The Elm is a 456-unit high-rise apartment complex in Bethesda, Maryland. Berkadia… [+] Institutional Solutions completed the sale in August 2023.
Berkadia
The commercial real estate industry has undergone significant change since the pandemic. Changes in how and where people live and work have brought many challenges. For commercial real estate companies, these changes have brought a new focus on data and technology to help the industry adapt to changing behaviors and market conditions.
Damu Bashyam, CIO and Chief Innovation Officer, Berkadia
Berkadia
Berkadia, a privately held joint venture between Berkshire Hathaway and Jefferies Financial Group, provides commercial real estate services across mortgage banking, investment sales and loan servicing. Dam Basham, the company's CIO and Chief Innovation Officer, oversees the company's innovation unit, which focuses on digital transformation, software engineering, IT, data strategy, product development and the company's BeEngaged startup accelerator program. He spoke about why he believes the commercial real estate industry is at a tipping point, the impact of generative AI, and the importance of a collaborative culture in driving change.
How are data and technology changing Berkadia’s business and the industry at large? Where do you see it heading in 2024?
Historically, CRE companies have been notoriously slow to adapt to technology. The pandemic has increased the need for technology and accelerated investment and adoption in areas like real estate tech, fintech, data analytics, AI, and augmented reality. This has brought the industry to an inflection point, and we believe the next 3-5 years will be transformative.
Berkadia makes long-term investments in people and technology. For example, we run our BeEngaged accelerator program for startups we believe have the potential to redefine the CRE industry. The program conducts market research, presents proofs of concept and provides mentorship to startups, and, when appropriate, may also acquire or integrate these partners. This program led to the acquisition of BlueSuit, a CRE-focused AI technology platform company, and we continue to explore strategic opportunities going forward.
It has also entered into a strategic partnership with Hyderabad-based T-Hub to foster growth in India's startup ecosystem and knowledge exchange.
How is AI driving change across Berkadia's business lines?
Data, and AI, serves as the foundation of the CRE industry. Our strategy is to continue to lead through data innovation to empower mortgage bankers, investment sales advisors, and customers to make informed decisions. Whether it's providing insights into market trends, property performance, or customer behavior, relevant data underpins it all.
Berkadia has a mature data practice, which is a key differentiator for us. We aggregate data from dozens of sources into a centralized cloud platform. Our master data management process produces standardized and enriched data sets that drive AI and machine learning algorithms and analytics. Data insights then flow directly into multiple employee- and client-facing tools to enable data-driven decisions and customized user experiences.
AI and machine learning play a pivotal role in our work by uncovering leads and opportunities within our network. We can more efficiently monitor property performance compared to similar properties and generate automated property valuations, which are key in identifying refinancing and sale opportunities. In a recent engagement, we used AI and machine learning to identify relevant buyers for Berkadia properties. These insights allow us to scale and target our real estate marketing efforts, ultimately delivering maximum benefits for our clients. Looking at the landscape as a whole, we see a lot of opportunities to optimize our processes and drive growth.
For an organization to deliver many of these solutions, it needs skilled teams and an innovation-driven culture. What are you doing to foster that culture within Berkadia?
Organizations need to be agile and quickly embrace new products and solutions. Companies that don't continually evolve their offerings will find it increasingly difficult to keep up.
Innovation starts with people and culture. One of the drivers of our culture is an internal program called the Berkadia Way, which emphasizes treating colleagues with respect and focusing on teams and common goals, not as individuals. This is critical in driving any kind of change initiative. For big, innovative ideas to succeed, you need to involve key stakeholders across the organization, from business partners to learning and development teams, to drive engagement and adoption. It's about including everyone in the story and creating a shared understanding of how technology can drive growth for the company.
Looking ahead to the year ahead, what do you see as the biggest opportunities for Berkadia and the industry as a whole, and what are the potential challenges?
Generative AI opens up many opportunities for Berkadia and the CRE industry as a whole. We recently launched Berkie, an AI-based virtual assistant that provides an internal, secure platform for a variety of tasks. Berkie can be used to answer questions, summarize information, help producers with market analysis, facilitate property searches, and more.
This technology can be extremely useful for streamlining processes and improving productivity. However, when adopting generative AI, it's important to be aware of the risks it can pose. To ensure the responsible and ethical use of AI, we have dedicated resources to evaluate usage patterns and implement appropriate guardrails.
In addition to the opportunities presented by generative AI, our internal research indicates that potential disruptions from inflationary pressures, high interest rates and a tightening credit environment may continue to impact the CRE industry in 2024. Concerns about economic conditions will likely remain a major factor in decision-making during this period.
We recognize these challenges and are committed to continuing to invest in our people and technology so that we are positioned to gain market share as the industry recovers.