PropTech to Increase Efficiency in Real Estate
- A company should define what it wants to improve before investing in proptech.
- Evaluate the technology's impact on staffing and resources.
- Address the cybersecurity risks of any new proptech.
There have been some significant advances on the digital mortgage front within the residential and multifamily space. However, many other facets of the real estate industry have not been as quick to adopt new technology. A McKinsey index recently ranked construction as the least digitized industry, only after agriculture and hunting. So, how should owners and operators move forward with proptech to increase efficiency in managing real estate? A Fordham Real Estate Institute panel on modernizing real estate operations addressed this question.
Proptech to Improve NOI
John Gilbert, COO of Rudin Management, described an initial, basic threshold for investing in proptech. He quoted his company’s CEO Bill Rudin saying, “If it doesn’t help me attract or retain customers, I don’t care about it, and I’m not going to fund this thing.”
Gilbert co-founded Prescriptive Data, Rudin Management’s proptech company. He co-invented the Nantum building operating system. Nantum gathers building and occupancy data. It collects information from utility and power meters, and physical sensors. The system combines the data with information on the internet, such as the weather. In real-time, Nantum monitors and adjusts onsite conditions. Controlling elements such as temperature and airflow, the technology focuses on maximizing building efficiency and tenant comfort.
In a January 2019 Forbes interview, Gilbert stated that using Nantum saved the Rudin Management portfolio an average of 55 cents per foot in energy costs. This reduction translated to a $5.5 million savings per year across properties spanning 10 million square feet.
How to Choose Your Proptech
The Rudin portfolio includes both commercial and residential properties. Similar proptech could apply to managing multifamily portfolios. The real estate industry may not be known as the earliest adopters of technology. But proptech is here and growing. By 2022, there will be 2.4 billion new devices installed across the real estate platform on a global basis, according to Prescriptive Data’s CEO Sonu Panda. So, how does a company decide where to invest with multiple options coming to the market?
The panelists recommended the following steps to evaluate investing in proptech to increase efficiency:
(1) Define the problem.
(2) Understand how the technology will help the problem.
(3) Evaluate the financial impact and the return on investment. Calculate how it will affect labor, including staffing and allocation of resources.
(4) Determine if the gains will outweigh the investment.
(5) Assess and address cybersecurity risks and costs.
(6) Ensure the technology is user-friendly and employees will adopt it.
Proptech Case Studies
The speakers described case studies where proptech resulted in bottom-line financial savings. Panda described an incident at an office tower at 845 Third Ave. Over the weekend, the operators received a Nantum alert of an aberration in water consumption at the property. Once informed, the watch engineer discovered a flushometer had burst. The mishap had resulted in water running into an elevator pit. The building management notified tenants and fixed the problem before it affected elevator services. Similar monitoring and alert systems could equally avert disruptions in large multifamily buildings.
Laura Patel is a real estate strategist at Density, a company that uses technology to measure building occupancy. One of their clients, LinkedIn, provides complimentary breakfast, lunch and snacks for employees. Instead of preparing food for the maximum number of attendees, the company gathered data from swiped employee cards. Using historical data and predictive analytics, the culinary staff knew how many people to cook for on any given day of the week. With the Density technology, LinkedIn saved $1 million by preventing food waste.
In multifamily properties, operators could use similar proptech to improve tenant programs and shared amenity spaces.
Invest in Cybersecurity
All of the speakers acknowledged added technology could increase cybersecurity risks. Gilbert underscored the importance of understanding cybersecurity both from the IT and operational standpoints. “You need to understand the companies you work with, what they’re doing, and ultimately how to protect your network,” he stated.
Yet even with added risks of cyberattacks, Gilbert resoundingly advocated for continued, evolving proptech. “Get caught up in the creative ways that you can use technologies to solve real-life problems and be creative,” he said. “Why are we here on the face of the planet? We’re here to create. We’re here to change.”
Certain companies such as Arbor Realty Trust have had a leading role in modernizing systems with innovative technology to best serve customers. Visit Arbor Loan Express (ALEX) the first all-agency, online origination platform for the multifamily market.