To compete in the digital economy, innovative commercial real estate (CRE) companies will act now to maintain control of their “location” or digital real estate, to reduce operating costs for themselves and their tenants and put in place inbuilding digital processes so they, and their tenants, will better “know” their customers.
The iPhone was introduced at 6:00 PM on June 29, 2007, and in a mere 10 years has completely changed the market for commercial real estate, now even threatening core CRE valuations.
Location, once the very basis for the valuation of real estate assets, has been displaced by a 4.7 inch multi-touch, place-of-business and point-of-sale, carried in your pocket and available 24 hours a day, 7 days a week.
People can now work and communicate from almost anywhere, so they spend less time in the office and may well work from where they want to live, rather than live where they need to work. At BuiltSpace we have employees spread across eight time zones, connected by technology, and their mobile phones.
Employers, unsure where employees will be located, want more flexibility and control of their space. Long term, single location leases are being replaced with real-estate-as-a-service that puts bums-in-seats by the hour, wherever those seats are needed.
Online retail forgoes expensive showrooms in favour of a thrifty, data-driven business model, where products may be delivered directly from distribution centre to the end customer. The online customer doesn’t get the touch, try and feel experience found in bricks and mortar stores, but they may get one-hour home delivery, for less.
But the greatest competitive advantage to the online business model is the detailed customer knowledge captured as people navigate the internet, leaving clues about where they have been, what they’ve seen, and what they are looking for. “How can I help you?” at the front desk, is simply no match for Google Analytics. Online, it’s data, data, data – captured and used by digital operators long before the customer hits “Checkout”.
To compete in the digital economy, bricks and mortar real estate needs to cut operating costs, amp-up “touch, try and feel experiences”, but also be more like online, leveraging Google-like data analytics, so that they can better “know” customers, long before and long after, the point of sale. It’s the new CRE business model “bricks, mortar and data.”
Building a digital platform
In Assets vs. Access: A Digital Reality for Commercial Real Estate a team of Wharton researchers propose that CRE companies create value by buying or building a technology platform, not unlike Facebook or LinkedIn for real estate participants. They say:
Value: Envision a digital platform and virtual network (like a Facebook or LinkedIn for real estate participants) where you partner and co-create with tenants, suppliers and employees in a new business model — allowing them to participate and share in the value that your network brings.
The authors’ envisioned platform certainly isn’t today’s CMMS, enterprise workplace management, enterprise field service, enterprise asset management or even enterprise resource planning software. In fact, it’s not “enterprise” at all. They are talking about digitizing real estate assets, creating a hub, organized around the real estate assets themselves, that connects tenants, suppliers and employees within individual properties and across entire real estate portfolios. We call it a digital real estate platform and it is available today.
By digitally connecting the people within buildings, on a common technology platform, real estate operators can better utilize bricks and mortar assets; capturing better knowledge of what those people are doing in the buildings and deliver dramatically lower operating costs for their tenants, while helping them find new revenue opportunities.
Bricks, mortar and data: A new business model for CRE
We started out talking about how Apple, by introducing technology, has permanently changed commercial real estate. Ironically, Apple (one of the most marketing-savvy technology companies out there) isn’t completely online. Their technology-enabled bricks and mortar stores lead the retail industry, typically generating more than $5,000 per square foot in annual revenues. People queue to get into Apple’s showcase stores, heavily staffed by knowledgeable service teams, where they can touch, feel, try, experience, and learn. Apple’s model: bricks, mortar and data.
Rick Rolston is the founder of BuiltSpace, a software as a service provider whose platform uses the power of mobile to data-enable the work that people are doing to buildings, providing radical transparency and visibility to processes and performance, that allows you to transform your business and be a disruptor.