Just as has been the experience of other industries, there is enormous potential for real estate owners and managers to profit from using the immense streams of data that their properties generate, panelists said during the 2019 ULI Fall Meeting in Washington, D.C., in September.
Whereas the commercial sector increasingly is abandoning its old analog ways and shifting to property technology, or proptech, the buzzword for building-related applications, the real revolution will come when commercial real estate companies not only have amassed large amounts of data, but also have figured out how to combine information from different apps and turn that data into actionable intelligence.
That degree of integration would enable operators to leverage the power of all the technology they have been putting into buildings and discover “insights that didn’t exist before,” said Riggs Kubiak, a senior vice president for owner strategy at Procore Technologies, a provider of cloud-based construction apps. He is the founder of capital planning and project management platform Honest Buildings, which Procore acquired in July.
“Buildings themselves are essentially becoming computers,” said Chase Garbarino, chief executive officer and cofounder of HqO, a tenant engagement platform.
“I don’t think it’s one data set that will have relative higher value,” said Elo Ofodile, head of business development for VergeSense, which markets an artificial intelligence–powered sensor and cloud app that tracks how workers use office spaces. “It’s the aggregation of all that data” that will cause value to surface, he predicted.
Commercial real estate operators also will need to beef up their electronic infrastructure to take full advantage of anticipated advances in smart building technology, Ofodile said. And 5G, the next generation of cellular connectivity that will provide vastly faster speed and bandwidth, will quickly become an essential.
“The smart building is going to be communicating 24/7,” he said. “You’ll need an industrial-grade, large-bandwidth pipe to facilitate it.”
Already, sensors and analytics are transforming what goes on inside office buildings. VergeSense’s technology, for example, enables its users to see how employees move through buildings and where they do their work, enabling them to spot excess capacity as well as facilitating the sharing of desks and meeting spaces.
“Our customers are transitioning from a static to an agile workplace,” Ofodile said.
Building operators are likely to collaborate increasingly with tenants on gathering and sharing such data.
“It’s amazing how little we know about how people use real estate,” said HqO’s Garbarino, whose company provides operators with a branded mobile app for tenants that helps them use smart building features and amenities to create a better workplace experience. The app also enables owners to better understand tenant needs and wants.
Garbarino cited the case of an owner who was considering eliminating the first-floor retail space in a building and converting it into a restaurant. But after using HqO’s app to survey tenants and find out how many of them wanted a restaurant, the owners discovered that dining “turned out to be seventh on the list of things they wanted.” The plan was scrapped as a result. “At the end of the day, you need to own the data on how people use your product,” Garbarino said.
Meanwhile, data on commercial real estate deals, which once was spread out across regional silos and entered manually into spreadsheets on personal computers, is now increasingly being captured automatically and analyzed in new ways, said Mike Sroka, chief executive officer and cofounder of Dealpath, a cloud-based deal management platform. Sroka said Dealpath users gained the capability to evaluate 20 percent more deals and made 30 percent fewer errors in due diligence.
In addition to finding ways to combine data from different proptech apps, building operators will need to pay more attention to privacy and security issues, panelists agreed.
In particular, real estate operators will need to anonymize data so that they can see patterns but not track individuals. “It’s not great when you can pinpoint when John Doe comes into the building,” Garbarino said. “There’s a lot of liability with that. We need to come up with standards of how we’re going to put this all together.”
“People want to know what data is being collected and what it is used for,” Ofodile added. Tenants also will want the opportunity to opt out of data collection.
The adoption of technology should accelerate as real estate operators begin to generate numbers to show the return on investment, Sroka said. He suggested that proptech eventually would have an impact comparable to the advent of customer relationship management (CRM) software in the late 1990s, when CRM cloud app provider Salesforce was just taking off. “Today, you can’t compete effectively without CRM,” he said.
The panel was moderated by Andrea Jang, growth lead for the Americas at JLL Spark, a $100 million strategic global venture fund focused on proptech for the commercial real estate sector.