The impact of efficiency enablers in proptech
In our first proptech article, consumer behavior was discussed as one of the key drivers behind proptech. In the second of a three-part series, we examine technologies that unlock efficiencies (“efficiency enablers”) as an additional driver impacting the sector.
Existing technologies and tools are being applied to the built world in constantly evolving ways. These tools – referred to as proptech – improve the efficiency of workflows and operations, provide actionable insights to make better investment and operational decisions and are critical to managing the carbon footprint of the built world.
The below graphic (figure 1) maps some of the standout proptech themes which fall into three distinct drivers. Our sector-specialized investment teams incorporate these into their strategic plans and determine how soon we anticipate their impacts on real estate.
Real estate firms are beginning to recognize the importance of their data strategies. Research departments have been long-time users of third-party data, but the industry has been slower to figure out how to collect and analyze its own (proprietary) data. A strong data strategy combines all of these data sets and derives actionable insights from them, enabling investors and operators to make better decisions.
We are in the early innings of seeing the impacts of big data (very large data sets that are analyzed to reveal patterns or trends) and machine learning in real estate. However, some applications are beginning to be seen in operations like energy management and space optimization.
Every technological advancement profiled here – and many others – will result in an increase in the volume, velocity and variety of data available to all real estate stakeholders, including investors. Those who have the expertise to collect, analyze and extract actionable insights from data will be best positioned to create and capture value in tomorrow’s world.
Real estate transactions – whether commercial or residential – are complex, lengthy and bespoke. Many parties are involved throughout the process, providing various inputs and playing a range of roles. The multi-faceted nature of transactions creates many opportunities for software to automate parts of the process and ensure the accuracy of data collected and exchanged.
Tools have emerged to manage the transaction process from sourcing through closing and portfolio management. Cloud-based software tools are starting to simplify and standardize complex processes, enabling deal teams to operate more efficiently. We are moving toward a world where Excel files are no longer stored locally on hard drives and shared over email.
Many of these investment management platforms are taking well-established business models and technology products from other industries (e.g. financial services), and tailoring them specifically to the real estate industry. For example, customer relationship management (CRM) software has helped enterprises manage their sales funnels for decades (Salesforce, for example, was founded in 1999). Tools like these are now available to manage pipelines and enable teams to better collaborate throughout a transaction. Data, documents and communications are aggregated and made visible in real-time, improving the quality of information used in decision making. Automation is embedded throughout these platforms, improving project management and reporting processes.
While many of the technologies that have emerged to manage real estate transactions are not entirely novel, they are bringing tools and best practices from other industries to real estate, often for the first time. Robust integrations with other real estate technologies are critical to the success of these deployments.
The smart building industry is a complicated one, and there are many working definitions of what makes a building smart. Cisco defines a smart building as one that “converges various building-wide systems – such as HVAC [heating, ventilation and air conditioning], lighting, alarms, and security – and uses its intelligence to collect actionable data from user devices, sensors, systems, and services on the premises.1” That definition highlights how many systems and stakeholders a smart building must address to fulfill its promise.
Historically, smart building technologies have focused on point solutions that are often siloed, meaning they do not easily integrate with other technologies or building systems. For example, an occupancy sensor platform may be collecting valuable data on the use of conference rooms in an office building. However, if that sensor data cannot talk to the HVAC, then the potential energy savings and improved occupier comfort that could be possible with communication between those systems will not be realized.
Recent developments in the smart buildings space have focused on integrations, open software and application programming interfaces (APIs) that enable better connections between disparate building systems. Advances in machine learning and artificial intelligence also offer exciting future use cases for how to more efficiently operate a building with technology.
In December 2016, Nuveen Real Estate acquired the Cube, an office development project in Berlin. The 17,239 sq m building was completed in June 2020.
The iconic office asset integrates the latest smart technology and is in a prime location between the Parliament Quarter and Hauptbahnhof Station, next to the River Spree. Some of the Cube’s smart sustainable building blueprint features have been highlighted below:
- Automated lighting controls
- Water filtration/hydration stations
- Electric Vehicle charging stations
- Common area WIFI
- Virtual tours
- Tenant engagement app
- Touchless fixtures
The building has already achieved WiredScore Platinum certification, one of the first assets in Germany to attain this, and is also expected to achieve a DGNB Gold rating.
Internet of things
The Internet of Things (IoT) refers to the interconnection of everyday objects, embedding them with computing devices and enabling them to transmit data reliably and at a low cost. The term has been around for over a decade but has only made a significant impact in select industries.
Smart home devices like thermostats, locks and appliances are prevalent and provide clear value propositions to consumers. Likewise, the decreasing cost of sensors and computing power have also found IoT use cases in manufacturing and industrial environments.
One of the key factors that has restrained the proliferation of IoT has been the absence of fast, reliable and high-capacity wireless internet connectivity. Therefore, the transition to 5G may reinvigorate the IoT landscape, and in turn the ability of cities and buildings to blend digital and the physical worlds.
Though the concept is not a new one, technological advancements and changing market dynamics have reinvigorated the modular (or prefabricated) construction industry in recent years. Modular represented approximately 5.5% of all North American construction in 2021, or about $200 billion in construction starts.2 There are an increasing number of start-ups trying to address this market opportunity in different ways.
Growing demand for modular has been driven by (1) technological improvements, (2) a greater focus on sustainability and embodied carbon, and (3) changing consumer preferences. Technological advancements in design and manufacturing have improved existing manufacturing processes and introduced entirely new concepts like 3D printing to the construction industry for the first time. While technologies like 3D printing are still likely years away from becoming mainstream in construction, start-ups are encouraging the industry to rethink how (and where) housing is built.
Technology is also finding ways to make the design process more efficient and sustainable by providing tools for the preconstruction and planning process and facilitating logistics. New solutions tout their potential cost and time savings, as well as lower carbon footprints. These value propositions have been welcome in an environment where supply chains are constrained and labor costs are high. Consumers have also taken notice of the increased activity and investment in the space. Historically thought of as cheap and unattractive, new entrants to the prefabricated (prefab) space are delivering attractive and customizable products that are having consumers revisit those preconceived notions.