Why Proptech Should Matter to Every CIO
If you are a CIO reading this, you are likely in ‘emergency mode’.
Digital transformation meant that your role within the organization was changing long before you’d ever heard of COVID-19, but there’s little doubt that the pandemic has accelerated the need for CIOs like you to be less operational and more strategic. CIOs today are change agents within their organizations. Far from being just responsible for the ‘tech stack,’ CIOs are “tech whisperers” who can guide senior management and the Board to make the right investments across the entire business landscape.
For this reason, alone, you need to pay more attention to property-level technology, or proptech. CIO’s at major multinational corporations which own, lease and operate their own real estate are now taking steps with proptech to help their business prosper. Are you?
But, you say, my company doesn’t own real estate, and I don’t get involved in my company’s real estate strategy anyway. So why should I care about proptech?
“If the employee experience was important to the corporation prior to COVID-19, it is now critical”
Well, you report to the CEO or CFO and they are looking to you to manage the company’s tech stack and drive metrics, right? What tools can be applied to help bring employees back to the office and promote retention and recruitment of people? Is the Board expecting the C Suite to deliver the company’s environmental, social and governance (ESG) report? Is the Board asking you for insight into the health and safety of employees? Are they looking for help identifying risk factors the business may face moving forward and what tech solutions might help mitigate those risks? If the employee experience was important to the corporation prior to COVID-19, it is now critical.
What is Proptech?
Real estate isn’t an industry that’s known for digital transformation. Historically, building owners and real estate investors have been slow to bring innovative technology into their buildings, unlike the widespread amenities we see in today’s corporate campuses. Cost was one issue, but the unwillingness to see any need for change was a big part of the reason real estate was viewed for many years as a “dinosaur’ among industries.
With the advent of proptech, that’s changing. Events in the broader economy, such as climate change, COVID-19, other contagious viruses and corporate risk are spurring the industry to transform digitally at an accelerated pace.
"Let’s face it, it’s going to take much more than temperature checks to bring the mass of employees back to the office."
Between 2015 and 2019, investment in proptech by venture capitalists grew by more than 1,000 percent, or five times faster than investment in almost any other industry. And, while the total number of deals completed by VC investors fell between 2018 and 2019, the total dollar value of VC-backed proptech deals in that period rose from $420 billion to $600 billion. My guess is both the number of deals and the value of those deals will continue to grow, post-COVID.
My own company, JLL, several years ago began investing in proptech start-ups. Through JLL Spark, a strategic global venture fund, our firm has invested in 20+ start-ups including VergeSense, a space utilization and occupancy planning platform to help tenants efficiently manage their real estate footprints. HqO, a tenant experience app designed to tie all tenant-facing amenities & digital solutions into one centralized platform. This includes: retail concierge services, access control & much more.
Real estate has been decidedly ‘low tech’ throughout its history. Now, digital transformation and disruption is creating huge opportunities for any company involved in physical real estate. And that real estate includes ‘Work from Home’ because those employees use real estate too. I get it, there’s an important decision tree for CIOs involving proptech. No company wants to make a material investment in tech that might have a limited useful life. After 9/11, many owners made major investments in building security and other safeguards. Some, such as access control, have been slowly dialed back in some cases while others, such as security monitoring continue to be developed. While post COVID office buildings are likely to always need sensors that detect internal air quality and filtering some may not always need one-way systems for foot traffic.
But, I believe having knowledge of what proptech is out there and what it might be able to do for your company is essential. Here are three reasons why:
Employee health and safety
Prior to the pandemic many businesses were touting programs geared toward the health and wellness of their employees as a perk. COVID-19 has made them imperative. Let’s face it, it’s going to take much more than temperature checks to bring the mass of employees back to public transportation and the office.
And health and wellness goes far beyond having a fitness facility, exercise programs, or a yoga room. Luckily, proptech is delivering viable solutions to companies, often through investments made by their landlords in technology and industry certifications such as WELL. Corporate tenants and occupiers are also being pushed by employees to meet these standards.
Smart building sensors can monitor a host of potential problem factors in real time from indoor and outdoor air quality to lighting, HVAC, heat, even noise pollution. Air sensors can detect volatile organic compounds (VOCs) in the air, instruct systems when to draw fresh air into a workspace or close windows on bad air days. Light sensors can detect when someone enters a darkened room and turn on the lights. These same sensors can monitor appropriate social distancing in the office and remind employees when they need to de-densify conference rooms and collaborative spaces.
‘Sensors also enable touchless technologies...Thanks to COVID-19, touch is now the enemy.’
Products such as dynamic or electrochromic glass can be programmed to track the orbit of the sun throughout the day ensuring the right amount of shade and light in the workplace. This glass, which also contains sensors, has been shown to reduce eyestrain, headaches and daytime drowsiness by up to 50 percent and boost productivity. It can also result in reduced energy costs.
Dynamic glass also makes window blinds and coverings redundant, meaning that airborne dust, viruses and pathogens have fewer surfaces to adhere to. Window blinds also return pathogens to the air when raised and lowered, so removing blinds is not only beneficial from a cost perspective, it’s healthier too.
Sensors also enable touchless technologies, and that’s something that more workers will be seeing post-COVID, both in elevators and for building access. A recent study suggests almost half of workers, many already using key cards, would prefer to have building access via smartphone app. Thanks to COVID-19, touch is now the enemy.
And, because sensors can be connected to the Internet of Things (IoT) data gathered by all of these sensors can be compiled and analyzed, providing the CIO with a robust set of data. According to a study by the World Economic Forum, it is projected that more than one trillion sensors will be connected and active worldwide in the next five years. It’s the perfect time and opportunity for CIOs to incorporate key findings from proptech sensors into ongoing company strategy and Board reports.
Environmental, Social and Governance (ESG)
Smart building technology also provides the CIO with critical insight into elements of a company’s environmental performance at the property level. Sensors that monitor light, heat and air cooling also collect data that can be analyzed for greater efficiency, creating both potential cost and carbon savings.
While these costs savings may financially benefit the landlord, they also ultimately benefit the tenant in terms of pass-through savings. More importantly, they also provide ‘sustainability savings.’
That’s something that large asset management firms and institutional investors are looking at with a much more critical eye. Major corporate investors are not only pressing corporations to improve sustainability practices, but they are demanding metrics that show “job done.” Creating access to and communicating that information is a job for the CIO.
Risk
Health and wellness, employee safety, environmental concerns. These all add up to risk factors for the modern corporation, and mitigating risk is a 24/7 job for most companies. Just look at COVID-19. Here was a risk that was on few company’s radar screens which caused a loss in actual Gross Domestic Product (GDP) in the U.S. of 31.7 percent (on an annualized basis) in the second quarter, down from 5 percent in the first quarter.
Companies today are better positioned now than they were in January 2020 to weather large scale, or in some cases complete, business disruption. COVID-19's effect on productivity was not something that anyone in business really saw coming. But now we have a measure and are attuned to the downside. CIOs are in a unique position to be able to access and analyze data for the benefit of the business.
If CIOs weren’t seen as major players in employee health and wellness, ESG or the determination of corporate risk prior to COVID, they surely must be now. This means CIOs and their companies need all the resources at their disposal, including proptech, to combat the forces affecting their businesses and maximize corporate ROI. The CIO’s position at the top of the technology and information pyramid gives an unparalleled, holistic view of the organization and the opportunities.
About the author:
Rich Branning is a JLL thought leader orchestrating a team of specialists in brokerage, finance, workplace management, construction, global incentives, labor analytics, prop tech and venture capital. In his more than 30-year career he has advised and represented some of the Bay Area's top high growth global companies, offering creative business and negotiating strategies with an entrepreneurial point of view on more than 25 million square feet of corporate real estate transactions.
Rich's favorite quote: "As Iron Sharpens Iron, One Person Sharpens Another."
You can reach Rich directly by email at [email protected] or via phone at +1 (650) 480-2188.
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