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What's Next for Proptech?

Next for Proptech
By: Michael Hoban

When all is said and done, the silver lining of a dismal 2020 from an industry standpoint may be that it was the year when CRE brokers finally stopped talking about technology and actually started using it on a broader scale. In a year that saw the deadliest pandemic in over a century extract a devastating toll on human life and the global economy, digital tools went from “nice to have” or “wave of the future” status to “must have.”

Those who were previously reluctant to pick up those tools found themselves on an accelerated learning curve as they scrambled to stay competitive. A number of evolving technologies, including 3D virtual tours, business communication platforms like Microsoft Teams and Slack, and electronic signature software such as DocuSign—all of which had been available in some iteration for some time—quickly became indispensable as shutdowns made in-person meetings virtually impossible.

“It’s not like COVID happened and these technologies just came out. They were already there for the most part, but the pandemic really accelerated the use of it,” said Steve Kapp, SIOR, executive managing director for Newmark’s San Francisco East Bay industrial division. These technologies became essential to conducting business as COVID took its toll. But even with the rollout of the vaccine and an expected return to the office (most likely in the form of an office/work from home hybrid model), they are here to stay, predicts Kapp. “The behavior isn’t going to revert back. It’s just like when people realized you could buy something from Amazon and have it show up on your front door instead of going out to the mall or the supermarket. I think it’s a permanent change.”

In the near term, some brokers will be leaning heavily upon evolving technologies in their role as advisors. This comes as companies develop safe return-to-work strategies using apps that can reduce the risk of onsite COVID-19 exposure while also planning for efficient space utilization. Applications developed by workplace solution providers like Appian, Condeco, and Smartway2 deliver integrated solutions that allow companies to do employee health screenings, provide secure building and room access to approved employees, while also assisting with desk assignments, and monitoring capacity limits for offices. Some apps also offer FDA-authorized COVID-19 testing and contact tracing.

“Office utilization and physical workflow software is becoming increasingly important for tenants,” says Chris Falk, SIOR, executive vice president with Newmark ACRES in Salt Lake City. “Calibrating locations, coordinating cleanings, and figuring out density can be a nightmare, but these software programs simplify the process. I think this is going to be a huge tool going forward and an advantage for groups that are looking to get back to the office sooner rather than later in a safe, programmed manner.”

 
Office utilization and physical workflow software is becoming increasingly important for tenants

But as the world slowly returns to a pre- or post-COVID reality, what are the emerging technologies that will be most impactful for the commercial real estate industry? John D’Angelo, U.S. real estate leader for Deloitte Consulting, told Forbes magazine that the four technology trends he feels will be most impactful in 2021 and beyond will be the rise of digital twins; direct digital engagement with the end-users of real estate; data and analytics; and robotic process automation. One could also make the case that technologies focused on building wellness, cybersecurity, and smart building operations will continue to gain traction across the broader industry. “All of these emerging technologies are great, but as a broker, when I think about technology I’m interested in two things: How is it going to help me make money, and how will it pay me faster?” says Daniel Levison, CEO of CRE Holdings. He acknowledges that he too did not embrace 3D virtual tours, Zoom, or Docusign until the pandemic was underway, and although he looks forward to resuming in-person tours, he now considers the tech tools to be vital to his operation. And Levison is not your stereotypical tech-averse broker.

In addition to his broker/owner role with Commercial Property Consultants in Atlanta, Levison holds leadership positions with three proptech companies (including co-founder and chairman of CommissionTrac, which provides back office intelligence for CRE firms and was acquired by Yardi in December). He says that the proptech tools that are currently having the greatest impact on his business are applications that assist with deal management, lead generation, and data analytics. None of these are new concepts, but recent enhancements to existing applications have made them more enticing. And not surprisingly, it’s the old guard CRE companies that are leading the way.

When proptech first began disrupting the industry in 2010 and began gaining wider adoption around 2014, startups like VTS, Compstack, and Square Foot were the main drivers of innovation. Now through mergers and acquisitions, as well as partnerships between early-stage proptech companies and the largest brokerages like JLL, CBRE, Cushman & Wakefield, Newmark, and Colliers, innovation and rollout of new platforms is the domain of industry heavyweights.

“The tech growth in recent years has been coming from the established companies, and I would have to put VTS and Compstack in that category, even though they’re relatively new compared to a CoStar or Yardi or LoopNet, because you can trust their data,” says Levison. “All of these firms are getting smarter about how they package the information, and now brokers are starting to connect the dots better.”

What is driving the industry now—and what is fairly new—is the access to real time, accurate information through automation and open-source data. Firms like Leverton, an AI-based document data extraction and contract analytics platform, eliminates tedious, manual, and error-prone data extraction through automation and helps brokerages create actionable intelligence from an organization’s reams of leases and contracts. The other component is the increased availability and transparency of data.

“What we’re seeing is a movement toward the democratization of CRE data,” says Frank Spadafora, strategic advisor for the recently formed CREtech Global Innovation Consulting team. “Our industry has traditionally been constrained by the lack of access to accurate and trustworthy property and transaction data, and the high cost of entry to assemble and make that data actionable. Alternative sources and methods are changing that paradigm, with examples ranging from crowdsourced providers like CompStak achieving enough volume and variety to provide valuable representative comparables, to data super aggregators like Reonomy, RealMassive, and Cherre, to open public datasets like OpenData NYC. When combined effectively with an organization's proprietary information, these datasets can provide the backbone for powerful new analytic and insight capabilities.”

In addition to an expanding range of new data sources and types, the standardization and transparency of CRE data is also being driven by the adoption of deal management platforms by firms like VTS and Yardi, which track the entire deal process from beginning to end using real-time information. Spadafora refers to the process as the “virtualization of leasing” and breaks it into eight components, which includes “pre-broker market intelligence” from digital listing engines like CoStar, Crexi, LoopNet and Commercial Café by Yardi; access to location intelligence and site selection; comp analysis; property level data for benchmarking; lease administration; and managing the lease through the end and alerting the broker when it’s time to discuss lease renewals. Deal management platforms also provide real-time information for stakeholders. Every communication during the leasing life cycle can be documented and tracked, with permission sets established for the various parties (owners, listing brokers, clients, outside brokers, etc.) to access that data.

“We’re hyper-focused on the workflows and the functionality that create efficiencies in the leasing process from the lead all the way through to executed leases, as well as the underlying analytics and reporting,” said Joseph Moskowitz, VTS head of strategic partnerships, in a recent CREtech “best practices” webinar. “Most organizations today are really taking a look at all of the proptech solutions that are out there, and building out an ecosystem that works for them. Creating a layer of automation amongst all those platforms is paramount to having the ability to make decisions based off of accurate sourced data…and we’re trying to create actionable data insights for our clients to make strategic decisions.”

Another longstanding technology that has greatly enhanced its value are the listing services. Since most companies begin their search for space online—as opposed to directly contacting a brokerage—these listing sites have become a significantly more important marketing tool for brokers. Some of the services (VTS, LoopNet and now Crexi) not only expose a property, but generate actionable leads that alert the broker immediately while also providing data analytics for premium or deal management platform users.

So do the lessons learned from the pandemic mean that the industry is more likely to adopt technology going forward?

“I hate to say it, but you almost have to drag us—particularly older brokers—into the future and most won’t adopt until we’re forced to,” concedes Levison. “But once you get a little taste of it, you might find yourself saying, ‘What else might be out there that might be practical and easy for me to get my arms around that I can use to help me make more money?’”




CONTRIBUTING MEMBERS

Chris Falk, SIOR

Steve Kapp, SIOR

Daniel Levison, General Affiliate

 

Media Contact
Alexis Fermanis SIOR Director of Communications
Michael Hoban
Michael Hoban
michaelhoban@comcast.net

Michael Hoban is a Boston-based commercial real estate and construction writer and founder of Hoban Communications, which provides media advisory services to CRE and AEC firms. Contact him at michaelhoban@comcast.net