This article was sponsored by Nuveen Real Estate. It appeared in the Technology Special Report alongside the December/January 2019 issue of PERE magazine.
Managers and investors know they have little choice but to stay on top of the latest developments in proptech, but in an increasingly crowded marketplace it can be difficult to see the wood for the trees. PERE’s Stuart Watson listens as Alexander Gebauer, chief executive officer for western Europe at Allianz Real Estate, and Jack Sibley, technology and innovation strategist at Nuveen Real Estate, discuss how to identify tech and data solutions that genuinely add value to real estate portfolios.
Identifying scalable solutions
Alexander Gebauer: We are an investment and asset management company not a broker or a facilities manager. We need to concentrate on what matters to us, and to the users of our buildings. The ocean of proptech solutions available is already becoming hard to navigate, so we have sought to identify where proptech is causing disruption in the areas that are meaningful for us, and based on that logic we track what’s going on in the proptech markets. Once we have identified the solutions that can help us in those areas, we enter into an analysis and prototyping phase to see how we can implement them.
Jack Sibley: To get the best results from trialing new technologies, it is an advantage to have scale, as it helps to diversify the innovation risk and to spread the learnings across a larger portfolio and platform. Alignment between stakeholders across the whole value chain is critical and needs to be as dynamic and agile as possible throughout the process. As well as identifying which technologies will help to solve which problems, and which providers are the right partners, it is important to look at the likely return on investment and how scalable different solutions are across portfolios.
One of the problems as a large real estate platform is that every real estate market is different from each other and technologies are not necessarily easily transferable from one geography to another. One has to weigh up the advantages of a flexible bottom-up approach versus a scalable top-down approach and find the right balance on a case-by-case basis.
AG: We operate in many global markets, but we have a country-specific approach to proptech, backed up by our strong local presence and market knowledge. It is more efficient to try things out on a local basis without expending lots of effort on a big academic study or centralizing the technology too early, then afterward look at whether it’s possible to employ that solution at scale across a whole segment.
Sometimes differences between geographies make an across-the-board approach impossible. For example, facial recognition technology is accepted in Asia and there are a multitude of uses for it. However, it cannot be used in Europe in the same way because of data privacy and protection regulations.
Most of the solutions we’ve identified as easily scalable are the ones that relate to data and ESG performance of our assets. Gathering, processing and analyzing data is scalable once we have a harmonized and structured approach across the portfolio.
Gathering and analyzing data
AG: We don’t do site operations or facilities and property management. We externalized those functions years ago, but we are realizing we need the data that is produced by building operations and by tenants to understand better what we own and how we manage it. We’ve been doing a lot of work on merging real-time operational and tenant data into the BIM (Building Information Model) that is created when a building is designed and constructed to generate a digital twin, a graphic digital representation of real-time data about the building.
JS: When you buy an asset, there is a period of physical technical due diligence and inspections. Over time, we increasingly expect to see buyers doing an inspection of the data twin of the asset as well. When you hand over the keys to the asset, the digital twin shouldn’t disappear, you should hand over the ‘digital keys’ (digital twin log-in) as well. In the long term that might speed up due diligence or make it more accurate, and you may even get some sort of transparency premium for assets with a richer data footprint.
AG: However, for the building to be smart, the asset manager must also be smart. It’s not just about data collection, but also data analysis. Data makes more sense when you can analyze it over a longer time period and if you can compare different buildings. The next challenge for the industry is to aggregate operational and tenant data from different buildings into the same system to produce really meaningful insights at a portfolio level.
JS: That is already happening on the environmental and energy efficiency side. We collect data on a portfolio basis and can benchmark across funds, regions and geographies. Many of the initiatives we’re driving on sustainability are very closely linked to technology. However, tech gets especially interesting once it starts linking to the user experience and the satisfaction with the space itself. This can start to shift the needle on investment returns, as it can connect directly with leasing. Ultimately, the question is how can a smart building help us attract better tenants, have shorter void periods, and ultimately achieve higher rents?
Creating a better environment for tenants
JS: An innovation that’s been gaining traction recently is the tenant experience app, which pulls data out of the building (or the digital twin) for use by the occupier. For instance, it might be to book a meeting room, order food or understand what events are going on in the building this week. These apps can also be used by different tenants to communicate and build a sense of community. The wider context is the growing consumer-centric approach within real estate and the use to attract and retain talent rather than treating it as a cost to be minimized. That evolution is driving more focus on end users from all landlords, but it is also driving new business models like flexible offices that blur the line between what was historically the tenant’s space and what was the landlord’s role. Those new models are both enabled by, and enablers of, technology. Tech allows us to have a closer engagement with tenants through solutions like apps, but tenants are also drawn into closer relationships with landlords as they look to them as enablers of their smart workplace strategy.
AG: Whereas in the past owners might have handed over the keys and asked just before the lease break how the tenant was doing, real-time data allows us to understand how the building is being used throughout the duration of the tenancy. With that data we’re able to provide better services to tenants, help them achieve more efficient building operations and interact with them in a faster and smarter way. There is also an increasing focus on the wellbeing of the people who occupy the building, and the experience it provides is becoming more important in securing and retaining tenants. Where we can use technology to make people feel more connected, both within their companies and within the building, they’re more likely to stay for the long term.
The data ecosystem
AG: We believe that if we make data available for everyone, the ecosystem of stakeholders will find a way to use that data that will add value for the tenant. For example, in a smart office building you could gather real-time data about energy consumption. Who can use this data and for what? The owner of the building can use it for reporting and overall energy consumption optimization and the tenant can raise awareness among employees and make better use of their space occupancy. In turn, the facilities manager might use this data for predictive maintenance of key technical installations by analyzing their energy consumption patterns. Predictive maintenance automatically reduces operating costs and increases users’ satisfaction. Those kinds of uses may be hard for us to predict, unless you make all kinds of data available for everyone.
JS: The data layer is always the foundation. Once you have visibility of that, you can build up from smart workplaces, to smart buildings and ultimately a smart city. Data governance is important throughout, but privacy concerns are particularly highlighted at the smart city level. In private buildings tenants opt into data solutions by agreeing to take space there, but in public spaces the issues around consent are more complicated. That means landlords will need to cultivate a better understanding of the way in which they impact the broader built environment and the city’s social context, thinking beyond the door of their building.
Intelligence at work
Nuveen’s 70 St Mary Axe is a testing ground for a raft of technological innovations
Nuveen Real Estate completed construction of 70 St Mary Axe in February. The 24-story, 317,000-square-foot office building, which sits alongside the Gherkin in the City of London, was developed on a speculative basis by the Cityhold Office Partnership.
“We are collecting lots of data in this building and using it to optimize the user experience in terms of wellbeing and productivity,” says Sibley.
Proptech platform Equiem is building a bespoke app for the building to enable the provision of a range of services to occupiers including the booking of short-term office space, meeting room spaces, events spaces, accessing the catering, wellbeing and concierge facilities within the building, as well as a range of amenities in the near vicinity.
Sibley says the objective is to improve the user experience of occupiers within the building with a view to retaining occupiers for longer.
Meanwhile, through the use of Iconics, an intelligent building analytics platform, the owner aims to improve plant reliability and equipment efficiency while driving down maintenance costs.
The platform uses data from existing building management systems to offer practical solutions that can be implemented to enable more efficient operating models for the building.
At the sharp end
EDGE Olympic – a high-tech and highly sustainable redevelopment
Acquired in mid-2018 by Nuveen Real Estate’s Cityhold Office Partnership via a forward commitment from tech-focused office developer and operator EDGE Technologies, the 119,663-square-foot building in Amsterdam is designed along three core principles. Those are: optimizing the efficiency of the building and the health and wellbeing of its users (as demonstrated by its WELL Platinum certification – the first building to achieve this in the Netherlands); emphasizing the collection of data and centralizing all aspects of the building and user experience onto a single digital platform; and enabling tenants to become a community by offering the opportunity for start-ups and corporates to mix through the common areas and co-working space.
Nuveen Real Estate’s Cityhold Office Partnership is also acquiring a second project from EDGE Technologies – the 245,420-square-foot EDGE Grand Central in Berlin, which is seeking to achieve DGNB Platinum certification, while Allianz has also backed the platform committing capital to forthcoming EDGE developments at East Side Berlin and Hafencity Hamburg.