A proptech (r)evolution
Real estate managers and investors, big and small, the world over, are seeing their businesses disrupted by technology innovation designed specifically for use in the built environment. For the most part, institutional capital views this development as good for business – a tool to keep portfolios relevant well into the future, attractive to tenants and delivering returns.
“Technology has the potential to add the greatest value to the investment process,” says Berkshire Residential Investments’ chief information and technology officer Josh Glastein.
Bigger, better data
The data derived from proptech give owners valuable visibility on how assets are performing, from how tenants are using space to the energy efficiency of a building. Allianz Real Estate’s chief executive for west Europe, Alexander Gebauer, says: “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.”
John D’Angelo, managing director of the US real estate team at Deloitte Consulting, adds that data are used to “make decisions about where to spend capital” and to understand “risks at an asset or portfolio level.” And Yardi’s senior vice-president of global solutions, Rob Peel, notes that data allow owners to find ways to improve operational performance. “Increasing revenue, decreasing expenses and reducing risk is the recipe for improved building value and greater returns,” he says.
Although still in its infancy, our feature on page 10 offers a compelling insight into how 5G networks are set to be a game-changer in the property world through the delivery of faster connectivity and data speeds, allowing owners to ensure their properties are managed with even greater efficiency in the years to come.
Over to Grosvenor’s group technology director, Kevin Kincaid: “5G connections require much less energy – up to 90 percent less – allowing enhanced battery life for connected devices.
“As more of the building becomes connected, this will lead to lower energy consumption and operational costs.” And ultimately that is music to investors’ ears as they continue to seek ways to improve bottom lines.
A relatively new trend on the block is that some traditional real estate investment managers – those more used to buying and selling physical assets – are financing the companies developing proptech innovations. An example, reported by PERE back in May, is the three sector heavyweights – Brookfield Asset Management, Tishman Speyer and GLP – that backed proptech company VTS, the subject of our big interview on page 19, to the tune of $90 million.
This is an indication of the value institutional capital is placing on proptech and that investing directly in such innovation is increasingly being seen as a natural extension to capitalizing the physical assets.
Let’s not overlook the vital role that technology is also playing within real estate fund management companies themselves. There are now a raft of tools and systems at managers’ fingertips to ensure that internal operational and administrative processes – including accounting, HR, compliance, reporting and due diligence, to name a few – are as efficient as possible, and ultimately helping managers to run their businesses as well-oiled machines.
And with investors keeping an ever-closer eye on the internal workings – and cashflow – of their managers, there is a growing realization that tech is a necessary tool in meeting client expectations, fostering good investor relations and raising capital.
For small to mid-size managers that perhaps lack the big budgets of the sector giants, the cost of developing and maintaining technology in-house, and hiring the skill set to oversee it, can be burdensome. And this is a reason why more and more are looking to third-party administrators and specialist tech platforms to do much of the heavy lifting.
Global head of real estate at Alter Domus, Anita Lyse, says it is one of the “top reasons” for the growth in outsourcing, which can help reduce costs associated with building tech in-house, as well as offer managers access to scale and efficiencies through a service provider’s platform. And importantly, it frees up managers’ time to focus on their core activities – scoping the market for good deals, investing and generating good returns for their investors.