Perspective on Proptech

By on Mar 18, 2020 in News

Editor’s note: The following article originally appeared in Vastgoedmarkt, a Netherlands-based real estate magazine. It is reprinted here with permission.

Mapping the future of living, working and recreation, will require being responsive to the needs of millennials.  For this, proptech is essential, according to Richard Gerritsen of Yardi. Most of the technology is already available, but the drive to actually apply it to some sectors of the global real estate industry is still missing.

Richard Gerritsen has been working for Yardi since 2005, and currently serves as regional director Europe. The American real estate automation supplier is doing well, the regional director says.

Richard Gerritsen

‘We started with offices in London and Amsterdam, but Yardi is now also in Germany and Romania, and will soon also be present in France. Our goal was to double our turnover every five years. We succeeded in that and recently, we have been even growing faster than that. Yardi saw its European turnover grow by 44 percent in the year 2019 alone. Now that Yardi is an established party in Europe and in the Netherlands, Gerritsen also sees it as his mission to stimulate more enthusiasm for proptech in the real estate industry.

Unlimited possibilities

‘I want to make the industry aware of the great importance of proptech.  When I started at Yardi in 2005, I learned that I shouldn’t use the word software in my conversations with real estate professionals. The software department meant the lads at the end of the corridor where it was always dark. But now, technology and proptech play a much bigger role in (office) life.  Yet technology is still not a popular subject in the boardrooms. This is related to conservatism within the real estate industry, but it is also because those aged over 50 are usually the ones pulling the strings.

He thinks it is not enough that themes such as the future, artificial intelligence and big data are central during big fairs such as Provada. ‘We have been talking about it for years.  But developing a long-term vision and strategy based on proptech hardly happens, with some exceptions. In the real estate industry, proptech is mainly seen as a tool with merely practical value.  But the industry is not utilising all possibilities yet and proptech is currently only used in a limited number of places. This is only the beginning.  The possibilities on an operational, financial and managerial level are unlimited’.

Focus on the end user

He thinks the role of real estate investor and manager will change drastically in the coming years under the influence of proptech. ‘Before the crisis in 2008, it was only about the bricks; the bricks determined the value of real estate.  After the crisis, asset managers started focusing on cash flow; a collection of rental contracts defined a large part of the value. But from now on, we have to focus entirely on the end users and their data. A happy office worker, shop visitor and tenant is probably the most important asset for the owner; after all, space becomes a service. Without consumers who find inspiration and have an experience in a shopping centre, the real estate has no value. With sensors, Internet-of-things applications and AI, owners can generate those data in their shopping centres, offices and homes. Parties such as Yardi can create dashboards out of that enormous mountain of data in which all parties have an overview and gain insights. In this way, the asset or facility manager really understands what goes on in a building and at the end user. With those insights they can provide better service to tenants and users and make better management decisions’.

Housing corporations should provide smart thermostats as standard immediately, he states. ‘That provides more value for the tenant, is a source of data and is more sustainable. In the US, this is rapidly becoming the standard. There, landlords are collaborating to predict their energy consumption, in order to be able to purchase energy and water at competitive prices. It enables the developer to make future construction projects more energy-efficient. With big data, cost-cutting is possible everywhere. This leads to higher yield’. However, most real estate owners let the gold slip out of their hands, Gerritsen argues. ‘Google, Amazon, Apple and Facebook run away with the profit. Those tech companies that are worth about a trillion dollars each have based their business model entirely on data about our consumer behaviour. Those data are largely initiated in our shops, offices and homes. Not Google, but real estate organisations themselves should mine and exploit those data’.

Creativity

But Gerritsen emphasises that technology is not the whole story. ‘I think in disruption, 10 percent is about technology and 90 percent is about creativity. For example, taxi app Uber is based on simple, existing technology that has been applied in a very smart way.  I do not see real disruption in the real estate market yet.  In the office market, there is a lot of movement due to co-working providers, such as WeWork and The Office Group. Smart entrepreneurs have transformed the relationship between tenant and landlord after the crisis. Rental contracts cast in concrete of 5, 7 or 10 years are no longer necessary.  Flexible contracts of a year, a month, or subscriptions of a day are more suitable for many companies’.

While the real estate industry is still looking for new business models with big data and AI, the big tech companies are already busy with new technologies, the Yardi director says. ‘Google is developing a new working method, which means we no longer need to search. Based on machine learning and big data, Google already knows which services and products we want. They only need to offer it at the right moment. For many people this is still scary, but it just indicates how much more is possible’.

Executing proactive management

Gerritsen acknowledges that he is still meeting with scepticism in the industry. ‘What use are all those data that my office measures, an asset manager put to me during a Provada debate. He is well able to manage his real estate with ten parameters. I gave him the example of a GP. The GP makes a diagnosis based on three points: he looks into my throat, measures my temperature and takes my blood pressure. With sensors, he can now measure my physical health on 30,000 points. That way, he can see new things and link things together. In the same way, you can also reach a better diagnosis regarding the performance of a building. Based on this, the asset manager can draw up a different management plan. The tenant also gains more trust in asset management that is supported by data’.

Gerritsen advises real estate companies to familiarise themselves with proptech step by step. ‘I think real estate managers can make a step to big data and AI via operational management in a very accessible way. Operational management is currently very reactive and ad hoc: repairs, maintenance and tenant complaints can hardly be planned. Thanks to online sensors, all data from the installations, machines and buildings becomes available. Asset managers can execute proactive management with the data that those produce. This means they can save money and provide better service to their end users. That would mean a fundamental change in real estate. We often see this happening in practice.  Many companies apply the technology as a pilot or for a limited part of the real estate portfolio. But when it is effective, a company should apply the technology on a wider scale. That is only happening at a few companies’.

Responding to the needs of the millennial

In order to make real estate future-proof, professionals must focus on the young generations of up to 30 years of age. ‘The needs of millennials are fundamentally different from those of my generation. The young generation wants to decide for themselves where they live, work and seek recreation. This need is not going to disappear.  In the US, apartment buildings are marketed as a lifestyle where a particular community is present. People choose a home where they can live their lives with “their own kind of people”. We do not have that here, but it will be essential in order to lure millennials’.

On the housing market there is no incentive yet to innovate, due to the shortage of houses, Gerritsen concludes. ‘That is different in the US. There is a lot more competition and much more effort is needed to get a tenant for a house. That’s why landlords offer a self-service rental process there. With a few clicks of a button, you can rent a home in the US. Why do you have to fill in a big pile of paper in the Netherlands, while all my data are available everywhere? An app could be made for this. But every new residential complex will be filled anyway, and therefore it does not happen.  It is also very strange that we still walk around with a piece of metal in our pockets in order to open our door. The key is 13th century technology. Millennials want a phone app to open their door. This is already applied in the car industry. Real estate professionals must respond to the needs of the new generation through Proptech. Otherwise, a disruptor from outside the real estate sector will come and gain a dominant position.