Oxford Properties Discusses Technology Gaps in Commercial Real Estate
With more than 25 years of experience in company building, Dean Hopkins is widely recognized for his expertise in digital transformation. He has scaled several prominent innovation companies, including Cyberplex, Thomson Reuters and OneEleven. Today, Dean is the COO of Oxford Properties Group – the commercial real-estate arm of OMERS, a global leader in real estate and valued partner to R-LABS. In the article below, Dean discusses technology gaps in commercial real estate and shares where we should be focusing our efforts going forward.
As Oxford Properties’ COO, my role is to solve growth-oriented problems on a global scale by bringing together the right technologies, processes and people. But when I started digging in, I found a substantial technology gap in our industry.
It quickly became clear that there was a disconnect between the problems and the problem solvers.
The entrepreneurial sector seems to lack a true understanding of commercial real estate – often leaning on their own residential experiences to shape solutions. Around the world, many innovators seem to focus solely on problems that they understand or perceive as being a problem rather than the core issues affecting commercial real estate. Today, there are very few entrepreneurs with a commercial real estate background and a deep understanding of its problems. As a result, commercially-dedicated solutions are quite scarce.
Enterprises need consumer-grade technologies, and to get there, we need to start closing the gap between our industry and entrepreneurs. While taking an eye off the residential market would be a mistake, I want to focus my attention on enterprise-level solutions and guiding entrepreneurs towards the right problems in commercial real estate. So, if you’re in the innovation business and looking to support the commercial sector, you need to consider the following core issues affecting our industry.
Transparency & Liquidity
The first issue in commercial real estate is the lack of transparency and liquidity in the market – and travel the perfect analogy for what we can expect going forward.
Fifteen years ago, travel agents were the only option for booking travel because they were the only ones who had access to accommodation listings, flight schedules and pricing. The alternative was to call around to individual hotels and individual airlines. This opaque model caused inefficiency in the system, which ultimately led to higher fare and hotel prices.
Enter Expedia. By putting a front end on the systems that travel agents were using, there was suddenly a much more liquid market. Pricing became more efficient and leaned in the direction of the consumer – completely changing the way travel agents did their work.
While the complexities of arranging a 100,000 square foot, ten-year office lease immeasurably outweigh booking a week in the sun, increased transparency in real estate market data will naturally change the role of intermediaries. The current commercial real estate brokerage community has the relationships, the market data, and the pricing information, and they manage a lot of the transaction volume in the same way travel agents did before Expedia.
The potential impact is smaller and more routine leases will become more commoditized, adding further stimulus to the already changing nature of the advice and services that brokerages offer their clients. Brokerage firms are already moving up the value chain with their clients by providing workplace strategy and greater value will placed on their ability to help their customers navigate large and complex leases with occupiers also demanding greater flexibility in lease terms.
Again, look to the travel industry for precedent. Travel Agents didn’t simply disappear, they altered their strategy and product. While now routine, straightforward trips and holidays are now largely booked directly online, those looking for high-end, multi-country curated experiences increasingly seek out agents to help navigate the complexities and add value through their relationships
Landlords who don’t adapt to the changes in terms of embracing digital merchandising and differentiating their properties when marketed online will also feel an impact, much like hotels and airlines that didn’t initially learn how to market their wares online.
The second issue we’re facing in commercial real estate is a lack of interoperability standards. While there are pockets of interoperability (e.g. BACNet), the elements of our buildings generally don’t connect easily given their different vintages, vendors, and conventions. This hasn’t been a problem in the past but is holding us back from significant opportunities at many different levels.
Microsoft’s IoT group has a great analogy for this. Think of our physical environments like nested Russian dolls. The moving parts inside of a building are the first doll. These are housed within the building, which is the second doll, then the campus, the city, and so on. The ideal would be for each level of the nesting to have standards that promote interoperability so that we can unlock value. This is not the case today.
The problem is that proprietary solutions are so prominent in commercial real estate that it’s very difficult to analyze and manage the whole ecosystem – which means that we can’t deliver the kind of customer experiences to that we want to deliver to our customers. Whether its wayfinding within and between buildings or transit connections with the city, we need a complete understanding of our spaces before we can solve the problems within them.
This manifests itself in transactions, too. Say I want to buy a building from another company, and that building comes with a certain set of digital assets that describe the building. The sellers may have described their building in a very different manner than I’ve described mine. The differences in taxonomy and naming conventions mean we not only lose the ability to analyze their building, but their assets won’t plug into my existing architecture. As a result, we’ll end up having to do a lot of work to get that building to integrate with our portfolio and the platforms that support it.
One of our biggest needs at Oxford is a virtual model that connects the data points at every level of nesting – which will require a very high degree of standardization. If we had an “open building platform” with standards that everyone works from, we would be far better positioned to solve problems and drive innovation like what we have seen in FinTech enabled via the Open Banking standards. We could assess patterns across asset classes, improve the carbon targets on our buildings, and create exceptional customer experiences – all through standardization.
As a whole, commercial real estate is relatively unsophisticated when it comes to available technology solutions. There are very few out-of-the-box, cloud-based technologies for global enterprises, and the solutions from the late 90s and early 2000s don’t operate with agility, speed, and scalability that we require. Yet, we do not want to have to build our own solutions, like we did in the past.
In today’s technology-enabled climate, we should be able to buy most of these tools off-the-shelf without having to do a huge amount of integration.
The lack of mature, contemporary technologies means we’ve had to spend a lot of time laying the foundations. We have a global enterprise architecture that helps us find the core SaaS platforms to support our key processes. This architecture has revealed that there is a ton of white space in the market. We’re continually looking for that cloud-based, mobile-capable, global solution that can support key global process needs.
We have made the decision not to write our own software anymore. Instead we are working to help the key SaaS vendors either broaden their understanding of our needs, deepen their product or add new capabilities. This has revealed a new challenge. Because it’s early days for technology in real estate, it’s difficult to finding the right talent within the real estate community with the right experience in using these solutions in a more contemporary way. As a result, we’ve had to bring in people from outside the industry and work with the technology vendors to help mature their solutions to get where we want to go.
There has been a lot of heavy lifting to get the platform capabilities to a level that we can really lean on. That said, we also realize that we’re just at an early stage of digital transformation. We’re taking advantage of the opportunity to shape the solutions. Innovation and adoption would be much easier if there was more maturity in our technologies.
Role of Technology in Real Estate
It might seem counter-intuitive, but the biggest thing that technology can do is free up our time so we can focus on people-oriented tasks. Whether it’s spending time with customers or collaborating with our teams, people should be empowered to do the things that human beings are meant to do.
Many of our most time-consuming tasks are far better suited for machines to perform. We need to create capacity in the system for people to look for unique patterns, be more creative and lead innovative initiatives – because that’s what we’re really good at.
At Oxford, we’re thinking about how we can use technology to create more capacity in our team so that we are able to scale the business without increasing headcount. It’s about rethinking the work that our people do, shifting workloads to technology where possible, and freeing up time for our people to work on more interesting and value creating work. Many people are looking at technology from the perspective of, “How do I save money for my workforce?” We’re looking at it the opposite way, which is, “Can we create more meaningful opportunities for our people to spend more time with each other and with our customers?”
Above all else, remember that your innovation is driven by your people; technology is simply a tool to help us achieve it.