A tidal wave of tech startups, optimizing every square inch of real estate, data from smart buildings and how to best use artificial intelligence (AI) are all influencing commercial real estate from every angle. Some say the that CRE is no longer a fixed asset, it’s fluid – and Steve Weikal, head of industry relations at the MIT Center for Real Estate, agrees. With 1,100 alumni spread across 46 countries, the Center keeps a finger on the pulse of what’s happening in CRE and analyzes the trends impacting the built environment. Weikal joined the NAIOP Board of Directors at CRE.Converge 2018 in Washington, D.C., to share an insider’s view on innovations and tech impacting CRE today. Below are some of the highlights.
- Great Convergence: Unprecedented breakthroughs in technology (you’ve heard that there’s more power in an iPhone than in the entire Apollo spacecraft) and leaner, faster coding (sometimes done in a dorm room) are changing our industry and the world. An increasingly tech-savvy workforce is infiltrating our offices, as well as a growing “contingency” workforce that requires tech to stay connected as they move between projects and positions. No matter the generation, nearly every worker is in search of vibrant areas with creative energy, offering a mix of housing, shopping, offices, culture/entertainment, walkability and transit. The sharing economy allows us to have what we want when we want it, and we only pay for what we use. In short, everything is on-demand.
- Startup Tsunami: Funding in real estate technology has surged in the last decade, with funds like Fifth Wall and Navitas focused on investing in tech for the built environment and funding R&D for the real estate industry. Adding money behind the innovation will simply accelerate the development of the tech that tenants and businesses demand.
- Real Estate Fracking: Weikal’s colleague, MIT Professor Dennis Frenchman, defines this as “using technology to break real estate use apart and put it back together into something more productive, thus unlocking overlooked asset value.” Sound like Wework or Airbnb? For the workplace, coworking demographics have taken a huge swing since 2010 – firms with more than 100 employees are using shared workspaces and outpacing the demand by freelancers and independent workers. Fifty-one percent of coworking centers are located in five markets (mainly gateway cities), but this is also shifting as companies other than WeWork gain ground and pop up in smaller markets. Even developers are getting into the game. Boston Properties, Tishman Speyer, Hines and Equity Office are either partnering or launching their own brands based on the evidence that coworking is here to stay. JLL says that less than 5 percent of current U.S. office inventory is controlled by flexible space providers, but this could be as much as 30 percent by 2020.Coworking spaces are not just office – biolabs provides startup life science companies with coworking lab and office space, the food loft is a Boston coworking space dedicated to food and food tech startups, and Paragon is the hub of innovation and coworking for the cannabis industry. Pop-ups are taking form in everything from retail to hotels to micro distribution centers in vacant spaces – optimizing every square inch and offering nimble options for everyone from couture brands to new innovators coming up with the next great idea.
- UI/UX of Real Estate: This refers to the user interface or user experience of space. HqO co-founder Chase Barbarino says that, “Technology is causing a huge shift in value from physical assets to user experiences.” Beacons, sensors and smart furniture track how and when we’re using spaces, allowing us to interact passively while allowing property managers to collect meaningful data. Tech like Equiem and HqO provides services that enrich how building managers can engage with tenants and help them anticipate future demands. In short, said Chris Kelley, co-founder of Convene: “What talent wants, landlords need, developers must build.”
- Real Estate is Getting Smarter: Ninety percent of the data in the world today has been created in the last two years alone. What are we going to do with all this data? One idea is to feed artificial intelligence and machine learning, which allows machines to learn data patterns versus task-specific algorithms. This results in pattern-based decision making, or predictive analytics. You see this in Waze, Siri and even Amazon, and it’s showing up in real estate too. Digsy and Truss offer matchmaking-like online brokerage for leasing spaces with zero fees. “Digital twin” modeling pairs physical and virtual worlds, like seeing how furniture will look in a space before actually buying it. Digital asset management is the big hurdle here: How can real estate landlords capitalize when virtual and digital realities impact how people use and see real estate? Should digital rights clauses be included in leases and contracts?
The importance of “stickiness” will have a bigger impact on real estate than anything, particularly to rising on-demand generations with little interest in long-term obligations. Extended leases and space commitments may be a thing of the past, and developers and owners will be driven to use place making to capitalize on assets, inspiration and potential to create loyalties and demand for the spaces they create.
Kathryn Hamilton is Vice President for Marketing and Communications at NAIOP Corporate.