Staying Competitive in a Changing World

Summary

- COVID-19 has made the industry look at technology differently and speed up timelines

- Unfortunately, the landscape is like a 40-page menu; there are too many options to chart a path forward

- At the same time, the PropTech industry has matured. There is now a track record of success to draw from for tech adoption at scale.

The Times They Are A-Changin'

A startling revelation is sinking in across commercial real estate: the industry is likely to change more in the next decade than it has in the previous century.

Staying competitive

COVID-19 made owners and operators look at technology differently.?

What had previously been a collective effort to understand how technology will change the business has transformed into a competitive and ever-quickening race to keep up with the changing world.

For the first time ever, tenants are demanding to see operations and maintenance plans for HVAC systems, they are questioning the value and safety of their spaces, and they’re expecting the experience to be infused with technology.

At the same time, experienced operators are retiring and while new hires are craving technology, the number of software systems being used has ballooned into a confusing assortment.?

Meanwhile, investors that had only ever cared about financial performance now expect companies to be leaders in environmental, social, and governance (ESG) as well.

All these added demands, immediately following the most difficult year in memory, is creating a high-stakes environment for every portfolio.

Easier said than done

Ironically, the same macro economic forces are also drawing entrepreneurs to the real estate technology space.

While the attention, energy, intelligence and hard work of these entrepreneurs are welcome, the explosion in the number of new companies vying for the same business has made it more difficult to chart a path forward for owners and operators.

It’s like going to a restaurant with a 40-page menu. Plenty of options look good, but it’s very difficult to make a selection.

And landlords aren’t making this choice for one meal, they’re hoping the company they choose will be their partner for the next 10 years.

That opens up another can of worms, forcing owners and operators to become experts in the financial health, market presence, and product roadmap of each technology company.

What’s needed is a playbook. A repeatable series of steps that portfolios can apply to every aspect of their business and can be implemented quickly without sacrificing the long term possibilities.

The playbooks exist

There was a great article in Bisnow a week ago featuring interviews with MetaProp, RETVentures, PGIM, Cushman, Mitsui Fudosan, and CREtech’s Michael Beckerman.

The jist of the article is that the PropTech sector has matured, one of the signs of which is the track records that technology companies have to draw off of now. Track records that didn’t necessarily exist a couple of years ago.

At Enertiv, we’ve been fortunate enough to be part of portfolio-wide transformations ourselves. To see first hand the sequence of events from basic digitization to application of today’s cutting edge.

We’ve seen companies deploy asset tags to create a digital equipment inventory, then digitize their maintenance programs, then use that information to create a strategy for equipment optimization with real-time data.

We’ve seen companies start by centralizing their utility bills in one place, then automate benchmarking and basic reporting, then use this wealth of information to streamline energy budgeting and more in-depth ESG reporting.

We’ve seen companies move their tenant billing off of clipboards onto mobile apps and in the process, finally get a handle on their metering infrastructure so they can put together a capital plan for upgrading to automated meter readings.

While these examples are in completely different domains (and often silos) of a real estate organization, there is a common thread.

That is, it all starts with basic digitization, then streamlining workflows, then using the information created in that process to create a strategy to integrate real-time data.

The end result is remaining competitive by directly increasing the NOI of assets, keeping operators happy by enabling them to do more with less, and providing transparency so answers to any question are at the organization’s fingertips.

It all ties together

The really exciting thing about the maturing of PropTech is that when you combine multiple functional areas in one platform, the whole is greater than the sum of its parts.

For example, say you have software that tracks equipment installation dates and uses the latest property condition assessment to determine a capital plan for the property.

Well, the combination of daily inspections and preventative maintenance data can fine tune those expected equipment replacement dates.

Likewise, if the property’s ESG goals are integrated into the same capital plan, it would be much easier to determine where upgrades and retrofits make sense within the overall capital plan, instead of different teams operating in vacuums.

In fact, proper maintenance is one of the most effective and overlooked strategies for building efficiency.?

Finally, imagine if you went to sell a property which had a capital plan that, instead of relying on a snapshot taken during due diligence, was based on daily inputs from the operators and maintenance vendors. That would demonstrably remove some risk from the purchase and likely lower the cap rate.?

That’s what a competitive future looks like. Fortunately, there’s a blueprint of best practices forged by others.

Whether you've seen our Buyer's Guide to Operations Tech for CRE or not, it make make sense to take another look. Instead of focusing on the floors horizontally, see how they build on each other vertically. Thank for reading!