PropTech in Focus 2021

PropTech IN FOCUS 2021

CONNECTED SPACES Adapting properties to remain competitive Featuring Essensys | Yardi

FUTURE OF REAL ESTATE Technology plays a starring role

USE OF DATA Transforming the real estate value chain

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CONTENTS

04 INSIDE THIS ISSUE… 04 TECHNOLOGY STARS IN THE FUTURE OF REAL ESTATE INVESTMENT

By A. Paris

06 DATA DRIVEN COMPANIES WILL DELIVER SERVICE FOCUSED REAL ESTATE

Interview with Richard Gerritsen, Yardi

08 CREATING FLEXIBLE, CONNECTED SPACES

Interview with James Shannon, Essensys

11 DIRECTORY

06

08 Published by: Property Funds World, 8 St James’s Square, London SW1Y 4JU, UK www.propertyfundsworld.com ©Copyright 2021 Global Fund Media Ltd. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher.

Investment Warning: The information provided in this publication should not form the sole basis of any investment decision. No investment decision should be made in relation to any of the information provided other than on the advice of a professional financial advisor. Past performance is no guarantee of future results. The value and income derived from investments can go down as well as up.

PROPTECH IN FOCUS | Jul 2021

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OV E RV I E W

Technology stars in the future of real estate investment

By A. Paris

W

hen Covid-19 first plunged the world into a series of successive lockdowns in the early part of last year, to many, the prospects for the global property industry appeared bleak.

With hundreds of millions of workers around the world being encouraged to work from home indefinitely, many felt the long-term impact on both the commercial office space market and city centre retail would be potentially devastating.

Starved of traditional commuters and devoid of office workers, what would happen to many of the densely-built central urban office districts where so many people have traditionally worked?

Now, as economies begin to recover and workers return to the office – but in new and more flexible ways – there is a growing realisation: New technology is set to reshape the way the industry operates and ‘proptech’ is taking on a crucial role as the real estate industry emerges from the pandemic. Things may never be quite the same again.

“The key to maximising existing and current real estate projects is increased flexibility as to the use and services 4 | www.propertyfundsworld.com

provided by each property,” writes Dimitri Tournas, an associate in the real estate team at Withers, the international law firm.

Landlords, investors and tenants have all been forced to adjust and are eager to maximise the potential of properties which are more in demand, given the current climate.

Against this background, new technology is helping more organisations use real estate more flexibly, enabling a hybrid model where staff alternate between working from home and spending time in the office. It is proptech which is proving critical to support this trend.

Daniel Lepore, AMP Capital Real Estate’s Head of Asset Technology, comments: “There’s no doubt proptech has become a key change for the way we operate our buildings. It is increasingly becoming a differentiator for building owners to deliver superior tenant experiences, efficient operations and deliver data-driven insights to better inform investment decisions and ultimately deliver greater returns.”

The growing recognition that proptech is crucial to the industry’s future is encouraging a flood of investment to PROPTECH IN FOCUS | Jul 2021

OV E RV I E W the sector to ensure work spaces deliver the necessary benefits to investors, landlords and tenants.

“As buildings become increasingly digitised, it’s imperative to invest in solid smart building foundations such as cybersecurity and data protection to ensure we can enact on current and future trends,” Lepore continues.

Proptech is changing the way the industry operates – for everyone Real estate investment managers use proptech to improve the physical performance of assets, or the processes involved in managing those assets. For instance, software solutions can help create new efficiencies by digitising manual, cumbersome workflows and reducing the number of systems needed to store data.

That in turn typically results in savings of time and money while making it easier to scale a business, claims Bernie Bazile, vice president in Callan’s Real Assets Consulting group, writing in a recent newsletter.

“The corporate real estate industry is rapidly implementing technology that enables new needs at scale: sensors, automation, touchless access control, employee experience apps,” details an article by JLL Technologies.

Zsolt Kohalmi, Global Head of Real Estate & Co-CEO at Pictet Alternative Advisors, remarks: “Clearly, digitisation and data uses have multi-dimensional repercussions across our sector. They have a huge potential to enhance all facets of the investment manager workflow from sourcing to exit and everything in-between. One of the interesting facets is digitalising building operations, which will eventually lead to better investment performance for investment managers.”

Lepore outlines the impact of data-driven strategies on the competitive landscape for real estate investment managers: “These technologies are enabling portfolio visibility of building performance making it easier than ever before to capitalise on useful applications such as fault detection diagnostics, performance degradation modelling and even AI based autonomous Heating, Ventilation and Air Conditioning (HVAC) controls.

Institutional money floods in The growth potential and crucial role proptech has to play in the future success of real estate investment is also being acknowledged by institutional investors with a string of new funds being created to funnel cash into the sector.

In March 2021, Greensoil Proptech Ventures launched the Greensoil PropTech Ventures fund II. The fund’s first USD100 million closing was backed by Canada’s Public Sector Pension Investment Board, one of the country’s largest pension funds.

“The initial closing of Greensoil PropTech Ventures Fund II comes at a time of significant opportunity and adversity for the real estate industry and the global economy PROPTECH IN FOCUS | Jul 2021

and the need for innovation has never been greater,” said Kristopher Wojtecki, Managing Director, Real Estate Investments, PSP Investments, when announcing the investment.

Other proptech funds saw similar pledges. In November 2020, Round Hill Ventures (RHV), announced the first EUR200 million close of a dedicated European PropTech Fund. The firm said the fund attracted strong demand from large institutional capital, providing access to the fast-growing proptech sector for sovereign wealth and pension funds.

Michael Bickford, Founder and Chief Executive Officer of Round Hill Capital, comments: “We are on the cusp of major changes in global real estate as the sector evolves to match modern consumer expectations and streamline its operations...We see a clear market opportunity for technology centred around the modern needs of residents, and I’m excited that our fund will help address this opportunity for investors and society alike.”

Environmental concerns Proptech is also attracting attention from investors for another reason. It is increasingly aligned with the Environmental and Social Governance (ESG) objectives of asset managers.

New technology and better use of reliable real-time data on the performance of buildings is becoming increasingly important as both investors and tenants demand more sustainable, greener workspaces.

Sophie Taysom, director at Keyah Consulting, a UK advisory firm, says: “These requirements, once developed, will largely shape investment, loan, and indeed even insurance, decisions. We will also see a further increase in pressures from buyers and tenants, for homes, buildings and public spaces that have a positive social impact.”

Pictet’s Kohalmi stresses the importance of capturing, measuring and rationalising operational performance using data, which he says barely exists for almost all of the estimated 85pc of the EU building stock which is more than 20 years old.

“This is especially important given the imminent, yet unquantifiable risk of future carbon tax / energy offsets, which will directly affect real estate operational and investment performance,” Kohalmi adds.

“I am a firm believer that technology solutions are an important part of our ESG strategy to reduce environmental impacts while also having a positive impact on our tenants, visitors and the wider community,” remarks Lepore.

“The ability to be able to track metrics such as energy performance and combine them with AI means we are able to impact the indoor environment which in turn will improve customer comfort, lower energy use and reduce our environmental footprint, and all in real time. Lowering our environmental impact is a big focus for AMP Capital’s Real Estate team.” n www.propertyfundsworld.com | 5

YA R D I

Data driven companies will deliver service focused real estate Interview with Richard Gerritsen

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here’s no doubt that technology has the power to transform the entire real estate value chain. Investors, asset managers, landlords, tenants and residents all need to be ready for this shift. The change will result in a closer relationship between investors and the end-users, eventually creating a better experience for everyone. On one level, it’s no surprise that the real estate industry is embracing new technology. After all, ordinary consumers now expect far greater levels of convenience as services like home delivery have mushroomed, allowing them to order virtually anything with a few taps of their smartphone.

Real estate transactions, which are of much higher monetary value, should naturally offer end-users the same level of comfort, ease of use and accessibility.

Richard Gerritsen, Regional Director Europe for Yardi, says: “Technology has a tendency to cut out the middleman and therefore the whole value chain will start to develop into something new. Operating models will be different, driven by automation. This means business and revenue models will also change.”

As a firm, Yardi is a strong advocate for a single solution 6 | www.propertyfundsworld.com

approach and is investing heavily in this area. “We strongly believe having managers, external suppliers and tenants all working on the same platform will lead to a completely different experience of real estate,” Gerritsen says.

Operationally, the difference will be fundamental.

Gerritsen elaborates: “While currently, property managers, asset managers and investors each work in their own systems, a single platform approach means that operations will become much more fluid. Data will be accessed and utilised in a seamless way, but this is something that will happen over time.”

It’s a transformation that will take place throughout the real estate industry and it is also resulting in buildings being viewed as a brand rather than just a physical space that’s simply leased. This is vitally important as companies choose their workplaces based on service and the environment in which they want their employees to work.

Providing space as a service should be a fundamental part of a real estate strategy moving forward and deploying the right technology can help facilitate state of the art services that will successfully attract tenants.

PROPTECH IN FOCUS | Jul 2021

YA R D I “Investors have begun managing their property’s brand. By using some of the bigger operating platforms and providing services that residents and tenants desire, the gap between the investor and the actual “user” of the property becomes much smaller,” Gerritsen notes.

The role of forecasting To stay abreast of these changing patterns, real estate investors need to strengthen their forecasting capabilities. Having the ability to foresee change and adapt to it successfully is critical for real estate investment managers to remain competitive. This forecasting capacity must be built on data and technology and these two elements must become an integral part of any business strategy in today’s world rather than be relegated to the margins.

“Data must sit at the core of everything an investment management company is doing,” Gerritsen says. “It will help investment managers anticipate potential crashes and steer away from them.”

For this, the real estate industry must completely change the way it manages data. “As an industry, real estate has, historically, first decided what data is relevant, then gone on to gather that data and report on it. But this practice needs to change,” Gerritsen stresses.

He explains this trend is now well in place in the US and is a development Yardi believes will spread. “We are investing heavily in providing technology that improves the ability of investment managers to perform all kinds of forecasting and help them propose what needs to happen as a result.”

Due to the wealth of data available, technology can help investment managers predict certain factors, such as rent levels, which can better support their investment decisions. This is not currently possible in the UK or Europe because there isn’t enough publicly available data. However, Gerritsen is confident this is the direction of travel for the industry on a global scale.

Data is the future Looking ahead, proptech will not only facilitate and drive growth but, perhaps more importantly, it will help avoid decline. “Technology will help investors and landlords safeguard their business and make it more sustainable going forward. These solutions will become a core part of the whole interaction landlords and PROPTECH IN FOCUS | Jul 2021

investors have with the market, their clients and their business overall,” Gerritsen says.

Having access to information about potential clients can give landlords a better understanding of how to future-proof their businesses. For example, data can provide insight on whether they should chase certain clients or not and it can help them recognise the specific needs of their tenants.

These clients are also becoming more exacting, where a building is no longer simply space, but encompasses all the services end-users expect.

“Ultimately, technology is a means to better service your clients, both in a commercial and residential environment,” Gerritsen says. “We are moving to a future where technology will be delivered directly and seamlessly together with a property – in the form of smart meters, smart locks, thermostats, etc.”

He explains how these services can also be supported by real time data collected from physical buildings: “For example, having sensors and data on the operation of the lifts in your existing buildings, and potentially those in properties outside your portfolio, can help you decide what type of lift to install in your next investment. Therefore, such decisions will no longer rely on a sales pitch from a manufacturer or company representative, but on actual data from the end users.”

This focus on data has the potential to completely subvert the competitive landscape.

According to Gerritsen: “You could argue the future of real estate will be led less by the traditional investment firms and more by new companies that are data-driven.

It might also lead to the entrance of the big data firms like Apple and Amazon into the real estate space.

“There is so much that we can do with data – we’re only scratching the surface at the moment.” n Richard Gerritsen Regional Director, Sales – Continental Europe, Yardi Richard combines a financial accounting background with over 20 years’ experience in international software sales, sales management and business development. He has served as Financial Manager, European Controller, Sales Manager and Managing Director for several software companies before joining Yardi, the global real estate technology firm, in 2005. As Regional Director, Richard has a leadership role for sales and business development across Continental Europe, and continues to help the Yardi European organisation grow from strength to strength.

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ESSENSYS

Creating flexible, connected spaces Interview with James Shannon

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he commercial real estate market is changing rapidly – for investors, landlords and occupiers. It’s not just the profound impact of the pandemic on the property market and the accompanying surge in companies adopting more flexible working practices for their staff. New technology is also reshaping the market, allowing companies to embrace new products and services that are changing the way commercial spaces are let, used and managed. In order to remain competitive, landlords and commercial real estate investors need be agile. They need to adapt quickly and provide the flexibility their customers increasingly want.

“Enterprise occupiers are looking for more than just space,” says James Shannon, Chief Product and Technology Officer for essensys, a UK-listed company that provides software-as-a-service and technology to the flexible real estate industry. “They’re expecting to license or lease a productive space. This means touchless access, the ability to have booking availability and amenities.”

These days, property management is becoming about much more than just managing an asset. He says: “It signifies the evolution from pure asset management to a dynamic service and hospitality delivery.”

In this new world, so-called proptech enables traditional investors, who may not have the internal capability or 8 | www.propertyfundsworld.com

resource to do it themselves, to deliver better services for their occupiers. Technology is a critical tool which allows landlords and investors to be more active in the market.

Shannon says the pandemic has played an important role in accelerating uptake of new technology in the industry. “We have to recognise that the pandemic has been a catalyst for proptech deployment,” he says. “The real estate market had already been demonstrating a growing need for tech-driven, flexible workspaces. JLL predicts 30 percent of office space to be flexible in some form by 2030. This trend has accelerated as a result of Covid-19.”

The pandemic has fostered the emergence of the ‘work from anywhere’ ethos which, in turn, is bringing about a huge evolution in the world of real estate. It has underscored the need for flexible and well-connected workspaces.

Shannon says: “The more forward-thinking landlords and investors see this opportunity and are looking for partners to enable them to provide these services quickly.”

Essensys develops software and technology that helps landlords and real estate investors provide a “seamless digital experience for end-users”. The first step is to give occupiers the ability to easily browse and book space using a simple smartphone app.

“Following that, when people turn up at the building, their experience should be smooth – from going through PROPTECH IN FOCUS | Jul 2021

ESSENSYS the turnstile on the ground floor to taking the elevator, booking meeting rooms, interacting with printers and hot desks – our ultimate goal is to make that journey, both digital and physical, as flawless as possible,” Shannon stresses.

Better use of data also has an important role to play in the sector. Shannon explains: “Once a building is connected, you have real time data flowing and customers setting their requirements as they use the space. That data gives us the ability to measure and qualify their needs, then filter those through to the necessary resources, inventory and staff.

“This is going to be a natural evolution which moves first to flexibility, but then to measurability. We aim to get to the point where we have a real-time feedback loop which not only gives the landlord and the investor better data on how to fine-tune their product, but also helps to create a better environment which the enterprise customers can deliver to their staff in terms of productivity, connectivity and enjoyment of the physical space.”

He notes how geographical differences in the way properties are managed also need to be considered. These discrepancies may further hinder asset managers’ ability to fully benefit from the technology available.

“Change takes time. Although the technology allows us to be very dynamic and agile, the organisation needs to be ready for it.

These solutions can generally be deployed very quickly but the asset manager will dictate the pace at which change will actually be realised,” Shannon says.

This is what will drive differentiation across the industry; the landlords and investors able to adapt more quickly are likely to be more successful. According to Shannon, the more traditional pure asset managers have been slower to the game: “The more advanced, sophisticated hybrid type of investors and commercial real estate asset managers are already further down the technology path.

They might already be delivering tech-enabled, flexible spaces and may be looking to deliver another next generation product.”

Cultural shift To fully benefit from all of this technology, organisations need to fundamentally shift the way they view real estate.

“Traditionally, commercial real estate has been quite siloed, not just geographically, but also functionally. Several elements like security and connectivity might have been outsourced.

Now the approach needs to be more holistic,” Shannon explains. “Landlords and investors are having to work in a more coordinated and cross-functional manner.”

This means certain functions need to be taken into account much earlier in the build cycle. Things like security, visitor management and connectivity need to be designed at a much earlier stage in the building process.

Shannon says: “An organisational change needs to take place. They are transforming from purely managing an asset to delivering hospitality and services, which is a significant development.

“The internal shift required to do this is one of the greatest challenges we come across.

Organisations need to adapt. We can provide the platform to enable the technology for buildings but its full value can only be leveraged if organisations are themselves set up to manage this as well.”

Investor advantages In addition to meeting the changing needs of their occupiers, deploying proptech solutions across a real estate portfolio allows landlords and investors additional advantages. “Proptech reduces time-to-value across a property portfolio, which accelerates return on investment,” Shannon remarks.

In addition, industry statistics show customers are willing to pay a 15 to 20 percent premium for technology-enabled space. “So having proptech solutions in place allows investors to charge more for space, which also enhances their return on investment,” Shannon adds.

However, he believes the more long-term and deep-rooted impact of technology solutions goes beyond straightforward return on investment. Harking back to his earlier comment regarding differentiation, Shannon stresses: “Technology is all about being able to deliver flexibility both commercially and physically. It provides landlords and investors with the ability to attract the most lucrative customers; the biggest multinationals with the most demanding staff.” n

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James Shannon Chief Product & Technology Officer, Essensys

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D I R E C TO R Y

ESSENSYS Established in 2006, essensys is the world’s leading provider of software-as-a-service and technology to the flexible real estate industry. We empower ambitious workspace providers to meet the growing demand for flexible workspace solutions. Our secure, all-in-one platform delivers digital infrastructure, effective space setup, seamless operations, and mobile-first occupier interactions. It enables friction-free in-building experiences, instant control over processes, technology, and occupier services, as well as clear visibility into space and service utilisation.

www.essensys.tech

Contact: Amanda Fanoun | amanda.fanoun@essensys.tech

YARDI Established in 1984, Yardi has grown dramatically over the last three decades to become the leading provider of high-performance software solutions for the real estate industry. Today, we employ over 7,500 dedicated professionals working in over 45 offices throughout North America, Europe, Middle East, Asia and Australia.

Since its founding, Yardi has set the standard for real estate software solutions with a combination of responsiveness and technical innovation. We understand the unique needs of the industry’s various segments and have the technical expertise and vision necessary to translate that understanding into powerful solutions that meet and exceed those needs.

www.yardi.eu

PROPTECH IN FOCUS | Jul 2021

Contact: UK +44 (0)1908 308400 | The Netherlands +31 (0)20 565 0050 | Germany +49 (0)6131 14706 3 | europe@yardi.com

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