Blockchain. AI. Digital twin. The proliferation of property technology companies coming on line—upward of $12 billion annually—can make a building manager’s head spin. As homespun, pop-culture philosopher Dorothy Gale said in the Wizard of Oz: “I’ve a feeling we’re not in Kansas anymore.”
And frankly, we’re not. We stand on the threshold of a major redefinition of how we work based in large part on the proptech applications flooding the market. But how does any firm separate the wheat from the chaff? Who do you trust? What applications will withstand the inevitable shakeout? And, arguably, most importantly, what applications work best for your operation, your culture and your mission as a provider of service?
IREM is tackling these questions head on, emphasizing the education that goes into a wise evaluation of technology in order to help the membership make informed and impactful decisions. Over the past few years we have been ramping up our tech research and advocacy through such initiatives as our recently created Technology Advisory Board and the standing-room-only IREM-sponsored Property Management and Technology Forum that preceded Realcomm last month. This effort clicked into high gear earlier this year when James Scott came aboard as IREM’s innovator in residence.
Scott is a lead researcher at MIT’s Real Estate Innovation Lab, and he comes to IREM, in his words, “to help membership get a better understanding of all the new technologies out there and all of the changes taking place within the industry. It’s my job to navigate the members through this period of massive, rapid technological change.”
Those are two apt adjectives. As Scott explains, proptech is exploding. That $12 billion in annual venture capital has taken the industry from a field of roughly 50 or 60 players four years ago to more than 3,000 currently in the MIT database. Keeping up with that torrent of change itself is a massive undertaking.
Scott believes that, of all the concepts coming to market, the single biggest for property managers will be digital twin and the ability to test management and maintenance programs in virtual environments to gauge their potential impact on the physical plant.
Of course, selecting the vendor to provide such forward-thinking applications is like placing your bet on a dark horse—unless you know the vendor’s track record. Coupled with that is the selection of a compatible, scalable system.
“No matter the size of your portfolio, there are so many new companies with their own systems, but not one, cohesive strong infrastructure that can tie all aspects of operations together,” he says. “So a company’s accounting system is with one provider, the maintenance system with another and the outsourcing system with yet another. There is no Microsoft equivalent for proptech.”
That, he believes, is destined to change. “There won’t be 3000 companies in a few years,” he says. “The bigger players will take control of the companies that add value to their own platforms. And once we have those two or three strong market leaders, you’ll see a lot more people come on board.”
But a trusted, proven vendor isn’t the only needful thing here, as Scott explains. For any comprehensive proptech application to work, “You need a really strong alignment from the people at the top,” he says, adding that such pervasive operational changes as these systems can create demand for a cultural shift. Everyone down the line has to have buy-in, or even the most comprehensive application will fail.
Much has been written about the commercial real estate industry’s long-standing aversion to technology. It comes with good reason, says Scott. “Why should any decision-maker put their company on the line?” he asks. “If you’re an employee, why should you put your job or reputation on the line? Also, if you’re a property manager with a full plate, it’s hard to be a tech innovator. You simply don’t have the time.”
When it comes to technology, the profile of property managers is as varied as a fingerprint. “Some may be more enthusiastic, others more cautious,” he says. “But there’s little reason for a company that has been doing business—and doing it well—for 25 or 30 years to be on the leading edge of technology.”
They’ve heard all the hype, says Scott, and there’s been plenty of it. Unless you’re a major player with a massive footprint and can afford CTOs and CIOs to explore this burgeoning market, “Most savvy property management decision-makers will wait until they see an application that brings true added-value to their operation and their culture,” says Scott. “Then they’ll get on board. As a rule, a more cautious approach is wisest.”
That cautious approach includes watching, learning and waiting to see who’s left standing when the inevitable tech shakeout occurs.
In the meantime, IREM membership will be addressing the watching and learning part. That will be powered by our tech advisory committee and the ongoing guidance by MIT’s James Scott.
Don Wilkerson is 2018/2019 president of the Institute of Real Estate Management. In addition, he serves as president and CEO of Gaston and Wilkerson Management in Reno, Nev.