Furthermore, as much as 66% of respondents to a recent KPMG PropTech survey admit they do not have a digital strategy for their business. Meanwhile, the technology vendor community is developing a plethora of PropTech solutions across the real estate value chain, including smart building solutions, according to IPUT’s recent PropTech report, Shaping our Cities.
The investment numbers are starting to match the hype: 2018 saw investment in PropTech increase to the tune of US$20 billion, exceeding 2017 figures by 38%, according to CB Insights cited by IPUT. Projections for the end of 2019 forecast that investment funding will be on par with 2018 amounts, if not exceed 2018 figures by as much as 40%.
However, there is still a mismatch between the solutions being developed by the technology vendors and what is actually being deployed in commercial buildings.
There are four main reasons for this:
- Value proposition not aligned with current real estate business models;
- Legacy systems and proprietary solutions/vendors;
- Lack of technology leadership; and
- Risk Value proposition
Investment Briefings is hosting its inaugural PropTech, Data & Innovation Summit at Nuveen Real Estate’s London headquarters at 201 Bishopsgate on November 27, 2019 at 08:30. The morning summit will include three presentations and two panel discussions as well as breaks for coffee and networking.
Do not miss the opportunity to learn and network from some of the leading PropTech experts in Europe. Reserve your pace now, by clicking here.
The use of digital technology to deliver data and services in buildings has not been well aligned with traditional landlord business models. Typically, many landlords maintain a small portfolio made up of large, long-term leases, with terms of up to 10–15 years. At the end of each long lease, it is often in the developer’s interest to find new tenants, given that rent has likely significantly increased over those 10–15 years, and the developer will be able to negotiate more favourable terms in the new lease compared with the existing one.
Roles such as facilities management, complaints and customer service are outsourced to third-party providers who provide basic services. Unless the landlord has particular needs for differentiation or data-driven operations (for example, The Edge building in Amsterdam and similar buildings elsewhere), digital buildings have not been mainstream.
As illustrated by JLL’s 3/30/300 (utilities/rent/payroll) research, the most significant cost to a company occupying a building is not incurred through utilities or rent, but rather through payroll in the form of lost productivity, IPUT says. Considering that improving human productivity far outweighs the cost-benefit of optimising energy consumption, it is easy to understand why landlords and operators have been lacking the incentives to avail of PropTech solutions, given that, until recently, the available technologies primarily focused on energy savings and optimisation.