The commercial real estate industry has entered a new phase of technology adoption. The focus is less and less on proving that technologies work in small-scale deployments. Instead, owners are interested in moving the needle at the portfolio level by scaling early successes with strategic rollouts.
This is easier said than done. Landlords know better than anyone that as much as they’d like to apply consistency across their portfolio, each physical asset, market and property type is different. What works in one place is not guaranteed to work somewhere else.
At the same time, solutions cannot be so broad as to be generic and lack the specific insights that drive value. One of the important lessons the industry has learned from the first proptech wave is that data is largely useless without powerful analytics and a delivery method tailored to intended users.
The industry has reached a clear inflection point from just a few years ago, when it was common knowledge that commercial real estate was behind other industries in terms of technology adoption. Now, identifying technologies that have achieved this “goldilocks zone” of a scalable platform that is still capable of targeted insights is becoming increasingly important.
This momentum is clearly building toward radical change for the industry. The decisions made in the near term will likely have profound implications on whether real estate companies are positioned to benefit from this surging growth in technology’s influence or not. The world of real estate technology is large and diverse, but owners and operators should pay attention to these three trending technologies.
1. Business Intelligence
Though commercial real estate has always been data-driven, aggregating and analyzing data at scale has been a persistent challenge, as each deal and lease has been housed on disparate spreadsheets. It’s been said time and time again: When it comes to lease and sales comps, property listing and transaction tracking, the problem is not the availability of data; it’s pulling all the separate sources into one place so it can be effectively analyzed.
In recent years, a new generation of business intelligence tools tailored to commercial real estate has cropped up to address this issue. Companies like NavigatorCRE are building incredibly flexible and intuitive platforms that can break down siloed systems, clearly visualize data and give owners and asset managers the tools they need to drive better decision making.
Aside from the sunk costs, this trend comes as a welcome relief to the companies that have spent years and millions of dollars trying to build their own internal tools, interfaces and data warehouses. Despite the resources deployed into these projects, most owners would be in a better position subscribing to a world-class data visualization platform, rather than trying to build their own.
2. Operational And Asset Intelligence
It happens every day somewhere in the portfolio: Suddenly, a flurry of tenant complaints suddenly land on the property manager. Fortunately for most property managers, there is an experienced building engineer who they can count on to have an educated guess as to what the problem is and to begin finding a solution.
Unfortunately for owners, the skilled professionals they’ve relied on won’t be around forever: 55% of engineering managers are over the age of 55, and 86% are over the age of 45. Like it or not, the shrinking labor pool is forcing owners to find a way to do more with less.
For the day-to-day work of operating a building, data captured with sensors can unlock powerful insights around maintenance and repairs. For example, engineers can save time by maintaining equipment based on its actual usage, instead of based on a calendar date.
At the same time, the data can detect pre-failure conditions in equipment so that issues can be addressed in a proactive manner, saving time, money and tenant frustration. Going a step further, firms like ours are embedding this data within mobile apps and virtual reality, also known as “digital twins,” to enable one highly experienced engineer to effectively manage and support lower-skilled operators remotely, again saving time and money.
These solutions themselves have returns on investment of around 12-18 months, but the value goes beyond that. As the real estate owners and investors see their yields shrink due to a softening economy and increasing regulations in major markets, maximizing net operating income (NOI) and asset value through cost savings will become critical.
3. Tenant Experience
Whether with dog-walking services in multifamily apartment buildings, yoga classes in high-rise offices or even landlord-facilitated retrofits for industrial logistics centers, commercial real estate is becoming increasingly customized and experiential for the tenant.
This trend is being driven on both sides, with rising expectations in the general population that every interaction will be digital and streamlined, as well as competition among landlords to differentiate their properties in the amenity arms race. According to Colliers International, (a client of ours), in the past, approximately 3% of leasable square footage was committed to features like gyms and on-site dining. Now, it’s more like 10%.
To facilitate these amenities and help ensure that those foregone lease revenues are being made up with better retention and higher rents, companies specializing in tenant experience apps and other services have grown rapidly. Providers like Bixby and HqO offer tenants one place to pay rent and other services, access controls and visitor registration, book on-site services, order transportation and even personalize temperature and lighting controls.
One by one, large commercial real estate portfolios are building teams responsible for identifying and scaling technology. The difficulty of this job cannot be overstated. There are legacy systems, regionalized teams and huge amounts of unstructured data to sort through.
Fortunately, technology companies are developing solutions at a rapid pace and are designing platforms to not only provide value, but to do so for a large and diverse portfolio of assets. These “plug and play” solutions are helping to ensure that no building is left behind.