Assessing tech adoption in the real estate sector: Part 1

August 18, 2023

As a provider of building analytics software, CIM operates at the intersection of technology and commercial real estate. One question often floated is: where exactly does the real estate sector sit in terms of willingness and readiness to embrace digital transformation? Does the sector excel, boldly pushing the frontiers of innovation, or does it lag, stubbornly clinging to traditional ways of doing business?

On one hand, we see numerous examples of technology transforming the real estate sector. Proptech startups are introducing cutting-edge solutions to streamline processes, from property management to leasing and operations. Virtual reality tours are becoming the norm, and analytics-led AI is being harnessed for everything from automated fault detection and diagnosis to personalised customer experiences. The shift to remote work has underscored the importance of smart offices and IoT technologies that promote efficiency and connectivity. 

However, while the ‘proptech revolution’ has taken flight, EY notes that “there is still a major disconnect between interest and adoption” (EY). Real estate's digital journey has lagged behind some other sectors, Forbes adding that “real estate and property management businesses have been relatively slow to embrace the proptech revolution.” Consider the finance industry, which has embraced FinTech to revolutionise everything from personal banking to investment management. Or the marketing sector, pioneering the use of big data to improve audience segmentation, and harnessing the amplification power of social media influencers.

To delve deeper, we spoke to one of our newest team members Caitlin Koskinen, CIM’s Senior Enterprise Account Executive. Caitlin brings a valuable wealth of experience from a number of leading enterprise software providers. During our chat, we were keen to uncover Caitlin’s fresh perspective and initial reactions on how the real estate sector’s ‘tech readiness’ compares to others she has engaged with.

Having worked in various tech-driven industries before joining property, how would you characterise the industry’s willingness to adopt new technology?

Caitlin: I would say, as a whole, the property industry seems ripe and ready for transformation. Generally, the organisations that we see adopting technology are the ones that are more resilient to economic slowdowns or downturns. The property industry recognises this and overall I believe there is a willingness (and even an eagerness) to embrace technology. But there is room for improvement in the industry’s ability to convert this intent into actual adoption and scaling of new solutions.

And does that differ from the industry’s readiness to embrace technology?

Caitlin: I've noticed that people are indeed open to adoption. However, the readiness seems to be lagging due to a difficulty in addressing critical questions such as: What is the business need? Where can technology solve problems? How can we adopt and scale this technology? How can we ensure it's fully embedded and utilised? This is where I'm witnessing a lack of maturity or preparedness.

I've also observed a difference in attitudes across different stakeholder levels within property organisations. The conversations I've had with senior leaders reveal their ambition to drive change and manage their assets more effectively. Their ultimate goal is to enhance portfolio value for their investors, and they believe that achieving this involves running the assets more effectively from the ground up.

However, as we move closer to where the actual transformation needs to happen, particularly at the facility level, resistance becomes more apparent. This is perfectly understandable as change of any kind can be difficult. There are teams who are highly eager and prepared for change, but others are quite resistant. This resistance often stems from a fear that technology might render their job redundant or overrule their expertise.

This is not our intention at all; rather, we aim to facilitate their work. Solutions like CIM's PEAK Platform are designed to help operations teams work smarter and more collaboratively. We need to improve our communication to counter this resistance and clearly illustrate that our mission is to make the process of facilities management easier and more efficient, not to eliminate roles.

What are the factors that seem to be holding property companies back?

Caitlin: I’d say it largely stems from the property industry's maturity as it pertains to rising customer expectations and needing to meet those demands. Customers in this industry haven't demanded change to such an extreme extent as some other industries, so there hasn't been a strong impetus to change.

Consider retailers as an example. In the past, consumers would go to supermarkets to buy their necessities. Everyone would walk into a grocery store, purchase their groceries, pack their cars and return home. However, the advent of technology has revolutionised this concept. People now expect that they can order their groceries online and that these groceries will be delivered promptly. These new expectations forced the hands of those companies to embrace a new way of doing things.

In the case of real estate, the customers of REITs or developers have not demanded this shift, causing the sector to lag behind. The real estate industry doesn't face consumers directly in the way most of us understand. Therefore, I believe that ultimately, it will be the customers who drive the demand for change. This is, in fact, what instigates transformation in most industries - the voice of the consumer.

How would you compare this with the readiness you've witnessed in other industries?

Caitlin: I would say the readiness of the property industry lags behind industries like financial services and retail. These sectors have had to be customer-centric and technologically advanced for years to ensure competitive differentiation. For example, Woolworths established an entire entity known as WooliesX in 2017, which functions as a centralised technology arm for the Woolworths Group.

Historically, my expertise has been predominantly in consumer-facing industries, specifically in financial services, banking, insurance, and retail. The readiness in real estate seems to trail behind these industries, largely because from an outsider's perspective, it doesn't seem like their consumers or tenants have demanded superior customer experience as a differentiating factor like other industries. 

Indeed, we've witnessed how retail has been disrupted by the likes of Amazon, or how companies like Xero have reshaped accounting. The pace of change in these sectors has seemingly been much more rapid compared to real estate.

Are you noticing any nuances between commercial property verticals in terms of attitudes towards technology adoption?

Caitlin: From the discussions I've had over the past few months, it appears that organisations with office portfolios are the most mature in terms of technology adoption, closely followed by retail. This interest is particularly geared towards better data utilisation for making informed decisions about all aspects of an asset. Interestingly, I've noticed the most enthusiasm for technology in the build-to-rent sector. As most of these are new developments, they are naturally predisposed to innovative thinking.

On the other hand, hotels and universities can seemingly be a little more resistant. Their perspective leans more towards human expertise as a differentiating factor. For instance, I've had hoteliers mention their chief engineer has been on site for 30 years and “knows the building better than anyone else”. While that's valuable, there's an inevitable question of what happens when such an individual retires. Therefore, the challenge lies in persuading them to see technology as a means of transferring this vast store of historical knowledge from one person to another.

Is there anything that surprised you when you saw how commercial buildings are being managed?

Caitlin: One aspect that has genuinely surprised me is the extent of manual effort involved in managing commercial buildings where technology could offer considerable efficiencies. I recall an example where a team was regularly flown to another city to perform a night audit for a large building. This involved five individuals wandering around, checking things manually—a task that could be automated with technology.

Another example is the manually intensive process of reporting on energy consumption. In some cases, landlords collect bills from numerous tenants across multiple assets, only to manually compile the energy consumption data for ESG reports each month. Again, technology could easily automate this process.

These examples highlight the need for increased automation in commercial building management. This will not only streamline operations but also free up valuable human resources to focus on more critical tasks such as tenant engagement and finding areas for optimisation.

Do you feel like those companies just didn't know that technology could remove that manual labour or they're just avoiding new ways of doing things?

Caitlin: I’d say it's a mixed bag. Some seem to be stuck in established routines, maintaining the status quo because "this is the way we've always done it." This isn't necessarily a resistance to change, but more a matter of inertia—there hasn't been a compelling reason to change their processes or methods. Others may simply not be aware of the technological solutions available that could streamline their operations and offer significant efficiencies.

Read more from our interview with Caitlin in Part 2 below.

Chris Joannides
August 18, 2023