Boston Properties' Owen Thomas presented at CRETech on Oct. 16 at Dock 72 in Brooklyn, N.Y.
Source: S&P Global Market Intelligence
Much noise is made about the emergence of PropTech and the many changes it will bring to real estate, but some still doubt that a revolution in property development and management via data and new digital tools is actually underway.
Industry leaders at the CRETech conference last week in the Brooklyn Navy Yard sought to dispel lingering disbelief.
"I often hear and read the commercial real estate industry is behind the rest of the world in terms of technologies. 'It's a stodgy industry. The industry is not interested in adopting technologies.' And I don't think that's true," Boston Properties Inc. CEO Owen Thomas said in a presentation.
Thomas said his company, a dominant office landlord in gateway markets, will continue to test and implement any tech that improves tenant "experiences" or boosts financial outcomes. In pursuit of those twin priorities, the REIT has piloted applications that streamline leasing and payment processes, improve asset management, and consolidate construction and the company's own day-to-day operations. New tech has allowed the company to track, across its 50 million-square-foot portfolio, every lease out for review, every transaction proposal, and every twist and turn of an individual negotiation.
Will O'Donnell, managing partner of Prologis Ventures (right), on stage at CRETech.
Source: S&P Global Market Intelligence
Advancements in tech have also accelerated the evolution of the tenant-landlord relationship, as evidenced by the rise of coworking. "Our customers are increasingly looking to us, as landlord, to provide them services," he said.
PropTech's impact has been perhaps even more profound in the industrial segment, where real estate, alongside the rise of e-commerce, has evolved from a cost sink to a new outlet for revenue generation via new services for tenants, transforming the way warehouse and logistics facilities are perceived as an asset class. The change has required industrial owners to develop an entire new "muscle memory," according to Will O'Donnell, managing partner of Prologis Inc.'s venture capital arm, Prologis Ventures.
In an onstage interview, O'Donnell said it is now clear that there is value to be extracted from every stage of the landlord-tenant relationship. "There is no other business in the world where you spend three months negotiating a contract with someone, and then ignore them for the next seven years," he said. "That's what real estate has been. That's been a constraint on the industry."
Prologis has used tech to improve not just tenants' efficiency, but their warehouse workers' own experience and productivity. New applications have helped the company transform lighting and air quality, employee retention, and the transportation to, from and within warehouses. Artificial intelligence and autonomous vehicles are augmenting worker performance rather than replacing them entirely, he said.
"For the first time, I think, we have the ability as a large owner of these physical assets to partner with people in a different way, and really look at problems that we can solve ... beyond four walls and a roof," he said.
Nowhere is the implementation of new real estate tech applications more pronounced, perhaps, than at Hudson Yards, Related Companies and Oxford Properties Group Inc.'s 28-acre mixed-use development on Midtown Manhattan's Far West Side. Two lead tech executives on the project, the first phase of which opened this year, spent an hour at the event mapping how new on-site applications expand internet connectivity, monitor and manage foot and vehicular traffic, and streamline payments and experiences.
Kenneth Finnegan, Related's chief technology officer, posited that accommodation of new tech is less a defined goal with a set checklist than a new real estate management ethos — a process that never ends. He emphasized the importance today of future-proofing new real estate developments, of building out infrastructure to accommodate new tech, such as autonomous vehicles, that has not fully arrived but may be just around the corner from mainstream adoption.
"Let's make sure, even if the technology isn't designed yet — we don't know exactly what the requirements are going to be — we put the physical infrastructure in place to accommodate those requirements in the future," he said.