Resistance to Change

• This challenge pertains to the refusal or hesitation of some employees to engage with new software. Some employees of CRE companies resist the adoption of new software because they are afraid that the technology will make their jobs obsolete. They fear that the software will replace them and they will eventually lose their jobs.
• It is also possible that some employees do not see or understand how the new software can help them in their jobs. They fail to see any personal benefit, so they are not motivated in any way to use the software.
•  Shelley Cernel, writing for Investor Management Services, an investor management platform provider that operates in the CRE industry, identifies resistance to change as one of the challenges that CRE companies face when implementing new technology. Cernel is the marketing director at RealPage, the real estate software provider that recently acquired Investor Management Services.
• Cernel, who is most likely speaking from experience, says that the solution to this challenge is the clear and proper communication of the inefficiencies the new software is designed to address. From her experience, the clearer the communication, the higher the chance of success. It is also beneficial for companies to have internal champions who can encourage their colleagues to use the software.
•  Apto, a company that offers customer relationship management (CRM) software for CRE brokers, have the same recommendations. It appears that from its experience with CRE brokerages, stakeholder buy-in, executive sponsorship, communication, training, and the identification of internal champions are effective ways of improving CRE software adoption.
• When leading CRE firm CBRE implemented its groundbreaking application Dimension, it handpicked a champion or leader to spearhead the adoption of the application. Mahan Thomas, the chosen champion, worked first with the most progressive brokers in the firm. When other brokers saw how this first batch of users were winning business with the software, the rate of adoption grew.

Lack of Time and Other Resources to Properly Evaluate Alternatives

•  Thirty-one percent of CRE professionals cite the lack of time and other resources as the biggest obstacle to replacing less effective software or solutions. Employees at CRE firms, like other employees, have busy schedules that would be disrupted if they are tasked with the additional burden of evaluating alternative software.
• CRE companies are often overbooked or overwhelmed by other tasks, and the sourcing and vetting of various CRE technologies are not something they can easily handle.
• CRE companies appear to remedy this by creating a whole new unit for this sole purpose or by hiring the services of a third party. For example, Cushman & Wakefield, a CRE brokerage, has enlisted the help of MetaProp NYC in evaluating and adopting new software or technology. MetaProp NYC, which offers advisory services for real estate firms, has a startup accelerator that deals purely with real estate technologies.
•  JLL, another CRE brokerage, recently launched a new unit called Spark, a new division dedicated to the incubation and development of CRE technologies, and the selection of CRE technologies that the company can invest in.

Lack of Success Metrics

• Some CRE companies are having difficulties with software adoption because they could not successfully demonstrate or prove the effectiveness of the software. The return on investment is not clear because they have not established benchmarks or metrics by which success can be measured.
• Cernel, the director of marketing at real estate software provider RealPage, identifies the identification of success metrics as one of the challenges that CRE companies face when implementing new technology.
• She recommends the immediate determination of success metrics since based on her experience, success metrics drive software adoption and accountability.
•  Bridge Commercial Real Estate, an office operating company, used a number of metrics to assess the success of its partnership with software provider VTS. Among these success metrics are the reduction in deal cycle time, the reduction in deal approval time, and the time saved from the elimination of manual processes.
• The company availed VTS’s platform because it has inefficient leasing and approval processes and it wastes a lot of time on report generation.

Overview

• The term commonly used to describe CRE Software is Proptech. This report was prepared with research from, and uses, the term proptech in this analysis.
• People use proptech to describe commercial real estate software and can include everything from "construction tech, collaboration tools, IoT devices, tenant experience apps, amenity apps, operations and property management platforms, marketplaces and more."

Strengths

• Changes taking place in Silicon Valley are making fundraising easier.
• Real Estate proptech startup companies are raising more money that ever before. In the first half of 2019, $12.9 billion was invested in real-estate tech startups. This was already more the $12.7 billion record for all of 2017. In 2013, the total was $491 million.

 

Source

 

• A survey of CRE CEOs shows that most of the proptech initiatives revolve around "smart building applications aimed at energy efficiency, typically by embedding IoT-powered sensors into their systems."
• In a survey of 400 global commercial real estate executives a majority stated they are "seeing the disruptive impact of technology on the sector." 

Weaknesses

• Real estate is the largest asset class in the world — worth more than all stocks and bonds combined — yet it is one of the last to adopt technology. 
• Collaboration across the many stakeholders in the value chain reside in fragmented, offline channels. Few software companies are directed to multiple channels.
• Many proptech startups failed to convince users the costs were justified. “The reason there’s a graveyard of technology companies in real estate is they try to disrupt just to disrupt.”

Opportunities

Facility technologies

• The values of many CRE properties have plateaued in the last couple years. "Many owners view technology as a way to keep growing their bottom lines, either by cutting costs or making their buildings more appealing to tenants. " Traditional owners are also looking to technology as a defense against major disruptions in their businesses.
• Co-working firms like WeWork Cos. have" triggered a race between startups and traditional landlords to provide better tenant amenities."
• CRE companies are beginning to create Chief Innovation Officer positions. One of these new hires stated that "the industry had changed more in the previous five years than in the preceding quarter-century. The volume of technology that was coming into real estate was larger than ever before.”
• The opportunity for proptech is driven not only by the size of the market, but also by the lack of innovation to-date. "Buildings are still constructed with the same processes employed a century ago. From the small mom-and-pop property owners to sophisticated real estate investment firms, Excel is the most commonly used tool for data management 30 years after its introduction."
• While 38 percent of CEOs across all industries are concerned about the speed of change driven by new technologies, only 10% of real estate CEOs consider it a cause for concern. This provides forward thinking proptech companies the opportunity to pluck low-hanging fruit from companies who have seen similar success in other CRE organizations.

Data Management Technologies

• Of 350 firms surveyed 80 percent now have a chief data officer or equivalent senior executive. Four years ago it was only 44 per cent.
• As stated under strengths, early proptech entrants focused on efficiencies, like lowering energy costs. In the next wave, the wealth of data available provides the opportunity "to improve future planning and tackle some more difficult decisions."

Threats

• A single construction project involves multiple stakeholders including architects, engineers, designers, general contractors, subcontractors and developers. "Since many players within the industry benefit from the current market failures, there has been minimal incentive, and even resistance, to change the status quo." Proptech companies need to have a full understanding of the end-to-end process and who will benefit from their solutions.
• There are many problems in each point of the value chain. The next wave of proptech companies must be prepared to provide transparency for every stakeholder so that better decisions can be made at a fraction of the cost.
• CRE industry faces a number of challenges when it comes to making use of data. Because much of their existing data is unstructured, proptech companies will find it difficult — and expensive — to make use of legacy data in their applications.