Technology and innovation were hot topics at the 2019 ULI Fall Meeting in Washington, D.C. These are some of the insights that speakers and attendees shared.
Defining Smart
Jennifer Bradley, founding director of the Aspen Institute Center for Urban Innovation, an international think tank that advocates for a values-led approach to piloting and implementing urban technologies.
“I’m a big digital city skeptic. I think of it as more of a marketing term, a way that cities seek to distinguish themselves from other cities,” Bradley says. Technology that makes cities more efficient, resilient, and collaborative has advanced to the point where using digital tools is just another characteristic of being a well-run city, she suggests. Having a digital layer to city infrastructure, such as cloud-based management of services, is going to be taken for granted by the public. Residents are “waking up from the tech sugar rush” and viewing technological change more skeptically, she says.
They also are increasingly wary about who will get the actual benefit from change—them, or the tech giants marketing their products to governments. “People are starting to say, that’s cool, that’s flashy, but what problem does it solve?”
To What End?
Salomon Salinas, managing director of Accenture Digital
Launching an array of pilot programs that use new technologies does not transform a city into a smart city, Salinas says. Smartness is more of a strategic mind-set—“a city that recognizes fundamental opportunity to redefine human experience to create new value.” Technology should be viewed as a means to an end. “JFK said, ‘Let’s put men on the moon,’ not, ‘Let’s build the Saturn V.’”
Even so, Salinas says technological advances will enable cities to transform themselves. Within a few years, he says, there will be more than two dozen sensors deployed for every person, measuring everything from weather and environmental conditions to various types of human activity. The data that those sensors compile will flow via the cloud into more internet-connected devices—as many as six per person. That capability will give humanity a chance to have information that’s never been collected before in real time, and to connect streams of data that have never been combined before. “The implications of that connectivity are enormous.”
George Karayannis, head of CityNOW, Panasonic North America’s urban innovation division
Panasonic’s sustainable smart town development in Fujisawa, Japan, is an example of technology’s potential transformative impact, Karayannis says. The solar-powered community incorporates features such as shared mobility services that provide residents with electric cars and electricity-assisted bicycles, as well as an online portal to connect residents with health care services. Homes in the development are worth more than others nearby, Karayannis says. Smart technology “can drive superior ROI.”
Panasonic is teaming up with developer LC Fulenwider to build Peña Station Next, a smart town near Denver International Airport, which will use robotic shuttles and a sensor array that will continuously monitor environmental conditions, as well as traffic density and pedestrian count. The Denver project illustrates the importance of working with local government and residents to figure out which innovations meet their needs. “We define smart cities as whatever that collection of stakeholders defines as important. It can be tech-rich or tech-poor, but it’s never tech-led.”
Drew Myers, senior consultant at Washington, D.C.–based data analytics firm CoStar Group
“Smaller, local, or regionally based companies develop strategies that work well for them in markets they know well,” Myers says. “Outside of scaling up to major portfolio acquisitions and evaluations, companies may not see a need to deviate from past methods that have returned success. But we do believe analytics and real estate tech are critical to driving outsized performance in the increasingly competitive real estate environment and can aid CRE professionals across the spectrum.”
Tech or Innovation?
Jason Fudin, cofounder and chief executive officer of WhyHotel
“There’s a huge difference between technology and innovation,” says Fudin, chief executive officer of the Washington, D.C.–based startup that monetizes unleased space in new apartment buildings by obtaining hospitality licenses and creating pop-up hotels. The “broken” legacy parts of commercial real estate can be revitalized to create revenue by changing “the way you do space utilization, consumer products, the way you comingle uses, the way you get to flexible or densify uses. For us, that’s the first solving point. We wouldn’t say we’re a technology company. We’d say we’re a high-growth real estate innovation company.” While WhyHotel uses software pricing solutions and yield-optimization tools to inform its operations, the company’s real value is that “we’ve found an innovative way to make real estate better, to make better consumer products,” Fudin says. “Technology is just a tool.”
Fudin started out working in commercial real estate in high-rise development, and previously worked in multifamily residential projects for Washington-area developer Vornado, where he gained insights and knowledge that enabled him to see an opportunity in repurposing underused capacity. “I definitely am a real estate insider, and I am a disrupter,” he says. “I think everyone is resigned to the fact that there are going to be other platforms that come from this world” of property technology, he says.
Justin Stewart, cofounder and president, Industrious
“We pride ourselves as the premium offering in this sector,” Stewart says of New York–based Industrious, a high-end coworking firm with 86 locations in 47 cities. “We focus more on the later-stage companies, the enterprise customer.” He previously was the director of acquisitions and operators for Windham Development and Windham China, where he headed the U.S. real estate operations.
Industrious works with large real estate owners to enhance the ambience of their properties by building an app on behalf of the landlords that all the tenants can use to learn about events and book conference rooms and food and beverage service. “Everything that’s really important is on this app.”
Industrious does not market itself as a technology company, as do some of its competitors in the coworking space. “We are a highly monetized service offering for these landlords,” he says. “I would have said ‘disrupter’ a couple of years ago,” Stewart says, when asked to characterize Industrious’s role in the sector. “But the way our model is, we’re now partnering with all these landlords. So, I guess we’re disrupting with landlords in hand.”
What’s Happening?
Clara Brenner, cofounder and managing partner, Urban Innovation Fund
The fund is a venture capital firm that invests in startups shaping the future of cities. Most of the ground-up innovation in smart city technology is coming from private-sector entrepreneurs rather than governments, Brenner says. She cites Bumblebee Spaces, a company that makes robotic systems that store furniture and other items in the ceiling of an apartment when not in use. Such technology could make small apartments more livable and help reduce the shortage of affordable housing in cities.
Roelof Opperman, managing director of real estate tech investments, Fifth Wall
Fifth Wall is a venture capital firm in Venice, California, focused on digital innovation for the built world. “[E]very other sector in the world—chemicals, automotive, aerospace—seems to be zooming ahead in technology, spending 5 to 7 percent of revenue on technology and innovation,” Opperman says. “But not commercial real estate.” It is a very conservative asset class, he adds. “There is a dearth of real estate software, possibly because some owners think they just buy and sell buildings.”
But real estate is becoming more tech savvy. “All of a sudden, the sector is waking up,” he says. “There needs to be change, to see what some tech and innovation companies are offering. Amazon hurt retail real estate; perhaps that could happen in logistics or another sector. Everyone is raising funds for real estate, so commercial real estate will have to become more efficient. Owners aren’t just going to be able to purchase and sell. They will need to be super efficient. The next big step in building management is to have smart buildings, to help manage a building using technologies like predictive maintenance, for example.”
Melanie Kirkwood Ruiz, chief information officer for the Americas, Cushman & Wakefield
Cushman & Wakefield is collaborating with San Francisco–based proptech startup Saltmine to provide clients with a new way to visualize and plan their current or future workspace by quickly creating space plans, test fits, and virtual tours of potential workspaces. Using property data and core and shell plans, the Saltmine platform integrates clients’ workplace strategy, programming, and design in one place and digitizes fully fitted properties in a matter of days. “By virtually taking clients through a space and laying out their costs, we can make their site selection process predictable, experiential, and flexible,” Ruiz says.
Yat-Pang Au, chief executive officer, Veritas Investments
The San Francisco–based apartment owner/operator firm has more than 250 buildings in California. At several Veritas Investments apartment buildings in San Francisco, residents are testing Carson Living, a one-stop electronic resident portal that is popular in New York City apartments without doormen. “Carson Living provides a 24/7 virtual doorman to facilitate a more secure entry for guests, deliveries, vendors, and more,” Au says. “It’s also a great tool for residents to communicate with the building manager, submit work orders, and receive news about the building. Residents are embracing it. It’s available to residents at no extra cost, and early feedback has been very positive.”
In 2017, the firm formed Veritas Innovations Platform to advise, incubate, and, in some cases, invest in proptech firms that it thinks can ultimately benefit its residents or properties. Veritas is also using the Aptly system to deliver customer service, including gathering direct customer feedback on top of Veritas’s on-site resident-manager relationships and phone support. “We’re reducing response times for resident issues and questions,” Au says. “Aptly also helps us measure customer satisfaction and happiness with every interaction. Residents know they are being heard, and we have a real-time happiness score that reflects the status with a resident and then through to the building or our entire portfolio.”
Conclusion
Mark Grinis, global real estate, hospitality, and construction leader, Ernst & Young
Terms such as proptech and innovation are too generalized to be meaningful, Grinis says. “Every single business that’s real estate—whether you’re construction or management—is compartmentalized, and the solutions are compartmentalized. I think a lot of people are trying to figure out what the universe is, what they need to be focused on, what will give them real return on investment, and should they develop it or not develop it themselves.”
Technology and innovation can provide the commercial real estate sector with the agility to respond to changing markets. Grinis notes that the real estate sector needs to figure out what to do with trillions of dollars in assets built under old assumptions of how they would be used and generate revenue. But those old assumptions—such as the notion that prime locations in urban cores are crucial—may now no longer be so solid.
“All of these things that we figured we had to use in a certain construct, we now have choice,” Grinis says. “How does the real estate respond to that choice? Do I want to do it remotely, or do I want to go into the office? All of these different choices—do I want to own, or do I want to maybe not own?” The question of repurposing assets, he says, is tied into the larger question of “how do we think people are going to want to spend their time? How are they going to prioritize one action over another? And then, is my real estate designed to compete in that type of choice?”
