Interview with Stuart Appley, CBRE Managing Director, GWS Digital & Technology
We caught up with Stuart Appley to discuss the current challenges in the commercial real estate space and how new technologies, such as AI and IOT, are revolutionizing this market.
Q: What are the main challenges faced by commercial real estate companies these days?
Commercial real estate is an industry that has been a laggard in its adoption of technology and digital approaches, and it’s always been a relationship driven industry, so there are a lot of challenges. Investors are very skeptical as they’ve been hugely successful, and they don’t all feel that they need to change. As a result, vendors have not historically been as innovative as in other industries, so there are a lot of inefficiencies inherent in the legacy real estate technology offerings.
However, we are starting to see a lot of startups coming into the market over the last few years due to the huge amount of investment capital flowing in, and the recognition from outsiders that the disruption potential is very large. These new startups are changing how we think about space, with the space as a service offering as just one example, but they’re also bringing new digital approaches into the industry with a big focus on the user experience and open integrations. All that investment money coming into the industry is actually bringing in some great innovations, while forcing the legacy vendors to re-evaluate how they serve the real estate industry.
Q: You mentioned inefficiencies. Where in the market do you see them? Who are the industry players that need to take the next step?
Operations is where you see most inefficiency today. Because it is very easy to start a commercial real estate company, it doesn’t take much to manage one building. But there are a lot of inefficiencies when you begin to scale. How do these investment and management companies move from one building to many? More broadly, the tenant/employee experience is also very disconnected today. The digital consumer mindset where you can order anything from your app, and the ability to interact with your physical surroundings, have both been missing. So, how do we fulfill our tenants’ and employee needs on a day to day basis? How are we being proactive into what those tenants and employees need and the operations of the physical aspects of the building?
Additionally, if you take the day to day lifecycle of an asset, from the sourcing of a building, to transacting, maintaining, leasing and then servicing the tenant, for many companies it’s not a holistic process, but rather a very fragmented process with many inefficiencies in how it’s done today.
Q: Can you describe some of the operational challenges and give examples?
From the building perspective, it is challenging to ensure you’re fully leveraging the assets in a way that you can proactively fix equipment in order to avoid day to day issues that cost more in the long run. Companies are also not very proactive in reacting to tenants’ needs and understanding where tenants experience pains and have the most issues. Companies don’t always have accurate and real time information about what’s happening with the tenants or the building itself, and when they do, they don’t know how to use that data. How do you know what types of space tenants or employees like to use? Are they utilizing the space today in the way you thought they were? These are important operational and utilization questions that are coming up daily.
We, as employees or consumers, are used to the digital ways of dealing with applications in our experience, and when we go to the office we expect an experience as good as at home. There is a lot of opportunity to improve how we interact with the physical building, but owners are challenged in meeting those new experiences.
From an employer perspective, the same issues translate into how you fight for talent. How do you ensure your employees are happy? How can they get to their work in the most productive and efficient manner, while also ensuring employees benefit from digital technologies as the blending of work and home increases? Dealing with these questions on a day to day perspective is operationally challenging.
From the investor perspective, getting a pulse on what makes some assets perform better, while ensuring they have a proper handle on their buildings revenue, debt and capital is critical. What’s challenging is when the data is on spreadsheets and not at their fingertips. Having data at your fingertips, and the ability to understand and leverage all that data for better business outcomes is still a challenge for many operators today.
Q: Looking into the near future, how do you see technology as a solution to these operational challenges?
As mentioned before, most companies don’t have a good grasp of the data that is even in the organization. There is a lot of gold there. There is a wealth of information from the service requests that come in, the insights from the tenants’ leasing patterns, and the insightful perspectives on which buildings are being bought and sold. That data is there, but it is locked up in silos, and where it’s not, correlating and leveraging the data to improve decision making is lacking
Making sense of your data is where Artificial Intelligence can help. AI can provide insights and real time information based on that data. If you can predict in advance what assets will fail before others, you’ll be more efficient in your capital spending. If you can optimize the routes your technicians make, you’ll satisfy your customers quicker, while reducing the amount of wasteful drive time between buildings.
With AI, we have the ability to truly augment the way we work in very transformative ways. I see it automating the manual and redundant tasks, performing tasks faster and better than we can today, helping us make better decisions, and automating the decision process to make quicker and more insightful decisions.
Q: Do you see companies starting to utilize their data?
IOT and smart buildings have been talked about for many years, so it is not a new topic, but it is starting to finally change. With IOT, we are finally starting to make progress with the cost of sensors coming down, the increasing use of edge computing and the ability to store the data locally, and the availability of open API’s and more open integration capabilities.
Data is starting to open up from their silos, but it’s still early and many companies don’t know where to start or the best approach. For those that are getting their hands on more data, the quality of it is an issue and many companies have a long way to go in having accurate and reliable data.
Q: Looking into the future, how do you see this industry in 10 years from now?
I think the space as service trend will have a continued impact on the industry. Many owners are trying to create their own flexible space offerings, and it will be interesting to see how this plays out, particularly when we see a downturn. Autonomous vehicles will have a great impact in how real estate is used, particularly parking lots, but also from where people choose to live. Will they feel more comfortable with longer, but easier commutes? AI and IOT will be very significant and they will be leveraged much more than they are today. I’m excited to think about how we’ll finally utilize AI in ways that are truly impactful in how we work and how we interact with customers.
I think we will have more augmented reality use cases and collaboration among building engineers and FM technicians, who can leverage augmented reality to fix problems remotely or get information about assets digitally.