Real Estate Trends in 2022: A Q&A With Nakisa’s Imran Mia

As business leaders across industries head into the new year, the big question is, ‘how much real estate space if any, will we need?’

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FEI Daily spoke with Imran Mia, VP of Global Solutions Engineering at Nakisa, about the effects of COVID-19 on the demand for commercial real estate in 2022 – both for office and retail space.

FEI Daily: What are some of the real estate trends business leaders should be prepared to see in 2022?

Imran Mia: Business leaders should expect to see a continued increase in PropertyTech (PropTech) adoption in 2022. The pandemic rapidly increased PropTech adoption, but we were seeing a surge even before the pandemic. According to an article from PWC, PropTech has grown over 50% since 2016.
In the digital age, quantitative-driven decision making is trending with a focus on measurable ROI when adopting new technologies. Not only are real estate operational derivatives easier to construe with advancements in technologies (improved user interface (UI) and workflow, centralized source of truth, etc.), but the opportunity for financial optimization, and not leaving any money on the table, is and will continue to be critical for organizations in 2022 and beyond.

FEI Daily: How can leaders determine what is the best technology to adopt for their real estate needs?

Mia: A recent article from EY states that optimizing real estate operations has shown to have a very material impact on the bottom line. Furthermore, a KPMG report showed that more than 50% of real estate incumbents see building management, performance measurement and tracking, and data management as their biggest pain points. The key will be change management and applying the best solution for real estate operations, but that doesn’t come without challenges.

It is important for leaders to consider operations, business strategy, budgeting and accounting compliance when choosing a real estate solution. Furthermore, effectively knowing what data you want to analyze is going to be imperative. As you consider PropTech solutions, take a look at your current processes to understand what is being done manually and can be optimized. For example, budgeting is an area that traditionally has been more network-driven, passing through several layers of approval, which normally includes multiple departments, such as financial planning, procurement/supply chain and accounting. Leveraging a real estate solution with a built-in budgeting process well help minimize delays, integrate ownership cross-functionally and dramatically increase operational excellence on a business scale.
Identifying the unique needs for your company and finding a scalable, sustainable technology with the latest features on the cloud is where businesses should focus.

FEI Daily: What are the most important steps in developing a post-COVID lease accounting strategy?

Mia: When developing a post-COVID lease accounting strategy, there are a few important steps leaders should consider, such as:

  • Take control of your leasing portfolio with the use of PropTech.
  • Research and bring your teams up to speed on all COVID-related legislation methods, such as rent concessions, extensions and terminations.
  • Implement a single source of truth, or a single platform, to streamline your process of obtaining data, not only from a compliance perspective, but from an operational and financial planning and analysis perspective.
  • Have a systematic process and approach for all month-end activities to ensure the accuracy of your output and validity of your data when merging leasing information within your enterprise resource planning (ERP). This is especially important given all of the changes that have been caused by the pandemic.

FEI Daily: What will be the biggest lease accounting challenges in 2022?

Mia: For private companies in the US, the biggest challenge in 2022 will be to go-live with the ASC 842 lease accounting standard while creating a sustainable end-to-end lease accounting process. For public companies that have already adopted the new lease accounting standards, the biggest challenges will be streamlining operations, remaining compliant and ensuring timely reporting. As companies look to run leases under multiple standards in parallel or merge lessee and lessor information, a clear set of operations and appropriate technology are needed.

Another challenge will be establishing compliance with complex lease arrangements and/or events that can come with mass modifications in a multi-currency environment. Complexities in this scenario can include sale-leaseback arrangements, percentage based-rent type leases, asset impairment, intercompany asset transfer, and more. 

Furthermore, organizations should be looking into additional methods to enhance their operational efficiencies with lease accounting, such as capital investment budgeting. Another challenge companies will face is building a sustainable and scalable strategy. To solve for this, real estate accounting teams will need to implement the proper tools to help with integration, mass modifications, compliance and rapid deployment.