Market View: CRE Tech

By Jim Young, Co-Founder & CEO, Realcomm

Jim Young, Co-Founder & CEO, Realcomm

Last year was probably one of the most celebrated years for CRE Tech recently, as we saw so many new players join the conversation. The current 4.0 phase started somewhere in the 2009-2010 timeframe. This period included investment in CRE Tech exceeding $5 billion.

The most interesting aspect of this cycle is that the investment side seems to be much more active than the adoption by the industry. While there have been some noteworthy companies created, some are wondering, given the amount of investment, why aren’t there more success stories? Is the supply side moving at 100 mph while the demand side moves at 25 mph? Is a correction coming? Can investment dollars continue to be a replacement for cash flow? Can the market support 10 companies (or more) providing the same thing? These are just some of the questions the industry is asking of CRE Tech 4.0.

CRE Tech 5.0

Image courtesy of Realcomm

Even as we await the logical conclusions of CRE Tech 4.0, we already need to prepare for CRE Tech 5.0. Not caring that the commercial and corporate real estate industry adopts at a specific pace, the general technology industry, much of it focused in Silicon Valley, unleashed a number of new, life-changing technologies in the last few years. Making their way into mainstream conversations in 2016 were artificial intelligence/machine learning, autonomous vehicles, augmented reality, blockchain and robotic automation, to name a few.

There is no doubt that these truly paradigm-changing technologies will impact our industry, but the questions remain: when and by whom? Who will be the earliest of adopters, believing in these very disruptive ideas and radically changing how we design, build, operate, transact and use space? An office building without a parking garage. AI so powerful it can predict major market turmoil. Machines replacing human jobs. Big questions … big challenges … big opportunities.

Cybersecurity

Starting three years ago, we were all introduced to the challenges of cyber, whether we wanted to hear it or not. Sony, Target, Blue Cross, Home Depot, the federal government and others affected by security issues began to emerge in our news headlines. Phishing, malware, ransomware, data theft and cyber warfare all began to invade our consciousness on a daily basis. Today, everyone knows someone who has been impacted by cybercrime. What does this mean from a strategic perspective? We are going to need to play more and more defense as a means of protection, and in some cases less offense.

Five years ago, if we had a dollar to invest in technology, some would have been spent on maintenance and some on innovation. Today, a growing part of that budget must be spent on securing the enterprise and everything it touches.

Cyber is not for the passive; it is not something you can ignore; it will not go away on its own. Those who think they can stay under the radar and only employ minimal effort will be wide open to the severe consequences. Whether it is a transaction that disappears into thin air, an enterprise that is encrypted and held hostage, customer data that is compromised, lights that are turned off or doors that are opened, brands can be tarnished, money stolen, and in some cases property and human life can be at risk. One thing is certain in 2017 and beyond: A comprehensive and well-thought-out cyber strategy needs to be part of everyone’s playbook.

Privacy

People joke that they cannot sleep without their phones, and it is the norm to see people using them constantly … even when they are driving. Mobile phones, along with all the other electronic devices we have come to rely on, have created a very powerful dependency on a digital lifestyle. Most are quick to push aside any concerns about privacy with statements like “I have nothing to hide,” but we are nearing a point where the potential for a non-stop surveillance state is inevitable. While most of us do have nothing to hide, electronic systems gathering data non-stop over a long period of time could lead to problems without the proper governance.

GPS, photos, texts, e-mails, phone calls, Facebook likes and transactions, when aggregated and analyzed with emerging software platforms, can produce incredibly intuitive predictive analytics. In addition to personal electronic devices with data tracking capabilities, IoT sensors will be showing up everywhere. From lighting to irrigation systems, IoT technologies will be able to capture large amounts of data at an unprecedented pace. Is this a bad thing? Perhaps not, as long as these tools are in the possession of those who know how to make the right decisions about the accumulated insight … today, tomorrow and far into the future.

As you can see, the level of complexity we have begun to experience is only going to move faster and become more powerful. We are moving well beyond property management reports, building automation, leasing systems and automated maintenance requests. I say this with the full knowledge that despite all this potential, the reality is that many firms still use Excel to manage their assets, and the majority of tenants still make their monthly lease payments by check.

This brand-new year seems like it is shaping up to be the beginning of a recalibration period. In this time, we will see technology continue to move at its normal pace—fast—and we will see a number of real estate companies begin to really increase their pace of adoption. While the mainstream of our industry may not adopt at the same pace, there will be those who break out and really redefine how our industry works. They will be the ones to set the new baselines, establish the new best practices and define in practical terms how to be the most financially successful. That will get people’s attention. The biggest question for everyone else will be: Are we able to regain our competitiveness? Blockbuster, Eastman Kodak and Tower Records gave way to Netflix, camera phones and Spotify. What happens when brick and mortar radically integrates with technology? 2017 should be an interesting year!

This article first appeared on Dec. 28, 2016, at www.realcomm.com/advisory/. Reposted with permission by Realcomm Conference Group.

Appearing in the March 2017 issue of CPE.