Despite a volatile market with headwinds and tailwinds that influence change across commercial real estate, leaders continue to leverage technology as a way to consolidate systems, cut costs, and capture the limited demand available.
However, industry professionals face the challenge of staying ahead of the curve while making informed decisions about implementing new solutions. Top commercial real estate firms look at technology by not only what’s innovative and competitive, but also what will provide a positive return on technology investment.
When it comes to what these executives look for in a new platform technology, Micheal Kirby, Managing Director of Invesco Real Estate, said it best: “We don’t just manage buildings, we manage the big number in the middle of the page which is investment returns… that’s what I try to think about every day.”
But at the research stage, how can you be sure a solution is the best fit? To shed light on this topic, we gathered a panel of industry executives who shared their insights on evaluating property technology (proptech), discussing adapting to changing market conditions, and what it takes to align stakeholders' goals. From streamlining deal cycles to connecting tenants across your portfolio, leveraging advanced technology is what separates the good from the great in commercial real estate.
North Star principles for evaluating proptech
Starting with the basics, when it comes to evaluating a solution, it’s essential to have a set of standards the technology must meet. Top executives shared a set of guidelines for effectively evaluating proptech solutions.
Understand the problem: Is the technology simply innovative or does it solve a specific business problem? Before diving into technology selection, it is essential to have a clear understanding of the pain points you’re looking to alleviate. This ensures that the chosen solution aligns with your specific needs and goals.
Vendor evaluation: Want an out-of-the-box solution or a technology partnership? One will give you a cookie-cutter, one-size-fits-all solution, while the other will be a continuous learning and evolving technology that scales as you do.
Seems like a no-brainer, but thoroughly researching and evaluating different vendors in the market is crucial. This step helps identify reliable partners with a track record of delivering results and can processes that contribute to your success.
Jeremy Poteet, Executive Vice President of Technology and Information Strategy at JBG SMITH, said that “We do have some good core vendors, partners that can build technology and people we rely on — like VTS — where if we see something out in the market and we think they can do that, we go to them and see if they are interested.”
Clearly set your standards: Is this tech a nice-to-have or an essential to capturing a competitive advantage? Creating a well-defined plan and setting standards before starting the selection process is vital. This allows you to establish clear criteria for success and have a roadmap to follow throughout the implementation.
Define success and set benchmarks: How will you know you’ve chosen correctly? What will “problem solved” look like? Clearly defining what success looks like early on is a must. It enables you to measure the effectiveness of the chosen proptech solution and evaluate its impact on your business goals so you can see if the return on investment is there.
Adapt investment strategies to the economic climate
Now that you’ve set your North Stars, it’s time to consider the economic impacts on your business (and budget). The economic climate plays an impactful role in shaping companies' approach to proptech adoption.
Poteet highlighted how JBG SMITH’s focus has shifted primarily to the residential sector due to the current market conditions, now prioritizing core projects that will help them weather the challenges ahead. “A lot of what we’re encountering and looking for has to do with impacting an experience, an experience to our tenant and residents.” Economic pressures may influence investment decisions, but at the end of the day, executives aim to balance the books alongside creating exceptional experiences for their tenants in both office and residential spaces.
In-house operations can be cost-effective, but it takes a certain level of expertise to see the return. Poteet mentioned how his team had considered building in-house for that reason, but it wasn’t going to be a viable solution. “For us, the investment decision is definitely key to making any decision,” and said that they’re minding what industries are being most heavily invested in to help guide their next move.
When to spend on tech: A CFO’s perspective
When considering the economic implications of spending in the current market, the argument to invest in technology needs to be ironclad. As Kirby said, investment returns is the primary focus for many — if not all — CRE executives.
Joe Doran, Chief Financial Officer of Tishman Speyer, shared his perspective on technology spending for building portfolios. He emphasized a shift in focus towards investments that are closer to the core competencies of the firm, ensuring impactful solutions that drive efficiency and improve competitiveness.
“Risk appetite is moderated, focusing on things that are truly impactful near-term. Impactful to your core business becomes front of mind, but I’m not sure that’s a negative.” Doran alluded to the fact that many firms have clunky, expensive legacy systems that spur investment in innovative solutions, but just those that are more functionally aligned than aspirational. “The role of proptech is addressing the historical inefficiencies and opening the door for potential disruption. We’re placing bets, working effectively with people who are in the space at the time.”
Diversifying and consolidating technology
When discussing the diversification of technology across portfolios, Kirby mentioned the challenges they face due to their investment model. While diversification is difficult to implement at a top-down level, they rely on their partners and property management teams to identify and adopt relevant technologies. “We have to be very selective about what we do from a top-down standpoint, at a portfolio level,” he said. “We get calls every day from people that think they have solved a great problem…so it’s a bit of a challenge to just weed through all of that.”
The technology realm is saturated, to say the least, which is why the evaluation stage is so important. Solutions exist that can diversify your tech stack and also consolidate systems; both can create efficiencies, it just depends on what your needs are.
However, in commercial real estate, the move to consolidation, with integrated solutions that form a platform, is a game changer. “I think VTS is leading the pack there, and really trying to be a partner to their customers and understand what those customers are trying to achieve.”
One of the key areas that Kirby stressed was the importance of connectivity as a table-stakes issue and highlighted the need to partner with experts in the field to determine the best technology for each building.
Aligning stakeholders
In recent years, to onboard a new technology in commercial real estate means having to convince a panel of stakeholders of its value. From leasing to asset management to finance to marketing, every core functional team will have their own laundry list of technical priorities.
Bringing together different stakeholders with diverse perspectives can be challenging but necessary for successful technology evaluation. Poteet said that alignment was difficult when his business took on new tech, and spoke about about mandating usage. “We struggled getting that adoption, but it forced a behavior that we had a difficult time enforcing across the portfolio. And getting deals done beats out technology, but now that everybody’s using the tech, the benefits have been huge.”
What executives conclude
In the dynamic world of proptech, where technological advancements continue to reshape the real estate industry, staying ahead requires careful evaluation and adaptation. Considerations for technology investment decisions need to be carefully navigated.
Selectivity and a cautious approach help ensure that core projects are pursued to weather the challenges ahead. Establishing guiding principles helps firms maneuver economic pressures, emphasizing the importance of having clear parameters for problems, solutions, and success.
Diversification of technology across portfolios is challenging but necessary. Partnering with experts and leveraging property management teams can help identify and adopt relevant technologies, and with the right technology — one that is scalable and integrated — the diverse needs of many stakeholders can be satisfied. This makes implementing proptech solutions that drive success in today's shifting times easier and more effective.
If you’d like to hear more from industry experts about how to evaluate technology in commercial real estate, be sure to join VTS at Realcomm. VTS CEO Nick Romito and other top industry executives will be disuccsing the future of the industry and role that technology plays in its success.
