Morley Barr is Chief Product Officer at Caret Ltd, a Proptech company based in Calgary, Alberta, Canada. Vist Caret on the web!
I’m talking to you, commercial real estate. Your industry is really old. Like an old dinosaur (almost). And the impact of technology on your sector is a kind of unnatural evolution that separates the strong from the weak. The name of the asteroid pouring into commercial real estate is proptech.
commercial real estate 10 trillion dollars industry in North America. island Manhattan Office space alone is over 500 million square feet. And I didn’t even mention the amount of space an industrial building takes up, the huge shopping malls or the small retail strip centers and suburban office buildings across the continent. The commercial real estate development association NAIOP notes that this sector has contributed. 1.2 trillion dollars It generated $418 billion in wages and supported 8.5 million jobs as a percentage of U.S. GDP in 2021.
Given the economic strength of the sector, it can be forgiven to assume that it is an active industry that stands on the edge of innovation to satisfy both investors and tenants. But commercial real estate is responsive in nature and has always been. Sam Zell, a prominent figure in the industry said once, “This has always been a fatal flaw in US real estate. The size of development has to do with availability of funds, not demand.” When it takes time to build and vacancy rates are low enough to spur development, the cycle has already occurred. The industry’s record of progress is in many ways a lagging indicator of a sector that appears to be lagging behind. Technological advances and advances have hindered the supply of actual bricks and mortars and the supply of funds needed for construction.
Historically, the technology has been classified as building infrastructure, such as building automation systems to control heating, ventilation and air conditioning systems, and destination dispatching to improve the waiting times of elevator systems. However, the pandemic’s “work from home” and “work anywhere” ideologies focused on what was missing from building occupants, a stable stakeholder in the industry.
The focus on the “tenant experience” actually started before the pandemic. This is thanks to the work environment popularized by tech giants like Google and the mainstream office environment for companies like WeWork. Productivity has to do with not only the time you spend in the office, but also how you experience the office and what your workplace can deliver.
Tenant experience platforms are emerging as a way to connect buildings and landlords with the people who work in them. It is a metaphorical umbrella for the entire building ecosystem. The core tenant experience is the sum of all aspects that a building occupant has during their stay in the building. This may include services and amenities, maintenance and cleanliness, and access control. Proptech ties these aspects together easily and seamlessly to provide tenants with an integrated all-in-one solution. The tenant experience platform provides a true “single window” interface between tenants and property owners. The efficiency of building operations can be achieved and traffic patterns and building usage can be analyzed, leading to a lighter, frictionless and more attractive workspace.
However, there are still commercial building owners who have not considered the widespread deployment of proptech and tenant experience platforms in their “tech stack” or property. They should immediately source technology companies with a solid understanding of the industry, and avoid companies with solutions that seek to solve problems.
For commercial property owners and managers who stick to the old fashioned way, now is the time to embrace Proptech. The luxury of being behind the cycle is now gone. The proptech platform driving the evolution of the tenant experience is gaining momentum and will be embraced by individuals who come to work every day.
There has never been a more critical time to be proactive, and given the size of this sector of our economy, the proptech industry is rapidly developing solutions for commercial real estate. Here are some tips to look for in potential technology partners.
• Is there market validation? We all love clunky startup stories, but it’s important to understand what kind of track record solution providers have with their industry peers.
• Commercial real estate is a collection of many asset classes and there are nuances to consider. Retailers still have different needs from office users than industrial tenants. Is your proptech partner an expert or generalist and how does it relate to your company’s needs?
• Does the existing infrastructure support the key benefits offered by the technology solution? Mobile door access via the Proptech platform (using your phone as a key instead of a keycard or remote control) is a great feature, but assumes that the door is equipped with a stunner, for example.
• Does your proptech partner have real-world experience in commercial real estate? As mentioned above, there are many technical solutions that seek to solve problems, but the key differentiator is experience. To use industry parlance, what you really want is a purpose-built solution, not a generic platform that wants to give everything to everyone.
Many commercial real estate companies have built their brands over decades, and as with building construction, a solid foundation is the key to success. Can commercial real estate be blamed for the dinosaur industry? Of course, things are changing rapidly, and as the world evolves and technology integration accelerates, commercial real estate cannot afford to sit back and watch.
An asteroid is coming and everything will change.