One Way to Disrupt Commercial Real Estate (Video)


Google the words “commercial real estate” and “Internet of Things (IoT),” and one word keeps popping up: Disruption. Many articles discuss how technology, in general, is becoming a disruptive force for the industry. “The commercial real estate industry is on the verge of a major disruption: the Internet of Things,” said IBM Cybersecurity Strategies Kevin G. Joseph.

The likely reason why the term is thrown around so much is because IoT is making inroads into an industry that isn’t known for its embrace of technology. “Just about every industry is going through some form of digital disruption,” said an article from Wharton School of the University of Pennsylvania. While many industries are slow when it comes to adaptation, “CRE is among the slowest,” the article noted.

However, expanding use of IoT in CRE is starting to shift focus to tenant and owner needs, and how technology can provide data and actions to meet those needs.

Defining IoT

Internet of Things has crept into our language, but what, exactly, does it mean? According to Deloitte’s report, “Smart Buildings: How IoT Technology Aims to Add Value for Real Estate Companies,” the concept focuses on technologies and applications used with devices and locations to generate information. Then, IoT analyzes the data to determines a “smart” course of action. In other words, “The IoT implies physical objects being able to utilize the internet backbone to communicate data about their condition, position, or other attributes,” the Deloitte report said.

Take motion-sensor lighting, for example. When an individual enters an office space, a sensor in the wall detects movement, and sends instructions to turn on a ceiling light. When the individual leaves the office space, the sensor doesn’t determine any more movement, and “tells” the light to turn off.

The IoT is motion-sensor lighting, multiplied, and can include some of the following activities.

Boosting efficiencies: A fully integrated, IoT-enabled building maintenance system can operate, and collect operational data from all systems, from climate control, to lights, to elevators. The system analyzes that information to ensure everything is functioning smoothly. Continual monitoring by an IoT system can also help preempt a maintenance issue by allowing a building manager to take action before a problem is even noticed.

Improving portfolio risk management: Enhanced tracking and monitoring at the portfolio level, combined with current analytics, could cut investor risk by providing asset valuation information before buying or selling. Furthermore, several tech startups created apps that automate brokerage leasing tasks and activities by sharing CRE pricing, and reducing barriers between potential tenants and CRE owners.

Creating value through differentiation: As IoT is still new, CRE owners using the concept can differentiate themselves and their assets from the competition. In addition to deploying effective systems that reduce costs, the IoT can also help pinpoint employee and tenant needs, monitor health and productivity and offer greater security and customized workspaces.

Increasing speed to lease: At a recent AIR CRE conference, Kilograph’s Keely Colcleugh discussed an augmented reality kit, which comes with the latest version of Apple’s iPhones and iPads. “It’s not difficult to use, or to get up to speed,” she said. “And it could help to facilitate conversations around complicated things to visualize, such as economic data.” The technology also allows potential tenants to visualize an empty space by swapping out furnishings and finishing, and even changing times of day, she added, noting that such tools help increase speed to lease, as they immerse the tenant in what a space could look like.

The Caveat

Deloitte noted that IoT isn’t another commercial real estate fad, also saying that diving into the concept for the heck of it was not a good idea. Users instead should rely on “an existing strategy to determine what a company needs,” the Deloitte report suggested. Those needs or goals could focus on increased efficiencies, competition differentiation and new revenue sources.

Meanwhile, IBM’s Joseph acknowledged that brokers and real estate owners need to keep up with the fast-changing technology landscape. “If you wish to remain competitive in the commercial real estate industry during the age of the IoT, you have only one option,” he noted. “Disrupt yourself before the competition does it for you.”

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