repurposed or redesigning underutilized spaces, optimizing available space can increase efficiency, reduce operating costs, and improve tenant experience. Proper optimization also helps create more functional and agile spaces that can easily adapt to new technologies and evolving business models, ensuring the long-term sustainability and competitiveness of commercial properties.

Digital twins allow owners to maintain a central source of information on each property, accessible at any time regardless of occupant schedules. Team members can walk the site, add or review notes, take measurements, or extract floor plans and BIM files based on the as-built environment for planning purposes. This streamlines the entire decision-making process, from assessing the property conditions, to prioritizing proposed improvements, to approving project budgets, with visual references that keep all stakeholders aligned. Digital twins can also easily be shared outside the organization with external project teams who need to evaluate and provide a rough order of magnitude for a potential capital expenditure.

Creating & Managing Digital Twins for Commercial Real Estate

Matterport makes it easy to create and maintain a set of digital twins for commercial real estate portfolios. For real estate investors with properties sitting across multiple geographies, we offer professional Capture Services in over 700 cities to scan your sites. Simply request an appointment and let our team take care of the rest-your digital twin will be ready in 24-48 hours. If you'd prefer to scan on your own, we also offer best-in-class 3D cameras to ensure a quality space capture.

If you capture with Matterport, your digital twins will be stored within your personal Cloud library. This ensures always-on access so you and your team can view, edit, and manage your spaces at any time. Keeping your digital twins on one platform streamlines portfolio organization and evaluation processes and allows you to easily visit and discuss multiple sites in one sitting. Your team maintains ownership of all files, lending easy access across the entire property lifecycle and reducing reliance on architects or other external partners. Matterport also offers an API integration to connect digital twins to your existing tech stack, allowing you to seamlessly exchange data and uplevel your planning workflows even further.

Portfolio management and capital planning are essential parts of commercial real estate ownership and investing. Having an accurate view of your assets is critical to make informed decisions about both short-term investments and long-term strategies. Digital twin technology gives commercial real estate investors easy access to immersive 3D visuals showcasing comprehensive and accurate conditions on each property in their portfolios, lending insights that would be difficult to obtain without costly site visits or highly manual execution. Take advantage of digital twins to find opportunities for cost savings, increase efficiency, and make smarter and more strategic decisions regarding your real estate capital investments.

Want to learn more? Watch our webinar on proactive capital planning for commercial real estate investors.

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