Proptech is a hot topic in the commercial real estate industry right now, but many questions remain about which products are viable and where proptech can deliver the highest return on investment.
Tech adoption in commercial real estate, although increasing year-over-year, is still slow compared to other industries, says Tim Kramer, vice president and director of operations at Draper and Kramer, a real estate services firm. For this reason, major proptech overhaul in the industry is still five to 10 years away, he notes. But many firms are already investing new products.
For example, NewMark Merrill, a property management firm, is currently testing more than 15 proptech products at its centers, according to Sandy Sigal, company president and CEO. Though a majority of tested proptech tools ultimately fail to deliver significant value, some of these products succeed and are expanded further through NewMark Merrill’s portfolio, he notes. NewMark Merrill is “absolutely investing in property technology,” with around 22 separate investments made last year, says Sigal.
Meanwhile, Thor Equities Group, a real estate development, leasing and management firm, is working in-house to develop its own mobile application for its buildings, says Melissa Gliatta, chief operating officer with the firm.
NREI asked Kramer, Gliatta and Sigal to discuss their outlook for how they choose proptech tools and where proptech delivers the most value.
This Q&A has been edited for style and clarity
NREI: What proptech products are your companies/firms using right now?
Tim Kramer: Yardi software is Draper and Kramer’s base property management software for everything from property accounting to day-to-day operations like leasing [and] resident management. Kardin software, an accounting software tailored for property management, is used for budgeting and forecasting. In particular, it’s good at income budgeting, which in the multifamily world is the most difficult part of the budget process. It needs to accommodate expected rents, renewal schedule, rent changes, etc. for multiple units. Yardi CRM is used for lead management. This manages the leasing process and makes sure that prospects are engaged throughout the leasing cycle. This is important not only to keep them interested, but also to tailor the prospect experience to what is important to them. SatisFacts software has two major uses. First, as a portal into sites like Apartmentratings.com, it is a way for Draper and Kramer to communicate with people who post reviews. Second, as a tool to survey residents at certain points, such as every time there’s a work order, before they send out renewals or right after they move in. This is the biggest tool for measuring resident satisfaction. YieldStar is used to manage rents. Rents used to be set for change or renewal one time per year. YieldStar lets you watch the traffic of prospects and building vacancies, and the software may recommend rents on a daily basis (like dynamic pricing with hotels or airlines).
Melissa Gliatta: Thor Equities Group is a strong proponent of proptech and we are implementing multiple innovative strategies across our portfolio. At 800 West Fulton Market, we are currently developing a custom mobile application focused on enriching tenant experience with Rise Buildings. The futuristic app will provide a seamless experience for tenants, allowing them the ability to schedule meetings, control space conditions, request work orders, schedule fitness classes, utilize wayfinding, and receive notifications during emergencies and on deals at local restaurants. Tenants will also have the ability to control the lighting, temperature, and other HVAC functions within their space. Additionally, we are developing a custom-building management software platform that will resourcefully tie all building systems together via the internet. Through the IOT (Internet of Things), tenants will benefit from energy and utility savings, increased maintenance efficiency, and improved health and wellness amenities. The building management platform will be fully operational upon building opening.
Sandy Sigal: For our shopping center analytics, analytics being tracking operational data, tenant performance, all things related to manager, customer and owner experience of the shopping center, we use something that’s called Datex BI. And that consolidates data for us from our accounting systems, from things that would normally be done in excel, document management, lease administration, manager interviews, work orders, all those kinds of things. We use another one called Placer. Placer takes mobile data, so it’s based on customer visits, and it helps us understand a whole variety of things [such as] where our customers come from, where they go when they [are at] our centers or what the trade area is [for] our centers. It uses really good customer data to tell us where customers are, when they come, how long they stay, what they like and that’s super useful. It’s all based on phone data. Placer we’ve been using for about three years. We use another piece of software called Merchant Centric. What Merchant Centric does is it measures all the social postings that are made on about 30 social sites. So that’s Facebook, that’s Yelp, that’s Trip Advisor, that’s Google, that’s Twitter, 25 to 30 sites, and what it does is it reads every review posted about every one of our tenants, as well as our shopping centers themselves, to help illustrate what the sentiment is of the consumer about our tenant and our shopping centers. So, the value of that is, if you know that a certain tenant is doing extremely well and the customers love them, you can build off of that, and you can use that for your marketing. More importantly, if you find out that a tenant in your center is perceived as lacking customer service, or isn’t clean, or has unfair pricing, you take that information and inform both the tenant, as well as your own customer service people, to make sure you address those needs. Merchant Centric we’ve been using for about two years. The fourth big thing that we’re doing has to do with body facial recognition. What we’re doing with those are using cameras to, not identify the face of the customer, in other words we don’t have personalized information, but what we do have is demographic information. So, male, female, age of our customer and where they visit in our shopping center. We use that in two ways. We use that for staff alignment. In other words, ‘hey we have a lot of customers showing up between this hour and this hour, and this is the type of customer they are, make sure we have the right amount of staffing to make sure they have a good experience. Secondly, we use that for security. So, we don’t have people behind the center at 2 a.m. causing issues. So, these are smart cameras and they’re able to determine whether there is abnormal behavior taking place. Because one of the largest costs you have in shopping centers is security. And you can throw as many people at it as you want, but cameras are a much more effective way that would identify and ultimately track if something bad happens. It’s called Springboard. We’ve been working on that for two or three years.
NREI: How do you decide which product to use? How do you determine value?
Tim Kramer: Initially, the duty was mainly placed with our IT group. But as we’ve gotten more sophisticated with our use of technology, we’ve realized we must include the operations side. So, one of my first jobs in this role was to be that “connector” between IT and operations. That’s evolved into a separate operations team, with proptech as a key function. It’s really moved from an IT function to operations.
Melissa Gliatta: As the proptech industry evolves, we feel it is important to focus on the products that will enhance the overall tenant experience and add value to the development. Proptech products allow developers the opportunity to offer greater tenant experiences while realizing cost savings. With the implementation of our smart building systems platform, we expect to see savings on the maintenance of building systems, utility and energy costs, and overall lifetime of mechanical units. The optimization of building systems will allow us to meet the requirements for LEED Platinum Core and Shell Certification.
Sandy Sigal: We have an innovation team internally. That team meets and says, is this potential [proptech product] solving a need? Is there a need that we’re addressing? That's the first thing. The innovation team is made up of property management, marketing, accounting, leasing, operations, all those people. Then, we trial it and we see did it give us accurate sustainable information that would be actionable? Then, if that’s a yes, the [question] becomes: can we scale that? Is this going to be so hard to install and use that, though it’s good information, it’s not yet ready for prime time because it’s too hard to install or to use. Then you go ahead and you say, “does the team that this company represents, are they able to support our needs?” Because often what happens is, they might have a great idea, but the team just doesn’t have the support necessary to fill our needs. I promised my tenants I’m going to help them, but I can’t get proper service or support to them. So, the tech goes through this checklist before they can make a good decision.
NREI: What are some categories within the proptech space that you’re bullish on?
Tim Kramer: We, as an industry, have been so slow to adopt new technology, there are many categories where there are lots of opportunities. Self-guided touring is still pretty wide open with lots of innovation to come. Resident interactions with their rental homes and management also have a long way to go. True real-time communication between residents and management (other than a phone call) is still not quite there yet. Submitting a work order via an app or resident portal is really nothing more than an email at this point.
Sandy Sigal: Sentiment analysis, [or] the ability to use AI to determine what customers think of your property and tenants, and give you actionable insight, location and ranking insight. The ability to [use] massive mobile data to understand the traffic trends by property location, by tenant type and providing baselines of tenant performance. In other words, ranking of tenants by traffic analyzed over many locations. Body and facial detection, [or] the use of cameras to help intelligently monitor the behavior of customers, vendors and employees on-sight—highlighting conversion, areas of traffic concentration, analysis of cross-shopping, etc. Centralized dashboards, [meaning] the ability to take property management information, acquisition software, document handling software, and other software inputs to have display-related datasets and using graphical information to help illustrate trends. This includes using workflows to push data out to parties throughout your organization.
Melissa Gliatta: As technology evolves, tenant demand has shifted from physical amenities, including gym space and roof decks, to experiences both tangible and intangible. The building app we are creating will bring together the digital with the physical, creating a custom experience for each individual who enters 800 Fulton Market.