Investments in technology have come even more to the forefront in recent weeks as a large percentage of the commercial real estate workforce shifts to working from home.
Earlier in the year, NREI spoke with several property management sources to discuss the proptech space. This time, NREI spoke with Patrick McGrath, chief information officer and head of client technologies at real estate services firm Savills, and Jake Edens, senior vice president of technology and innovation at real estate services firm Colliers International, to discuss which proptech products their companies are using and which proptech categories they are ultimately bullish on.
This Q&A has been edited for length, style and clarity.
NREI: How many proptech products is your company/firm using right now?
Patrick McGrath: We have pretty significant technology infrastructure and cloud-based initiatives across our company. There are at least three major initiatives that I’m working on that are in partnership with proptech companies.
I may not give you the name of the proptech company, but I can talk conceptually about those. One of them I’m going to announce the partnership, but I’m not going to announce it right now. [I’m planning on announcing the partnership] mid-second quarter or third quarter. Where we see the proptech initiatives having a benefit to us [is] around commercial real estate data and then also what I would describe as AI-enabled document management and data structuring. Our advisors are using a tool like CoStar to understand availability across the marketplace.
Where CoStar’s limitations exist, other protechs have popped up. So, supplementing the information around availability within the asset class is an area where proptechs are definitely spending some time. We’re also seeing from a client side a real demand for utilization type information across their property portfolios. So, who’s using what and when, and how can they most efficiently design the interiors of these assets in a way that maximizes productivity. That’s another area where we’re seeing interesting proptech. The output is large data sets that are then incorporated into the strategy formation process for our clients who are in the U.S., typically corporate occupiers of real estate. So, they are companies that aren’t in per se the real estate business, they’re leasing real estate assets out to people and they’re looking to us to develop strategies around which markets they should be in, which locations in which markets, how they should hold an asset, should they lease it? Should they own it? How the interior should be configured, and then how do they show that that’s a productive spend and return on invested capital. So, a lot of those proptech solutions fit in that space.
Jake Edens: Colliers currently utilizes over 50 proptech products. We have enterprise agreements with a variety of companies from some of the leading names in proptech to small pilots with two to three person teams and everything in between. We see these companies as an extension of our technology team who are helping us provide better solutions to our professionals and clients. All of our service lines (occupier services, capital markets, valuations, etc.), as well as our practice groups (office, industrial, retail, etc.) are using proptech to provide better service to our clients, specifically in how we collaborate with them. We want to make the experience of working with Colliers the best in the industry and we understand how technology can enhance that experience dramatically.
NREI: How do you decide which proptech product is worth taking a closer look at and ultimately worth investing time and money in?
Patrick McGrath: I think it’s pretty simple. Is it solving a painful problem? How many people face the painful problem? If the answer is yes and a lot, it’s worth investing time in.
Jake Edens: It all comes down to solving a real problem. Does the proptech company have product-market fit, or is it just a “nice to have?” That being said, our response is, “don’t hesitate to try it out.” It’s the only way these companies are going to improve their products and compete. We are constantly running pilots with new companies to determine if what they can provide now is valuable and if they will continue to be in the future. In order to stay ahead of the industry, Colliers has developed a clear 12-to-24 month technology plan, which is constantly evolving as time goes on.
NREI: What are some categories within the proptech space that you’re bullish on?
Patrick McGrath: There’s definitely demand for data around what’s being used, when it’s being used and how it’s being used. So, in that smart building category, I’ll give you a concrete example. We have 10 conference rooms. Are those conference rooms occupied? How many people are in those conference rooms? At what point in time? That data informs whether or not 10 is the right number, or should we have 12 or should we have seven? So, our clients, through their corporate occupiers, are looking for systems that can help inform that strategy. I think there’s some really interesting stuff happening at multiple levels around how to capture and synthesize that information. You’ve got devices that are out there, you’ve got infrastructure players that are putting it into classic HVAC, lights and plug type configuration and then you’ve got registration type of information, that’s cataloging a lot of information. So, around that smart building space, there are some interesting proptech companies that are creating solutions for those corporate occupiers that are looking to have a better understanding of what’s working and what can be improved across their people and property.
Another really interesting space, not quite smart building, we use Matterport. Matterport is a really interesting hybrid device and data company. So, the new devices they’re coming out with not only are going to give you photo-realistic interior skin, which is where they currently play, so they can see what the interiors of various different spaces look like across geographies. But, they’re also going to be calibrating the device with highly accurate measurements, so that when that interior photo scan happens, you get digital calculations around what the exact measurements of the space are. That’s another interesting hybrid proptech player.
We published an article ‘Resistance is futile: How corporate real estate companies can deploy artificial intelligence as a competitive advantage.’ We studied the impact of embedding AI-enabled document management tools within our lease administration and abstraction teams and calculated the speed advantage that was created there. The classic processes were basically having abstractors take lease documents and input the data into a lease administration system. What we did was we did a side-by-side comparison of that workflow versus a workflow where we had a partner of ours, that was actually just acquired by MRI, Leverton, with their interface, which allows a PDF to go through an OCR process, and then provides a first round abstraction based on a data model that we jointly developed with Leverton. So that the abstractor can look at the lease in a system, sort of side-by-side with the first round abstraction and correct it. Then, as they correct it the algorithm gets smarter, so that the first-round abstraction gets more and more efficient. So, that’s another interesting use case for us.
There are three major initiatives. I spoke on Matterport and Leverton. The other one is around data, but I can’t announce the project until we release. Zoom out for a second, we’re in an information business. We have practitioners and thought leaders that are being hired to advise their clients around fairly sophisticated marketplaces. So, as you look across the proptech industry, you’re seeing a lot of investment around bringing an enhancement for those practitioners and thought leaders to develop that strategy for their clients. It could be something like, and I’m not saying this is our third project, but it could be something like, “who is the true owner of a piece of property?” There is a company out there called Reonomy that claims they have the capability to get you to the true owner. So, anything that looks or feels like that in the proptech space, we are generally testing from our side.
Jake Edens: Maybe it’s cliché, but data is almost always what we are most bullish on. My team is heavily focused on data visualization and analytics. This allows us to provide the best available and most actionable information to our clients so they can optimize their portfolios and make better decisions.
Other categories that I think will impact the industry the most in the next few years are AI/automation and AR/VR. It’s already impacting our lives outside of work, so I am interested to see how these will impact commercial real estate.
NREI: Is your company looking to possibly buy some of these proptech companies and bring that product in-house?
Patrick McGrath: Savills as a company is not looking to be a venture capital investor. So, we’re not actively trying to put balance sheet capital to work across angel or VCs investment profiles. At the same time, we do have mechanisms. [For example,] we have a fund out of the U.K. that is available to Savills if we see something that we feel either could present a significant opportunity for the investors that have put their capital into that entity or could be strategically important for Savills. That’s the arm if we were going to potentially make that type of investment.
I’ve been in the business for 19 years, the amount of innovation that’s happening right now is incredibly exciting. I think it’s just a very fast-paced and interesting proptech environment right now. If you look at how much capital has been invested over the last couple of years, the growth is just incredible.
Jake Edens: If it’s a competitive advantage to own the technology, then yes. Our main vehicle for investing in these proptech start-ups is through Colliers’ Proptech Accelerator program, powered by Techstars, which was launched in 2018. So far, 20 companies have graduated and we are already seeing some incredible value being created for Colliers, as well as the industry in general. Between this program and our newly created in-house innovation team, we are excited to add even more momentum to this area of the commercial real estate industry.