Proptech

Although there is some confusion about what technologies and applications Proptech includes and excludes, there is no confusion as to some of its properties. Developers of these products often hope (or intend) to disrupt and transform the markets they address similarly to how Google has transformed peer-to-peer information flow or how Uber has transformed aspects of public transportation. Other examples of high-tech industry transformation can be found in the extent to which Airbnb and WeWork have changed how space is thought of and used.

Two large companies, Ernst & Young and Cushman & Wakefield, are heavily involved in the use of Proptech technologies. Paul Head, construction and real estate technology leader at Ernst & Young and Doug Stewart, head of digital buildings practice at Cushman & Wakefield spoke on four questions:

1. How do these companies define Proptech?

2. What are the major applications of your company’s client base and the primary factors influencing these applications?

3. What do you see as the best practices related to implementation of these technologies?

4. How do you see Proptech technology evolving and how would you characterize the impact of the Covid-19 pandemic on its development practices?

Proptech is a relatively new term and there does not seem to be a single definition as to what it is. Let’s start with a semantic question. How do you define Proptech; what are the primary technologies it includes or excludes and what are some of the current myths surrounding this rapidly evolving technology?

Paul Head:

1a - Definition

Proptech is the integration of information technology applied to the real estate (property) marketplace. Some examples include supporting real estate transactions (finding your perfect domicile), smart building elements (sensors and dashboards) to collect, synthesize, and automate operations for human convenience and interaction or enhanced building function.

1b – Proptech technologies

Per a recent publication by EY and CRETech, the major categories of Proptech markets include real estate and finance, flexible space, management, Internet of things / smart buildings, construction (aka ConTech), data and analytics, visualization, and tenant experience. These technology categories may not be solely Proptech focused, but when combined with other solution categories, they enhance the overall value to the real estate industry.

As with other emerging technologies and technology sectors, there is no silver bullet for the owner-operator. These individual Proptech technologies' ability to plug and play with every existing asset is never as easy as some would allege. When developing a solution to address the client's outcomes, it is necessAry to perform a pilot and evaluate the results before deploying to a production environment.

• Real estate and finance – solutions focused on investment, online marketplaces, brokerages, mortgage and title, and blockchain applications.

• Flexible space – refers to the shared movement of co-living, co-working, and retail popups.

• Management – solutions that support enterprise resource planning, client relationship management, building asset inventory management, and property management.

• Internet of things/smart building – solutions focused on building technologies that are 'system to system' interactions, controls, and 'people to system' controls, providing better operation and customer experience.

• Construction (aka ConTech) – solutions that address the building lifecycle's design/build cycle to include enhanced design performance and modeling, construction processes and resource, scheduling, and financial management.

• Data and analytics – solutions developed for the building lifecycle to enhance insights for building portfolio asset acquisition and operation, leveraging artificial intelligence, broadly available market data, and building operating information.

• Visualization – artificial reality (AR) and virtual reality (VR) providing users experience in a pre-built environment and operational guidance in a built environment, generally associated with other Proptech applications.

• Tenant experience – solutions focused on real estate inhabitants/consumers to enhance their daily experience and interaction with or around these facilities.

1c- Current myths

• Technologies will take over the world – While many artificial intelligence advancements have occurred, we have a long way to go before we are serving technology. Practical applications such as scanning, optical character recognition (OCR), and artificial intelligence to interpret and abstract a lease still require intervention and human language interpretation. Localized language intent and meaning are not 100 percent accurate and requires human intervention to complete.
• Technologies will outsource my vocation – In some cases, this is true and warranted. Sending an unmanned vehicle (drone) to inspect a bridge, waste line, or roof condition is safer, less intrusive, faster, and provides more accurate and better documentation. Unsafe or repetitive activities, or allow us to process multiple elements in seconds, are great candidates to automate and leverage technology. This automation eliminates undue risk and focuses our efforts on other critical factors.
• Buying technology X will solve all of my problems – We aren't there yet, but maybe someday soon. The notable developments in the Proptech community are getting us closer. Still, many of these innovations are focused on single elements of the entire puzzle. It still requires a cast of stakeholders to understand and determine the problem and integrate the unique technologies for a total solution.

Doug Stewart:

1a – Definition

The definition of Proptech is broad and seemingly varies between interpretation, industry segment, and role. Depending on the point of view, the prop-tech space can be limited to building or 'operational technologies' (compared to 'IT' solutions) such as digital twins, work order systems, or energy management platforms. Or it can include solutions that are more readily consumed by end-users such as tenant applications, reservation systems, etc. In many cases, the term Proptech encompasses both operational and experiential technologies developed for the built environment.

1b – Proptech technologies

Proptech can be broken down into two segments, solutions that drive operational efficiencies and ones that enhance experiences for occupants, tenants, residents, etc. Some solutions may accomplish both to a degree but, in most cases, they serve a primary purpose (operational or experiential) with residual benefits. Some examples of operational technologies may include systems that provide:

• Building automation

• Integrated lighting

• Indoor air quality monitoring

• Access control

• Occupancy and utilization measurement

• Leak detection

• Energy management

• Visualization and reporting

• Building performance operational data and analytics

• Work order management

• Asset management

• Space management

• Digital as-builts or twins

• Capital planning or financial management

• Automated workflow capabilities (scheduling, etc.)

Examples of experiential technologies may include systems that provide:

• Digital signage and content management

• Space or amenity reservations

• Digital wayfinding

• Visitor management

• Queue management

• Tenant and occupant engagement applications to include communication and engagement functions

Of course, arguments could be made that many of these technology categories can fall into operational or experiential (or both) categories based on various circumstances. The key is to establish the overall value proposition before investing. Another consideration is integrating multiple technologies and solutions to provide enhanced services to staff and occupants/tenants. Ensuring compatibility and security is critical from the onset.

1c – Misconceptions

Many myths or misconceptions around the subject of Proptech typically originate in three ways:

• Limited industry insights or understanding of nascent technologies

• Lack of industry skill sets or focus on technologies as a critical component of real estate/building operations.

• Aggressive vendor marketing during the product evaluation and sales cycles, leading to inflated or misaligned consumer expectations.

Some of the more common myths that seem to be circulating include:

• Technology as a 'silver bullet.' Technology, by itself, rarely solves business problems or realizes opportunities. Technology enhances and supports the ability to meet or produce expected outcomes. Combining the right technology solutions with people and processes will enable the opportunity for significant results.

• Building technologies as a 'one size fit all' solution. Buildings vary. The age, condition, and configuration of buildings and underlying systems differ significantly from one building to the next, even within a single portfolio and campus. Finding a solution that fits every situation is complicated. Different solutions within a particular solution category may need to be leveraged to fully provide the desired operational or experiential outcomes in many cases.

• Self-healing data. Starting with useful data is critical for any technology implementation. Investing in developing and deploying a structured data management approach is usually well worth the incurred cost. Many companies promote that they have technology that can 'heal' insufficient data. While some solutions can improve data by overlaying analytics and making educated assumptions to 'fill in the gaps,' they are no substitute for starting with a clean, normalized data set. Focusing on cleaning up and putting a structure to existing data is not necessarily the 'cool' or 'sexy' work that we all envision when considering deploying a smart or digital technology platform. But the foundational 'blocking and tackling' associated with the effort will pay long-term dividends as the platform develops and matures.

From your client base, what do you see as the current major Proptech applications being deployed and what are the primary drivers for these applications?

Paul Head:

2a - Significant applications

The following technologies represent a subset of solutions in the Proptech market.

• Reservation/workplace and utilization systems – Giving the employees choice of work options and locations and matching them up with other team members and colleagues when they arrive at a building. Pre-registered or just-in-time arrangements to find a space. Helping facility managers drive their building's better performance by understanding effective space use and optimizing areas not performing well.

• Real estate and asset administration systems – Providing better operational and financial decision support of their current portfolio. Supporting the financial office with better control and documentation of their owned and leased real /non-real estate assets.

• Security management – Enhanced access methods for employees and guests. Providing electronic Bluetooth enabled one-time access through entry points for service people and guests. Self-registration for pre and unscheduled on-site visits. Visual identity and recognition security and enhanced badging solutions.

• IoT sensors and people traffic – Supporting other operational and analytical technologies by monitoring and controlling environmental factors and locations. The ability to understand traffic flow and usage within facilities through utilization heat maps and foot traffic counts.

• Construction IoT, PM, and finance management – Re-enforce leading practices for construction programs' oversight and operation. Enhanced financial transparency of construction programs to provide decision support. Integration with other IoT devices and things to reduce the risk of injury and theft on project sites. Better as-built documentation with live as-built recordkeeping.

• Integrated asset management augmented by Proptech - Real-time asset management using IoT devices and drone technology to inspect as-built conditions.

• BIM – Visualization, design, and operation technology to aid in pre- and post-construction. In construction, BIM supports the development of modeling, cost estimating, project scheduling. From an operations perspective, BIM can support the commissioning of a built asset and the ongoing operation.

• Digital Twin – This technology enables the convergence between the physical and virtual. The digital twin can support modeling and simulation of entire building systems helping to understand air quality and refresh rates, lighting and other sustainability measures, as well as other potential failure points.

2b – Primary drivers

These different personas' drivers vary slightly but are driven ultimately by operational performance, additional market share, and or tenant experience.

• Property developers and owners – The ability to attract and retain tenants. The residential and office space categories are continually competing for market share, and technology offerings are the latest requirement that factor into tenant decision making. Additionally, improved building performance to minimize operating costs is another factor.

• Residents – Amenities and convenience, how can I get what I need simply and easily. Whether it's about getting something repaired, adjusting the environment (air and lighting solutions), concierge services, connections to local markets and retailers delivered to your doorstep is about improving the individual's quality of life.

• Corporate America (leased and owned space) – The ability to find office space with a current technology infrastructure - high-speed throughput and wireless access for employees and guests, lighting and temperature controls, concierge, and social amenities, as well air and natural light, to name a few.

Doug Stewart:

2a - Major applications

• Occupancy or utilization measurement. Measuring occupancy or space utilization, especially in real-time, can give building owners and occupiers a sense of the actual consumption and density of an amenity, area, floor, or building. Further, granular occupancy data can be a decisive element in managing workspaces and return-to-office initiatives, helping organizations enforce spacing and control density. The data can also help organizations monitor other strategies such as planned shifts or occupancy by groups and feed into the broader real estate approach.

• Indoor environmental quality (IEQ) mostly focused on indoor air quality (IAQ). Measuring IAQ can indicate how effective ventilation systems are performing. IAQ sensors measure CO2, VOCs, and particulate matter and determine how much fresh air is in a room. This data can show where and how air quality diminishes and provide information to operators to help decide whether to bring in more fresh air or reduce the space's occupancy.

• Booking and reservation systems. These systems are usually integrated with tenant or occupant experience applications. They allow organizations to manage defined workspaces and control occupancy. By implementing a reservation-only policy and making specific workspaces available or unavailable to reserve, organizations can more easily deploy alternative workplace strategies (e.g., hoteling, hot-desking) return-to-office schedules.

• Mobile badging and access control. These systems use an occupant's mobile phone as the security credential for access to floors or the building itself— touch-free. Organizations that consider deploying these technologies should also evaluate current processes that control access, including traffic flow, lobby queues, and visitor management.

• Visitor management. Managing or limiting visitor access to a building is critical to managing overall occupancy levels, especially during high-occupancy periods. Additionally, visitor data availability—tracking who visited and when—can be vital during a pandemic. Consider systems that enable visitors to fill out health questionnaires before arriving.

• centralized (remote) operations and building automation capabilities. The pandemic has bolstered the business case for this ongoing trend. Having the ability to monitor and control building systems, both remotely and securely, is essential. Through data from major mechanical and electrical systems and data from IoT devices, building owners and operators can see a holistic view of operational performance indicators in a single pane of glass and coordinate and direct facility operations for hard services.

• Fault detection diagnostics (FDD) and Monitoring-based commissioning (MBCx) for HVAC. These are mostly synonymous terms and increasingly will become a significant part of a building-level response. Ventilation (the 'V' in HVAC) is a critical system in a world that prioritizes reducing transmission risk, but it has been traditionally challenging to maintain and monitor at scale. Automated analytics enables teams to manage and maintain critical building systems proactively. FDD platforms can also feed directly into a centralized Operations Center for proactive response to emergent issues.

• Integrated destination dispatch for elevators. Elevators are a significant challenge from both a contact and ventilation perspective. This integration focuses on reducing the number of surfaces occupants need to touch to navigate a building. Integrating destination dispatch systems with access control and visitor management systems can be a way to automatically dispatch an elevator based on the occupant's mobile credentials.

• Advanced sensors/IoT. Sensor technology, deployed at discreet points to collect and measure building system performance and status, can provide operational benefits. For example, leak detection sensors help building staff manage the risks of water leaks while the building is unoccupied or under-occupied. Likewise, sensors can indicate pressure drops across ventilation systems, which could indicate dirty filters. This data can indicate issues within the HVAC systems and help them operate as designed, improving indoor air quality by maintaining airflow.

• Technology can be a great enabler when applied to solving specific challenges or addressing enhancement opportunities. As the focus turns to ensure the health, safety, and well-being of building occupants, technology can play a significant role in how the building contributes to that equation. Traditional approaches to managing and maintaining the core systems in a building have given way to an operating model focused more on the overall health of a building. Building health is defined in terms of the quality of the environment it provides for occupants and staff's ability to respond, or ideally, proactively resolve potential issues. The investments that can positively impact the building's health will be an ongoing discussion for the foreseeable future. One thing is sure, there is no magic solution.

2b - Drivers

From your experience, what are some of the best practices related to implementation? How do you initiate new Proptech initiatives and what are the differences related to medium vs. large companies or inexperienced vs. mature companies? How do you integrate multiple Proptech components to derive a holistic integrated solution?

Paul Head:

3a - Leading practices

The first application of leading practice is the technology evaluation and fit for an organization. Consideration for the technology's benefits, applicability to the ecosystem, and application to the scaled operation.

Especially with new and innovative technologies, change management is just as important as the technology itself. Most of us have experienced a failed technology roll out at some point in our careers. In many instances, it is not directly about the technology, due to the due diligence completed in the research and evaluation phase. It is more about the stakeholder engagement, expectation setting, consistent reinforcement of communications/enablement during and after implementation.

In addition to the above, other key factors include support for security protocols and integration methods for a multigenerational infrastructure. Many of these new evolving solutions solve for one aspect of a problem, which they do very well. Still, quite often, the technology will have to support receiving and sending information or commands to many other systems or assets. Another factor to consider is the compatibility of the broader infrastructure/real estate portfolio consisting of many various building types and ages.

Cybersecurity is very critical. All of the innovations we are discussing are technology-based and usually are sitting on someone else's cloud infrastructure. An organization must create access through a security barrier into the company's internal environment to use it. The potential for data loss, corruption, or leakage is a critical risk. For the technologies that support you at an individual level, a focus on personally identifiable information (PII) is a consideration. What does an individual need to divulge to use the application? Does the application continue to track you when you are not using the company's facilities? Personal privacy and, worse yet, data breaches are a significant concern for employees as well as their employers. Where is the line between convenience and security? Mature organizations have a developing or developed cybersecurity program to support the full assessment and deployment of these new applications and devices.

3b - Approach to Proptech for various organizations

Companies with a mature operation and technologies program within their real estate, construction, and facilities operations tend to take a measured approach to new technologies. It is an integrated stakeholder approach to human factors, property requirements, and technology considerations.

Inexperienced companies or smaller companies may see these innovations as a method to leapfrog their organization past the traditional systems into the future. A Software as a Service platform to bypass an IT organization (historically not focused on back-office (RE/FM) operations could offset costs, progress the organization forward, and introduce these new Proptech innovations. Alternatively, outsourcing operations to a third-party vendor and leveraging their technology platform may be another way to leverage these new technologies. Both of these options could be the right choice for the company, as long as the relevant security reviews and planning are in place. Typically, the cloud solutions and outsource vendors have already focused on these concerns and will support the company's review. But it is not a substitute for a thorough corporate IT security review. If the organization does not have the requisite skills to support the review, some third-party vendors can help.

3c - Integrate Protech components holistically

In short, design with the end in mind. Have a multi-year plan focused on key objectives and outcomes that include all relevant stakeholders. This plan needs to be revisited and updated annually to re-evaluate both outcomes and technology advancements and stabilization. What was groundbreaking last year could now be rendered useless by the advance of other technologies.

Doug Stewart:

3a -Best practices

Selecting the right technology can help organizations communicate more effectively, collect and analyze critical data, enforce the new norms in the workplace, and optimize building operations. As we consider what technology is the 'right' technology, the conversation must begin with the intended outcomes and what the technology is trying to achieve. A technology-first approach rarely leads to a long-term viable, and valuable result.

To start, develop or adopt a set of use cases that tie directly to the desired outcomes. Use cases are a valuable tool to help identify the right technology solutions and the underlying required functionality. Keep in mind that use cases are not technical—they are business problems that technology may help solve. With a set of use cases in hand, the conversations with technology suppliers shift from 'what do you do' to 'how can you help me do this.'

In some cases, the adoption of technology may complicate the use cases/processes. Carefully consider where a solution fits as an enabler and where it is applied solely for the technology itself. While hard to do sometimes, avoiding the 'bright shiny object' represented by technology solutions may be prudent.

From a technology perspective, there are two primary solution types. The first directly facilitates or enables a process. An example would be implementing visitor management and access systems that reduce the need for touchpoints or face to face interactions while controlling who is visiting the building and when.

The second is technical solutions that produce data to inform or direct process changes and enhancements. An example may be a sensor platform that provides the total occupancy and utilization of a defined space or spaces. This data could be used to determine a space's configuration or triggers environmental services, or enables an entirely different process that helps enforce social distancing guidelines post-pandemic.

It is crucial to keep in mind that the first solution type also produces data—a valuable asset. The pandemic reinforces the need for a broader and more holistic approach to data and data management within real estate. A comprehensive data management strategy enables investors, landlords, occupants, and building operators to glean valuable insights from analytics, business/artificial intelligence, and machine learning.

3b – Proptech initiatives

To steal from Simon Sinek - 'start with why.' The 'what' will follow. As previously mentioned, developing a set of desired outcomes, capabilities, and subsequent use cases will go a long way in establishing requirements, scope, and plot out a path forward. Setting the 'North Star' for the journey toward a digitized operation is a must for any organization - regardless of size or maturity. In a nutshell, success is dependent as much on the preparation and planning as it is on the execution.

3c – Integration issues

Commit the time and resources to identify strategies to recognize and mitigate potential risks arising from future disruptions. In many cases, these strategies will overlap and support opportunities to drive operational efficiency and enhance occupant experiences in normal operating modes.

• Focus on enabling future decision-making based on available data from various sources, including building systems and integrated third-party sources.

• Create a unified operational view of critical data to allow a rapid, effective response to an adverse situation.

• Align opportunities to augment existing data sets using technologies that help inform decision-makers. Examples may include occupancy sensors or air quality monitoring capabilities.

• Focus on automation. Develop automated sequences that can quickly be enacted during an event to manage or change building operations while minimizing the need for human intervention.

• Invest in operational building technologies that enhance the integration, visibility, and control of building and workplace systems.

• Move toward operating buildings in 'modes.' As situations evolve, predetermined modes can be used to facilitate faster responses. Examples of modes may be occupied, unoccupied, shelter-in-place, critical occupancy, and so forth. The modes should determine how the building operates in various scenarios. Technology should enable the modes through automated sequences of operations, data collection, and analytics where possible.

How do you see Proptech technologies evolving? What will the next generation of these technologies look like? How long is a Proptech generation and is it following Moore’s law? Has COVID affected the development or adoption of Proptech and will it do so in the future when there is a vaccine?

Paul Head:

4a - Proptech evolution

The innovation in property and construction technologies has been a growing trend and will accelerate. Since 2015 over 7,000 tech companies focused on "built-world" tech approximately $75 billion in investment.

As with any sector receiving this much attention by the venture capital community, Industry-leading manufacturers, software companies, service providers, and real estate companies have taken note. Many are developing strategies to align, compete, or acquire these technologies to include in their ecosystems and offerings.

4b - Next generation

As product categories stabilize and mature, the vendors' offerings that survive and grow will also consolidate. Standards will emerge, and more importantly, the built-environment infrastructure to support these emerging technologies will become more commonplace. This trend will set the stage for the next wave of evolving solutions, similar to the development of computing hardware and software platforms.

IoT devices' infusion to make buildings smarter and more responsive with their owners and inhabitants, including personal device integration such as wearables, mobile devices, is vital in this next phase. As we consider the current and future tech-savvy generations, a personal and social connection is important, so as companies/building owners, we will continue to cater to our audience to attract and retain new clients, tenants, employees to our facilities, residences, and offices.

For construction technology (ConTech), successful technologies will continue to drive performance, increase quality, cost reduction, time to market, reduced risk. We already see unmanned vehicles (drones), robots, and 3d printing technology successfully deployed to innovate the construction process. These innovations will continue to accelerate.

4c - How long is a Proptech generation

The adoption rate for Proptech has dramatically increased and so investment and innovation will continue to gain momentum. To this, we can speculate that the generation cycles will continue to decrease; however, this market is still reliant on other sectors such as computing and battery/energy generation, therefore it may be restricted or unleashed by their progress.

4d - The COVID effect

The pandemic has affected us globally and has helped us become aware of how to use several existing and new innovations together to address an issue that has risen to a new level. It is hard to imagine ten years ago that you could integrate badging systems, thermal scanners, face recognition, and employee contact tracing in a regular office building. These situations were only reserved for spy movies or futuristic dramas. Through the evolution of managing big data, artificial intelligence and other innovations, we can now aggregate and synthesize this information at a level we have never been able to before. Let's not forget that smartphone technology also plays a large role in this evolving scenario. Without the widespread adoption of these mobile devices, we would still be missing a significant puzzle piece for COVID and Proptech. While all of this helps address the problem, there are still major concerns over personal privacy regarding how much information should be shared with or without our consent.

While COVID is aligning some existing and new technologies to solve for the problem, after COVID, many of these technologies will revert to traditional business models, driving better working environments, effective utilization, and social interaction. Other PropTech solutions, like digital twin, will help monitor and control building air quality, lighting conditions, and performance to promote energy efficiency and employee wellness. Reservation systems will help employees find the right environment to work and collaborate with their peers while maximizing floor utilization.

Doug Stewart:

4a – Technology evolution

Prop Tech will continue to evolve and mature reasonably rapidly. For the most part, today's market, with few exceptions, are either point solutions narrowly focused on certain functionality or solutions focused on general requirements and not explicitly excelling at one or a subset in particular. The next generation will likely be broader, more integrated solutions that provide more robust functionality and interactivity. Advances in analytics and robotic processes can also assume to be on the horizon as those areas continue to advance.

4b – Proptech generation

It appears Prop Tech is like any other technology segment in terms of development and gestation. In that way, it will likely adhere to Moore's law as it evolves and matures. Over the last few years, there has been an influx of investment in the Proptech space, driving an increase in the number of vendors. The development cycles, especially in those emerging focus areas, seem to be more incremental with the rapid growth of capabilities and functionality.

4c – COVID impact

The pandemic hasn't necessarily shifted our (C&W's Digital Buildings Practice) focus regarding the technology landscape supporting smart and connected building solutions. If anything, it has reinforced the need to invest in technology that enhances the way buildings are operated and occupied. Post-pandemic, the shift in how technology is viewed and valued by the real estate industry should (hopefully) persist. While the focus on energy as the driving factor for investment may be set aside in favor of occupant health, safety, and sense of well-being, the tradeoffs needed to balance the economic and social aspects that technology enables will continue to be a point of discussion.