Is Digital Finally Real in Commercial Real Estate?

With the recent Realcomm conference still fresh in my mind, I wanted to share my thoughts on what I saw and my takeaways. It happened to be Realcomm’s 20th anniversary and the event was a great indicator of the changes happening in CRETech. Being at the conference reminded me that there is a great community of industry leaders pushing the envelope on leveraging technology to drive great business outcomes.

In a nutshell, the biggest themes were digital, innovation and IOT, with AI sprinkled throughout. The commercial real estate industry has traditionally been a laggard in the adoption of innovative technologies, but that’s changing. Though some digital adoption had been occurring, I’m only now seeing a deeper understanding of the broader integration capabilities needed to drive full adoption. Fully embracing the cloud, pushing mobile capabilities, and leveraging data were already there in some fashion, but I wasn’t previously seeing a real understanding of the user experience, an API mindset, nor agile thinking.

This year, examples of digital strategies and related vendor pitches on this were more prevalent than ever. While it’s clear not every company is really creating and driving a true digital strategy, the underpinnings of these themes were discussed more by the investment managers and owners than they ever used to be. Additionally, the larger, legacy CRETech vendors are finally delivering more open API’s to support the deeper integrations needed to leverage the ever-growing point solutions. Here, the legacy vendors are being pushed by the continued explosion in CRETech startups that are attacking each segment of the built wall industry. These innovative, easy to use and open applications are forcing the legacy vendors to pivot, finally realizing that they can’t always own the whole stack. The startups are coming out with products that are much easier to use with a big focus on the user experience and open API’s, something the legacy vendors never understood.

The larger players still have a long way to go on becoming truly agile though, as their release cycles are way too long. That’s still a reflection of their cobbled together technology approach, but they are trying.

Lastly on this theme, a big shout out for Yardi’s acquisition of Phoenix Broadband, a co-working technology firm. Co-working is a trend that is here to stay beyond WeWork, with most owners and landlords creating their own space-as- a-service environments. The Medus service platform caters to this need and Yardi was smart in getting in early.

Internet of Things (IOT): The Smart Building concept has been talked about for 10+ years, but a broad and integrated IOT ecosystem was always difficult and expensive. It’s now becoming real with an increased focus on the personalized experience, a greater availability of domain specific cloud solutions, the plummeting cost of sensors, the growing capabilities of edge devices, the broader move to an IOT subscription model, and the proliferation of CRETech startups attacking every segment.  There’s still a plethora of point solutions though and there is a lot of work to do on the security requirements. Just look at the recently hacked casino that was attacked via a connected fish tank thermometer in their lobby!

SmartCities and the App First World– Companies like Citylink.AI are pushing the limits of location based marketing and experiences, pushed by the IOT, digital and AI forces. With an app based world that is now being broadly adopted within the workplace, the employee and tenant based experience apps are taking off. Like the new CBRE 360 occupier and tenant services and app, many companies are looking to consolidate the various point solutions, embracing the personalization of the space using AI. Understanding what services or rooms employees like to use, where they typically park, how they commute and the temperature they like their space at, the convergence of IOT, AI and mobile are finally fulfilling the Smart Building promise. For an industry that has historically been a laggard, and one where the promise of an IOT based Smart Building has been more promise than reality, adoption is great to see.

More broadly on AI, I’m a little biased here, having led the “AI in CRE” panel again this year, but there is no technology trend that is more real and useful to the real estate industry in my opinion. AI will augment our work, automating and performing manual tasks quicker, while helping to make better decisions and improving the decision process.  We’re very early in our ability to truly leverage AI, but there are many real use cases happening now as shown below and the industry is starting to get it. In an informal survey, 1/3 of the respondents last year were thinking of, or had rolled out an AI project. This year it was 50%, though that is still behind the larger 60-80% pilot/adoption rate more broadly. With companies like Leverton, Okapi, Capital Brain and others helping to bring AI into the CRE world, and with the growing democratization of AI, I’m confident the CRE industry will catch up. It’s the most important technology for augmenting and supporting the future of work, and those that are ahead of this trend can be early disruptors.

Congrats again to the Realcomm team on their 20th anniversary and I’m glad to finally see these digital and innovation themes being talked about more than before. With all the startup money coming into the real estate industry, it’s only a matter of time before the industry is truly on par with others, but the CRE industry is finally starting to catch up.

The Future of CRETech is Here

I recently had the privilege of participating in CoreNet’s Technology Symposium, hosted by CBRE’s Peter Van Emburgh, President of the Mid-Atlantic chapter in Washington, DC, along with Katy Redmond. The theme of the symposium was the “Future of CRE Technology.” Being in the middle of some innovative technology projects at CBRE, this is a topic near and dear to my heart and I was thrilled to be involved. At the symposium, I participated on a panel with some great minds from IBM, Saltmine, IA Interior Architects and Capital One, and there was broad agreement among the panel that IOT, Machine Learning, Blockchain and Augmented/Virtual Reality continue to be the hot topics on innovation in Commercial & Corporate Real Estate Technology (CRETech). Below are some themes we discussed and my views of what this means for our industry.

CRETECH INVESTMENTS AND TRENDS

The real estate technology world, though still behind other industries, has come a long way in recent years. The amount of capital being invested in this space continues to be extraordinary, hitting $3 billion in 2017 across all real estate verticals. That’s on top of the $2.7 billion invested in 2016 and $2 billion in 2015. That’s a lot of money coming into real estate tech and we’re now seeing more and more startups bringing innovative, digitally focused, intuitive, and disruptive products to the industry. It’s still debatable on whether there is too much money being invested in an industry where exits are still rare, but it’s been a great push for moving CRETech into the middle of the digital revolution.

The keynote was given by Steve Weikal, the Head of Industry Relations at MIT Center for Real Estate, who gave a great overview of what he’s seeing from a trend and startup perspective. On some of the broader trends impacting CRETech, the pervasiveness of cloud computing, mobile computing, the explosion of “Big, small and wide data,” and the increasingly tech-savvy CRE workforce stood out and resonated with what I’m seeing. Along with the sharing and on-demand economy, these are all foundational trends that have had positive impacts on CRETech.

IOT

From a near-term practical perspective, the Internet of Things (IOT) is finally being broadly adopted and leveraged by real estate and workplace executives. IOT powers many enterprise and consumer products, and for the CRE world the Smart Building concept is not new. It’s been a topic of discussion and attention for over 15 years, but there was always more of a “when” attached to it than reality for most companies. That’s no longer.

The accelerated decrease in sensor prices, the ubiquitous view of mobility, the broad availability of cloud storage and services, and the ongoing adoption and capability of API’s, has resulted in IOT & Smart Buildings becoming ever more pervasive in CRE.

Energy management and related savings were the primary beneficiaries of the initial IOT waves, but we’re now in a world of “experiences” –one where IOT devices are star players. Adding Machine Learning to the mix, you now have the personalization of the experience. From conference room booking to wayfinding, people finding, parking and transportation search and reservations, service requests, community interactions, food or concierge services, IOT enables new ways for employees to interact with their workplaces.

 MACHINE LEARNING

Machine learning is another powerful advancement in the world of CRE tech. When Machine Learning is applied to IOT, the ability to identify and understand how space is utilized magnifies greatly. With a minimal number of sensors, coupled with machine learning, companies can now understand how employees and departments are actually using their space, adopting new working styles and improving the efficiency and effectiveness of their real estate portfolio. The combination of IOT and machine learning also can provide insights into asset performance, event filtering, and service work validation. These are all projects that we’re piloting with our clients with goals to improve performance and increase employee satisfaction.

The value of Machine Learning to the commercial real estate industry is broadly apparent. Its ability to find insights in data are transformational. The big tech companies (Microsoft, Amazon, Google, IBM) have all made huge strides in making machine learning models and approaches more available to a broader audience, “democratizing” the availability and use of machine learning. Related to the workplace experience theme mentioned earlier, we’ve spent time at CBRE applying machine learning to work-order data, enhancing and improving how employees can get what they need to do their job. Whether it’s leveraging text, voice or images, making the employee’s interactions simple, easy and personalized goes a long way towards employee satisfaction. That is something critical in today’s highly competitive fight for top talent.

BLOCKCHAIN

Usually blockchain in CRE is a topic for a narrow niche group at CRE technology meetups and conferences, but it got much more air time at the symposium than I’ve seen before, which is great. There is no arguing the value that a decentralized, secure, and fully searchable technology like a blockchain can have on the CRE world, but there aren’t many corporate or commercial real estate companies who are prepared to leverage it today. At CBRE, we completed a successful proof-of-concept with a client last year that opened our eyes further to the long-term potential. There are quite a few uses today that are viable in the short-term, particularly around logistics or IOT, but other aspects are many years away. Outside of the U.S., there are governments that are pushing to centralize all real estate transactions on a blockchain, enabled by a lack of available data today and a supportive and centralized regulatory approach. In the U.S., Cook County and other municipalities have piloted title transfers on a blockchain, but broad implementations are yet to come, particularly on the commercial side. Some of the best use cases require multiple organizations to participate, and many aren’t ready. Still, that shouldn’t stop organizations from exploring how it works and its benefits. I’m confident it will be a very disruptive technology over time.

AUGMENTED AND VIRTUAL REALITY

We also spent time on the panel talking about augmented, mixed and virtual reality, and it was agreed that this is a technology that is perfect for real estate and the workplace. Companies like Floored have already blazed the trails in creating innovative, virtual walkthroughs of space, but that’s just the beginning. Augmented reality has a real potential today that isn’t yet fully leveraged. Imagine a building engineer being able to see the work order, warranty or other documentation about a specific asset, just by holding their phone to in front of the asset. With AR being incorporated into the new phones, that’s starting to happen today, improving the time it takes for building engineers to do their work and reducing the time and cost of getting remote support for solving problems.

Since virtual reality is more about being fully immersed in your virtual surroundings, there is a thought that it would supplant the video call, allowing remote works to “feel” like they’re all together. That concept was discussed but there wasn’t a general agreement on its adoption or value. Completely removing the physical nature of human interactions is doubtful, but the current video-meeting experience is not the best either and ripe for disruptive changes.

CONCLUSION

In summary, we’re in a great time where the advances in CRETech are real and here now, with a bright future ahead for IOT, machine learning, blockchain and augmented reality. These technologies will all make a big impact in the employee experience, and it’s about time.