Hi Reader,
October has been a month of great conversations!
Between hosting our Feroce Briefing + AMA: AI in CRE and spending time at CREtech, I have enjoyed connecting with people who are asking thoughtful questions, sharing experiences, and exploring what technology means for the future of commercial real estate.
What I appreciate most about these conversations is the willingness to move beyond the technology itself and dig into the implications for our investments, operations, and teams. That curiosity and exchange of perspectives are particularly valuable as we navigate another period of transformative change.
In this month's newsletter, I explore the two lenses of ROI: Return on Investment and Risk of Ignoring. Because the decisions we make, including the decisions not to act, shape our future investment performance.
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Thank you for reading and for being part of the Feroce community. I am so glad that you are here.
The Two Lenses of ROI: Return on Investment and Risk of Ignoring
Not making a decision is making a decision.
When we choose not to invest, not to change, or not to address an issue, we are deciding to maintain the status quo. Whether deliberate or simply the result of postponing a difficult conversation, that decision has consequences.
And the world does not stop changing while we decide what to do.
In the CRE investment management world, we are well versed in evaluating Return on Investment (ROI). We build financial models, assess risks, estimate returns, and determine whether the expected benefits justify the investment.
But there is another lens of ROI that deserves our attention: Risk of Ignoring.
What happens if we do nothing? What are the costs and consequences of inaction? And have we considered whether the changes happening around us are relevant to our business?
The Smartphone Era
The iPhone was introduced in 2007. Almost 20 years ago. Think about that for a moment.
The iPhone transformed how we live, work, shop, and interact with the world. And now we are experiencing another transformative technological shift with artificial intelligence.
Young people entering college and the workforce today have grown up in the smartphone era. They use their phones to manage many aspects of their daily lives. Banking, shopping, transportation, entertainment, communication, and more.
Now think about the buildings we own, operate, and invest in. How relevant is an office building, apartment community, or retail store that has no meaningful connection to their smartphone?
This is the relevance test.
Not every building needs every technology. But tenant and customer lived-experience is increasingly digitally enabled, and those lived-experiences influence where people choose to live, work, and shop.
For real estate investors, understanding that relevance can translate directly into leasing velocity, tenant retention, rental rates, operating expenses, and ultimately asset value.
The Cost of Doing Nothing
In commercial real estate, choosing not to invest can look like the financially conservative decision. We preserve cash flow, avoid capital expenditures, and protect near-term investment returns. On paper, that can look like a win.
But what happens when a prospective tenant chooses a competing property because it better meets their needs? Or when a replacement that could have been incorporated into a planned capital project becomes a more expensive retrofit five years later?
Now that cost of inaction has negatively impacted the bottom line.
While some costs are relatively straightforward to quantify, others require market intelligence, scenario analysis, and informed judgment. Just because a cost is difficult to quantify does not mean that the cost is zero.
Consider how much time we spend modeling the cost of making an investment while failing to evaluate the consequences of not making a decision.
Recognize the Decision You Are Making
Risk of Ignoring does not mean we should chase every new technology or market trend. It means we need to understand which changes are relevant to our investments and what we risk by ignoring them.
Return on Investment remains fundamental. Capital is limited, competing priorities are productive friction, and investment decisions require discipline.
But that same discipline should extend to inaction.
When we defer a building technology investment, we are not simply avoiding an expenditure. We may also be accepting continued operating deficiencies, diminished competitive positioning, future capital requirements, or lost revenue opportunities.
Those consequences belong in the investment discussion.
Leadership Matters
Organizations can make significant strategic decisions without recognizing that they are making them. A postponed discussion becomes another year’s capital budget. A deferred investment becomes an aging system. A decision to wait becomes an operating strategy.
Inaction can quietly become strategy without ever being evaluated as a strategic decision.
Our responsibility as leaders is to recognize those decisions, assess their relevance, and understand the consequences before the passage of time makes the decision for us.
The goal is not to invest in every new idea. It is to make informed decisions with a clear understanding of the rewards and risks, including the risks of doing nothing.
Return on Investment and Risk of Ignoring are the two lenses of ROI. Both evaluate investment performance.