Andrew Waller’s eight take-aways from Realcomm 2019


Remit Consulting’s Andrew Waller recently pulled on his cowboy boots and attended Realcomm 2019 in Nashville, Tennessee. Here are his observations:

When the Global Head of Corporate Development at Brookfield Properties proclaims that we are entering the “Quant Real Estate Era”, you know that it is time to sit up and pay attention. Kevin Danehy was speaking at the 21st Realcomm conference in Nashville, Tennessee where the increasing amount of property data and the need to analyse it was central to every discussion.

At a time when some senior property figures are beginning to question the value of PropTech, Realcomm showcased the value that innovation has brought to US real estate investors and their portfolios around the world. The 2,500 attendees enjoyed three days of discussions involving 150 speakers from across the international real estate market.

1. Why isn’t building data analysis central to all property management?

Having been exposed to a huge number of case studies of data saving significant money across US portfolios, those attending the conference were left questioning why, when the value of the data is now greater than the cost of the device being monitored, building data analysis isn’t central to all property management? As one delegate said: “Just try leaving a broken HVAC unit running for a year and see how much additional cost it adds.”

2. Data is transforming business models

While the quick wins are coming at the building level, the more forward-thinking companies are using data to change their business models, too.

A prime example of this is Florida based Woolbright Development, which is using public data sources to analyse the performance of shopping malls. When they uncover a mall that they think can be improved, they line up potential new tenants that their analysis of data regarding retailers reveals should benefit the investment, before acquiring it. They then use the results of their data analysis to improve the asset before selling it on. The data backed business case makes it easier to take decisions and get consensus from at board level. A further advantage is that the Woolbright team can cover far larger markets than they would with only feet on the ground.

A further example of good practice is the work of Oxford Properties, which now builds a digital infrastructure into every building, saving on the costs of retrofitting and providing an immediate competitive advantage with the high-quality tenants they are seeking to attract.

3. PMs can be a barrier to digital transformation

Most of the stories of innovation and growth that emerged at Realcomm were where the investor has in house resources. With one investor admitting privately that they haven’t yet worked out how to deliver similar digital change through their property managers, it seems that PM’s are sometimes a barrier to innovation for some of the largest investors.

CBRE had a large stand at the exhibition, setting out its vision of the future centred on ‘Hana’ (a flexible workspace product) and ‘Host’ (customer experience). It will be interesting to see how its clientele differs from those at the leading edge who are choosing to build their own.

4. Where should ambitious businesses start their digital transformation?

All the commentators at Reallcomm had different points of view and each company will have its own priorities. For some, it will be security and privacy all the way – nothing will be done that puts the buildings at risk or brings the investor into conflict with tenants and users with privacy concerns. Setting up a data governance framework is a good first step. For others, identifying the objectives of gathering the data is key, asking “what outcomes do you hope to address?”

In the case of WP Carey, the fund management company, it set itself an ambitious target, described as a “JFK ‘man on the moon speech” moment, and it was decided that it needed to be able to report live-time NAV. At the time, the team was struggling to report NAV quarterly but the target had the effect of galvanising the whole real estate investment group behind the initiative and significantly pushed the project along.

5.  IT department should guide, not lead, digital transformation

What became apparent from all the case studies is cases is that to be successful, it is imperative that sponsorship is from outside the IT department – although keeping its members integrated into the process saves many mistakes and helps avoid increased costs.

6. The industry is challenged by security, privacy, poor data and HR

The problems faced by the industry were also highlighted at the conference with cyber threats are top of the list. It appears that insurers are still unsure how to tackle these risks.

Privacy is also a big issue with GDPR being used as guidance, even in the US where it doesn’t apply. In Honk Kong investors are talking of setting their own, even stronger, policies so as not to upset their tenants.

The paucity of data was also tackled at Realcomm where it was highlighted that real estate data “has many columns but few rows”. In some cases, however, this has been turned to an advantage because the columns can be combined to solve unique problems.

A further topic of discussion was the Human Resource challenges faced by the real estate industry. Not only is the industry in the US suffering from low unemployment, but the staff needed with data skills are also being mopped up by other industries. The need to make these roles attractive to non-traditional hires was highlighted.

7. Look beyond real estate to see the future.

There were two new pavilions at the Realcomm exhibition with Microsoft Azure providers showing that this big player sees real estate as a major plank in its strategy of being central to all data.

In addition, there was a 5G pavilion that demonstrated how digital backbones are being put into new buildings to facilitate the extremes of large amounts of regular sensor data, coupled with the bandwidth which may be needed for augmented reality and media over wireless. While this will largely be rolled out to stadiums at first, these technologies are already being included in buildings in the US for use by tenants.

8. I am consciously incompetent

Realcomm holds a UK CIO forum each October in London and snippets from these sessions will be presented there – nevertheless, the pace of adoption by these leaders suggests that the conscious incompetence I felt by the end of the three days will be shared by many more as time goes on.

Click here to read Andrew’s article for the Estates Gazette.