The commercial real estate (CRE) industry landscape has changed so much in the past few years that it has left even the most veteran of professionals with questions.
We recently met up with three CRE experts during the webinar, “What’s in Store for CRE Buildings Operations in 2023,” to talk about what they are seeing in the industry and to answer the most pressing commercial real estate questions that people working in the industry have. On this panel we were joined by:
- Tim Curran, Executive Managing Director, Property & Asset Management Technologies, Building Engines/JLL Technologies
- Greg Carey, Senior VP and Chief Information Officer, The RMR Group
- Randy Fink, Managing Director, Property & Asset Management, JLL
Read what other industry professionals are asking and the answers to those commercial real estate questions from the experts in this commercial real estate FAQ.
Topics covered in this commercial real estate FAQ include:
- Tips for new CRE tech adoption in a rapidly changing industry
- Smart buildings/IoT implementation
- Insights on how to work through issues during economic uncertainty
- HVAC operations when tenants are working on a hybrid model
- How to tackle sustainability goals in commercial buildings
- Options to amplify tenant satisfaction
(Note: Answers have been edited for length and clarity.)
Commercial Real Estate Questions on CRE Technology
What are your tips for new tech adoption? As we invest more, how do we encourage our tenants and property managers to use the new tech? Some people are hesitant to change.
Fink: We have seen so many changes hit us over the last three years, constant blue moons. Once in lifetime events happen daily in our business. And being able to manage that change is super hard. The thought of changing on purpose, when you’re forced to change in all these other directions, is really daunting.
I think one of the things that can help the process is taking change management seriously and building that capability in-house. There are tips and tricks about being able to plan forward for change both in terms of operations and business process, culture, learning, and continuous training.
Reducing the fear of change by being able to control the professionalization of change is one of the opportunities we see in property management. I know it’s a lot easier if we take it seriously and develop some capabilities around changing on purpose.
For a new building to be built, do construction companies’ architects take into consideration readiness of the building for smart buildings or IoT implementation?
Carey: From the very beginning of construction initiatives, we look at what smart technologies we want to put into the asset and have started. Engaging with tech partners early on in those conversations makes sure that we’re designing for tech to integrate into the asset. It’s a lot easier to put in tech as the building’s being constructed than it is to do it when it’s already been built out.
Expert Insights on Economic Uncertainty
How do you see the economic challenges (i.e. reduced occupancy and reduced property values) impacting the level of expenditures on property owners and operators on new technology, software, and proptech solutions for other asset types?
Carey: The tech must show a return. Tech needs to show that it’s going to be able to drive higher rents, reduce operating expenses, reduce a tenant’s common area charges, etc. Property teams are getting a lot more scrutiny over the types of things they are trying to deploy.
Wouldn’t tenant lease renegotiations and square foot reductions cause owners to pull back on building technology projects, especially if debt is coming with higher interest rates?
Fink: Every investor is wrestling with that on an asset-by-asset basis. If you’re in a bad spot and you need to reduce expenses, you’ve got to do what you got to do. On another level, if you are trying to compete, then you invest in what is important and you make sure there’s a return on your investment. To some extent, certainly with certain portfolios and in certain geographies, cost-reduction is a bankruptcy-avoidance strategy. Whereas others know that to get the cash flow, they must invest to be able to compete and get that revenue.
Curran: What we are seeing is that companies are gravitating towards technology solutions with hard ROI benefits. Hank is a software product, you purchase a subscription to it, and it delivers three times the savings. You’re going to get x3 back in energy reduction by letting Hank do its job and optimizing HVAC. There’s a lot of economic pressure here, there’s no question. You’re going to see companies gravitating towards quantifiable benefits from the technology.
Commercial Real Estate FAQ: HVAC and Sustainable Operations
Will Hank help to reach sustainability goals and help to better automate the HVAC adjustments?
Curran: First, it helps to lower the cost to operate the building. Second, it lowers the energy and carbon emissions that are associated with HVAC. HVAC is the largest consumer of energy which means that it’s the largest cause to a carbon footprint. So, Hank is going to reduce energy and expenses at the same time – helping to hit both goals.
How do you operate your HVAC when tenants are on a hybrid model and they all have unpredictable schedules?
Fink: Directionally we are seeing two rhythms:
- Cadences in buildings are becoming a little bit more predictable, that’s helping us with planning.
- Building automation systems, occupancy sensors, and the ability to be able to spot zoned temperatures in buildings.
That is increasingly the direction that we need to go. So, instead of setting a temperature for a building or a floor, we can get it more specific and customize it for individual users.
What are you seeing regarding waste management at the building level and the demand from tenants?
Curran: Sustainability, with respect to waste management, is a new thing. You’re looking at water and your recycling initiatives. So, yes, there is a new attention on waste because of our sustainability agenda.
Looking Ahead at Tenant Experience
Other than surveys, what tech options do we have for tenant satisfaction?
Curran: We talked about survey communication with a tenant, but offering amenities and making sure they understand that they’re available and that they can sign up for things. So, making sure that your offerings are taken advantage of, that can all be done now.
Also, building access. Is it easy to get in and out of the building? Maybe multiple buildings. I might be working across office buildings within my company, can I get into the space and those buildings through an app? There’s a range of things you can deliver through a tenant experience application, not just a survey.
More Insights from CRE Experts
With the answers to these commercial real estate questions, professionals can hopefully have a better grasp on the state of the industry. However, with the evolution of proptech, tenant needs, sustainability initiatives, and more, people are still sure to have more questions.
For more insights from the three experts on the state of commercial real estate and what property teams can expect to see this year, watch the full on-demand webinar.