In recent years there appears to have been an explosion of new ‘PropTech’ solutions in the market and the existing software vendors and service providers have consolidated and enhanced their offerings. The pandemic has meant that clients need to understand the operation of their portfolios in far more detail which should, in theory, support investment solutions to a far greater degree than before.
On the face of it, we should be entering a golden era with clients raising their priority level for Real Estate Technology investment to align with areas such as Finance or Human Resources. However, there are still major challenges for clients to justify expenditure in this space despite the large amounts of financial opportunity that such investments may deliver.
One factor preventing progress is that there is a communication disconnect between what the business needs and what a real estate solution can provide. Software vendors often try to sell software features that they feel will solve a client’s problem and then struggle to understand why the client hesitates. Clients also often fail to articulate the real problem that needs resolving internally which makes the business case difficult to justify.
What are the typical business problems clients need to solve?
Align the supply of space and demand for space.
This has become even more relevant following the pandemic. Some offices now follow occupancy patterns more akin to a bell curve across a week than a more traditional flattened usage with some tail-off on a Friday. Data and predictive analytics, with advanced sensing of building use, offer the scope to optimize space use and then use other measures and policies (e.g., financial incentives) to drive behaviors to better use the space available. Otherwise, there is a very expensive asset being under-utilized for significant parts of the working week.
Optimize the maintenance of their assets.
The topic of real estate asset maintenance strategy is complex and has evolved significantly as knowledge, particularly gleaned from other asset-intensive industries has been applied to this sector. However, what has not changed for clients is the concept of an optimum balance between the amount of time and resources that should be expended on an asset to meet the client’s needs. As Real Estate has a complex supply chain with the maintenance of client assets often outsourced to multiple third parties, the ability to ensure that the optimum point is maintained is often extremely difficult to achieve.
Deliver a fit-for-purpose portfolio.
The pandemic has undoubtedly changed clients’ outlook. There have been many papers and articles on how portfolios need to adapt to react to changes in working patterns but, until there is a period of stability, it is very difficult for clients to specify exactly how their portfolios should be structured and used.
Meet sustainability targets.
Post the pandemic, this is proving to be a difficult area to address. Many clients have laudable sustainability commitments and are making changes to meet some quite aggressive targets. However, having an under-utilized office, staff working from home some days per week, and a lack of clarity on what changes might be made to the portfolio in the future presents a far greater challenge for clients to achieve meaningful and auditable benefits.
Support decision-making to drive out cost efficiencies.
Clients want their data to provide management information so that they can drive insight and make the optimal decisions to drive out inefficiency. However, often the data is so poor that management information is not able to be trusted. This, in turn, hampers the delivery of insight and the ability to make informed decisions. This has certainly been true in the past but increasingly there are services and analytical techniques that improve the data to such a level that the information provided can inform and enhance decision-making.
Enhance the management of risk and compliance.
Increasingly, the need for clients to have a ‘golden thread’ of data and information across their projects and/or assets has become paramount. Internal audits of clients in this space are becoming more knowledgeable and sophisticated in raising deficiencies to the Board’s attention in a more timely fashion.
How can clients ensure their solutions meet their needs?
Define the problem.
The typical business problems described above are by no means exhaustive. A project should start with the client’s pain points and identify the client’s end-to-end processes. It should then be possible to demonstrate the steps where a solution adds value to a particular process.
Assess whether you are in the best place to solve the problem.
Technology projects are notoriously risky to deliver effectively. This should not detract from clients undertaking real estate technology projects as the real estate industry uses an enormous amount of technology successfully and could not operate without it. There are never any actual guarantees of success but by following good project disciplines, having clear requirements and outcomes, and selecting experienced and competent vendors, there is the greatest chance of the outcomes being achieved.
However, it should be noted many service providers and services companies have already been through the process of using and optimizing real estate technology. Provided clients do not lose complete control of their data and consider any conflicts of interest of the services company holding their data, this can be a very attractive way of reducing delivery risk for clients.
Move beyond management information.
There are no shortages of reports, dashboards, and spreadsheets within real estate. However, whether clients can review the material produced internally and externally and drive any real insight is, at times, questionable. One area in which the real estate industry has been weak is the use of advanced mathematical techniques to analyze the vast amount of data in such a way as to test areas such as volatility and predict outcomes. We have been expecting advanced analytics to have an impact on the industry for some time, but this may finally become a reality.
What are the next steps for a client?
Clients need to ask themselves three simple questions:
- Where are you now?
- Where do you want to be in the future, and how quickly?
- What is preventing you from reaching that future aspiration?
The answers to these questions can be complex, and clients sometimes struggle as they are unaware of the full range of options available to them…
Ultimately clients need data to generate information so that they can derive insight and therefore make informed decisions on how to best solve their complex business problems and meet their future needs. It is the task of vendors and service providers alike to move from just offering their solution. They need to articulate what the client’s advantages are once the problem is resolved.
It may also be beneficial to have independent advice that acts as a bridge between the client and the market. This can benefit all parties in building confidence that the right solution has been selected and the investment case is sound.
About the Author 
Andrew Carey has over 35 years of deep expertise advising ‘blue chip’ clients across Europe, the US, and the Middle East. Andrew’s career is founded on leading transformational programmes involving Real Estate technology, organisational change, and business process improvement from initial concept through to successful implementation. He is highly experienced in assisting management teams with the alignment of business strategy to operational execution and has served as a trusted business advisor regarding delivering complex and leading-edge real estate technology solutions internationally. Andrew has a market-leading reputation for his thought leadership around strategic technology solutions and operational improvements to owners, operators, occupiers, and investors in real estate.