Canadian real estate companies respond to survey on proptech potential

Proptech potential still largely unexploited

Real estate operators urged to think beyond cost savings to revenue generation
Tuesday, March 3, 2020

Canadian real estate companies lag somewhat behind their global peers in the uptake of the IT and data-based technologies and services collectively labelled as proptech. Analysis of recent survey data from 188 companies worldwide shows Canadian respondents generally in sync with prevailing views of proptech potential, but still at a relatively early stage of recognizing and pursuing the full range of opportunities it could deliver.

“Canadian real estate companies are awakening to the digital era, albeit a bit slowly,” concludes Saqib Jawed, partner and proptech lead with KPMG in Canada.

“Historically, it’s been a conservative industry, but companies can no longer afford a wait-and-see approach,” asserts Lorne Burns, national lead with KPMG Canada’s building, construction and real estate group.

Those observations are a prelude to a newly released snapshot of Canadian attitudes and proptech initiatives — drawn from and compared against the complete findings of last fall’s global proptech survey from KPMG — which suggests proptech is more piecemeal than strategically deployed in many cases, hindering the capacity to integrate data collection and interpretation. KPMG analysts also urge companies to better harness proptech for tenant services and to more aggressively address cyber-security vulnerability.

As an optimistic starting point, Canadian companies boast universal buy-in with 100 per cent of participating companies reporting that they have a staff position dedicated to leading digital transformation and innovation. For more than two-thirds of companies, a senior executive, defined as “C-suite level or equivalent”, fulfills the role.

Yet, progressing to the seemingly logical next step, just 36 per cent of Canadian real estate companies have developed and implemented a formal digital strategy and just 8 per cent have done so enterprise-wide. That’s significantly divergent from the global survey results, which reveal 58 per cent have a digital strategy and 29 per cent of companies have rolled them out across their entire enterprise. Analysts see reverberations in companies’ self-assessment of their degree of systems integration, fulsomeness of there data strategies and their cyber preparedness — noting that companies with a digital strategy are more advanced in all cases.

Fragmented systems hinder data interpretation and strategies

The global average score for systems integration was a rather unimpressive 5.4 out of 10, but Canadian companies scored themselves even more critically. An average of 4.7 out of 10 was lower than other regional scores cited in the global report, which reported averages of 5.09 in the Americas (including the United States), 4.86 in the United Kingdom, 5.73 in the rest of Europe and 6.14 in Asia. Even so, KPMG analysts are universally wary of those numbers.

“KPMG’s anecdotal evidence suggests that the average self-assessment of 5.38 is, at best, optimistic. According to our estimates, a property manager or developer can operate up to 30 stand-alone systems to manage finances, operations and different stages of the property value chain (acquisition & construction, marketing & sales, property management, customer & facility services, portfolio optimisation, etc.),” the global proptech report states. “The lack of integration across systems and functions results in inefficiency, task duplication and, most significantly, unreliable reporting and several variations of the truth.”

To a large degree, fragmented and incompatible systems reflect the operations-driven agenda that both the global report and Canadian snapshot highlight. Improving efficiency has been a primary rationale for introducing smart technologies with less consideration given to how its data-generating capability could mesh with other building systems.

Global and Canadian survey results confirm that capital budgeters continue to view proptech potential from a cost-savings rather than revenue-generating perspective. Seventy-six per cent of Canadian respondents identified “improved efficiency” and 55 per cent tapped “improved decision-making” as main objectives of proptech investment. A smaller proportion, at 24 per cent, saw it as an avenue for “improve customer engagement”, with just 20 per cent tying the investment to “revenue maximization”.

Accordingly, the report implores real estate owners/managers to view data as more than an incidental output of operational efficiencies, and to invest in extracting and capitalizing on its value. Globally, the survey found that only 25 per cent of respondents “have a well-established data strategy that enables the capture and analysis of the right datasets”, but that shrinks to just 5 per cent of Canadian companies. Forty-four per cent of survey respondents report that data tends to be generated and kept in silos, benefiting immediate users, but not widely shared or consistently scrutinized for all potential insight.

“The reasons for these low numbers are likely similar at home and abroad: the speed at which big data has arrived on the scene has left companies ill-prepared,” the report surmises. “Canadian real estate has a valuable opportunity to embrace digitization to better serve tenants, customers and tenants’ customers by using data to gain a deeper understanding of their needs and behaviours.”

Similarly, the global report makes links between companies’ digital strategies and the burgeoning demand for what’s been dubbed “property as a service” (PaaS) from co-working providers. “The widespread adoption of PaaS is an acknowledgement of the need to become customer-centric,” it hypothesizes.

Transparency and cyber-security rigour poised to be market differentiators

While real estate companies may be late-starters in tapping into the value of their data, nefarious players are well aware that is lucrative. Analysts recommend proactive cyber-vigilance with a healthy increment of corporate nervousness to drive regular and rigorous testing.

Globally, 69 per cent of respondents claimed to be quite confident or very confident of their companies’ cyber-security, while 24 per cent stated they lacked confidence. In this case, the 7 per cent of respondents in the “don’t know” category would also seem to be indicative of less-than-robust vigilance.

“Somewhat surprisingly, more than a fifth of respondents had undertaken none of the five cyber-security assessments we asked about in the survey: cyber maturity assessment; system/building penetration testing; continuity management in case of breach; supplier security risk management; and data protection under the European Union’s General Data Protection Regulation,” the global report states.

Drilling down to Canadian responses, six in 10 indicated they were confident of their organization’s readiness to deal with cyber-security risks. Meanwhile, 40 per cent had not formally assessed cyber preparedness. “Companies should be wary of overconfidence and institute formal measures to stay on top of security measures,” Canadian scrutineers stress.

Here, too, analysts urge companies to view the investment as more than an operating cost.

“Information security should be viewed as a strategic function and a source of competitive advantage,” the global report asserts. “Transparency is crucial here. By being forthcoming about how they handle data and privacy — even to the extent of showing how they deal with data breaches — real estate companies can differentiate their brands and foster greater trust among consumers.”

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