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Commercial real estate (CRE) owners and operators have a big challenge to overcome. On one hand, it’s critical to operate as efficiently as possible to keep costs under control and net operating income (NOI) high. On the other, tenants have growing expectations and increasingly want not just a space, but an experience.
Technology has, in many ways, been touted as a panacea. The argument is that it is possible to meet bottom-line demands and top tenant requirements with the right systems. You can work on the devices and with the workflows you already use, quickly access the data necessary to make better business decisions and connect a wide swath of seemingly disparate groups of people, among other benefits. While true, the path to putting tech into practice in most CRE firms hasn’t been that simple.
Past Solutions Didn’t Solve All the Problems
Buying CRE tech 25 or more years ago was akin to the popular saying in the tech world, “No one ever got fired for buying IBM.” Selecting an established leader was a safe bet. Even if the technology didn’t live up to expectations or it took years to see meaningful value, you seemingly couldn’t go wrong. Maintaining the status quo was a smart strategy. The systems in place worked: They kept the space filled, the lights on and the bills paid — quite literally.
In the late 1990s, a number of vendors emerged to try to change that mindset. And companies bought into the promise of many solutions to solve their myriad operational needs. They invested — not just money, but also considerable time — to deploy solutions across both buildings and entire portfolios. While many of those solutions were great, some didn’t live up to their promises; others were deployed in organizations not quite ready to evolve beyond Excel. The timing for a CRE tech revolution was off.
New Era, Necessary Pillars
While you still might not get fired for buying IBM, the reality is that even a blue-chip player now has competition from a wave of innovative startups taking a new approach to computing. And so, too, do legacy CRE tech players.
A new crop of technology companies have emerged: CRETech estimates that approximately 4,000 startups comprise this ecosystem today and reports that more than $12.9 billion was invested in startups in the first part of 2019 alone. To maximize the value of deploying solutions, owners will standardize their portfolios on modern, best-of-breed technology stacks that can deliver the best building experiences and delight their tenants in the process.
Much like today’s leading IT tech stacks complement IBM mainframes with cloud infrastructure from AWS or networking solutions from Cisco and a number of smaller solutions between, CRE portfolios will identify — and come to trust — a small set of core technologies. “Pillar platforms” will emerge as the cornerstones of the CRE tech stack, and they will map to the most critical elements of building experience: an accounting platform focused on the financial transactions of revenue and expense, a leasing and brokerage platform centered around the buying and selling of buildings and spaces in buildings, and the pillar on which my firm focuses, a building operations platform to bring together all elements critical to operations such as risk management, services procurement, tenant services and more.
Better Tech, Better Outcomes
Leaders are already emerging in those three categories, built from the ground up to address the modern needs of CRE. These leaders won’t be Frankenstein solutions retrofit to meet unique CRE needs, but rather modern platforms with intuitive interfaces and the ability to seamlessly integrate with each other — and systems outside the traditional CRE tech stack. They’ll also be scalable, so owners can use the same solutions across their entire portfolios, regardless of language or location, and operators can easily report up on building performance.
Thanks to advances in cloud computing and UX design, the best systems will be up and running in a fraction of the time of legacy solutions, and they will be intuitive to use and flexible enough to meet the specific workflows of an organization. They will also have to live up to stricter security standards: encryption and intrusion detection, real-time monitoring and backups, and SOC 2- and GDPR-ready to ensure compliance.
In property management, to use an example my company is up close and personal with, a company historically would spend hours negotiating price, standing up and learning to use each of likely a dozen or more systems, only to have to take a number of tasks offline because, for instance, the CRM system tracking the tenant contacts and their leases in no way connected to the work order system deploying maintenance crews or the accounting system generating invoices for those repairs. Reporting financials, service performance and other building performance metrics to owners was, if existent, a laborious process that required pages of information to be cobbled together.
This time around, the property owners and operators have a far different, better experience, with tech price structures better matched to the value the systems deliver and the exact features being used, interfaces that are simpler to use, and a less hefty stack of systems to manage and learn. Data — and thus workflows — will be able to seamlessly move from leasing to accounting to operations. Reporting will be complete in a matter of clicks.
The bottom line is that CRE players deserve better technology than they’ve historically had. Trusted pillar platforms have the opportunity to transform the industry by providing the power to deliver an exceptional experience for occupants while maximizing efficiency and profitability for owners.