Are you wondering how CRE property teams can increase NOI? The answer is by implementing property management software for your buildings. The best property management software not only increases efficiency for your teams but also has the power to grow your NOI.
Take it from the experts. Scott Sidman, EVP at Building Engines, recently sat down with Raphael Collazo and Jeff Walston, hosts of the Commercial Real Estate Academy Podcast, to discuss:
- What is property management software
- How CRE property teams can increase NOI
- How property teams can improve efficiency
Scott began his career in the hospitality industry, learning about world-class customer service in management roles at Four Seasons and InterContinental Hotels Group. He then embarked on an entrepreneurial path that included co-founding a real estate services firm and a trade consulting business in Brazil. His start in technology began with leading business development for Cedona Technologies, a company providing early hosted document and media archiving tools for consumer brands and distributors.
We’ve got an excerpt below of some insights from the podcast on how CRE property teams can increase NOI and efficiency. Text has been edited for length and clarity. But you can view the video below for more!
Raphael Collazo: Why do you think the commercial real estate industry, historically, has been slow to adopt technology? How has that changed over time?
Scott Sidman: I’ve had a lot of time to observe that and learn lessons along the way. Fundamentally, it’s because real estate has operated successfully for eons in the same way. Real estate companies, developers, managers, brokers – everybody runs their business and do it well. What’s happened within the industry over the past 20 years? Things have had an impact on changing that mindset, like more institutional ownership of real estate. Whereas real estate for many years was run regionally by family-run businesses or by individual investors, institutions began to become more prevalent and take ownership stakes. Things for reporting, data, and information drove the need for technology. The only way you can do that at scale is to put technology in place. Things like underwriting requirements. Or now there’s legislature for things like energy, sustainability, and ESG reporting.
Then there’s been the tenants themselves saying, “I do everything else on my phone and online. I don’t want to call the management office. I want an app. I want visibility. I want accountability.” And that combination of factors has impacted every single area of real estate, from brokerage to construction to development and design all the way through to operating for the full lifecycle of an asset.
Collazo: A lot of owners are starting to realize that tenants are starting to demand a more comprehensive tech stack when they’re looking for buildings to occupy. If you don’t adopt tech, you’re going to be left in the dust.
Jeff Walston: Can you give a description of what Building Engines does?
Sidman: Sure. At our core, we define ourselves as an operating platform for commercial real estate. If you think about the emerging tech stack in a commercial real estate asset, the foundational layer once it’s been acquired or developed, always is accounting. You have to put an accounting system in place. There’s some dominant players in that category – companies that have been around a long time. Then, from there, now I’ve got to fill space. I’ve got to manage the brokerage, the leasing process, the marketing of the space. And you’ve got some companies that dominate that space.
Above that is where we think we fit – and that’s the operating layer. Everything for the day-to-day basis, between tenants, management companies, the vendors, the people that work in the building – everything that happens within the four walls of the building. It includes functional elements like service request management, preventative maintenance, operational risk items like certificate of insurance tracking and incident reporting. All these things a management team needs to do on a daily basis and stay in close contact with their constituents in the building and the people who service the building.
Historically, they were done with paper and pencil, telephone calls, and faxes. We’ve consolidated all of those things into functional areas, modules, and capabilities that we can deploy in a building. We capture the data, manage the workflows, communications, notifications, billing elements. We share information back to the accounting systems. It becomes a seamless process. We do that through a platform called Prism. We have over 3.5 billion square feet and about 40,000 buildings. Prism is modular in nature. It’s a modern tech stack built with open APIs and interoperable with other tools and systems. And all systems in the tech stack share data and talk to each other.
Collazo: What are some ways you’ve seen your clients leverage the platform to improve the NOI of a property?
Sidman: Yeah, the key value proposition is always about improving net operating income. So, can you have an impact on topline revenue or can you help manage expenses? We can do both.
We talked about service requests. Managing that is a foundational element of what we do. We learned over time that property teams were really inefficient at capturing the billable items that they’re allowed to charge for when they provide service, according to the terms of the lease for the building. When we go through an implementation for our customers, we go through the tenant roster – and even in the same building, the leases can be different depending on what the broker negotiated. We make sure we capture all that on a tenant-by-tenant basis. We make sure the management teams understand how to do things like manage what their cost basis is but then what they’re allowed to charge for a margin, in a markup, and corporate things like taxes. And then build a process and a workflow notification so they can make sure they capture every billable item and track it during the course or servicing their building and tenants.
It’s not about nickel and diming tenants. But the incremental revenue can have a substantial impact on the bottom line in a building. We have customers who are billing hundreds of thousands of dollars or millions of dollars a year in service revenue. We make sure they capture every single one of those dollars and that they do it at the right rate and the right margin according to the leases. And then they can have an audit trail in case tenants ever have questions about their statements to prove that they did the work and they’re charging the right amounts.
Collazo: What about through operational efficiencies or whatever else?
Sidman: On the operational side, it’s about creating efficiency. How many people do you need in a building to run it? We can help our customers figure that out. So, how big should the maintenance team be? What’s the actual volume of work that’s coming through, either on a reactive or proactive basis? We help them figure out how to be more efficient. That’s one impact. As well as track how much they’re spending on repairs. Or where there are opportunities for equipment that fails at a much higher rate in one building versus another building, or within our customer base.
Then, if you look at something like incident tracking. One of the key things there is making sure you capture relevant information for an incident that occurs in a building and that you’ve documented everything you’ve done because one of the things we’ve learned over time from our customers is that settlements are generally offered when the property team or the insurance company doesn’t have the right information. But typically, if property teams do the right work up front and they mitigate their risk, they can reduce the amounts of claims that result in a loss. We’ve had customers make significant impacts on their insurance premiums and how much they pay out. And that’s just through proper automated processes and information capture.
Watch the video above to learn more insights from Scott, including how property management software like Building Engines can help you reduce energy usage and costs and prepare for sustainability mandates, how CRE proptech will evolve in the coming years, and more. Want to learn more about how CRE property teams can increase NOI? You can contact us to connect with an expert like Scott!