For all those bemoaning how slow the commercial real estate industry is to adapt to new technology, it might pay to be more measured. That was one of the takeaways from the CREtech LA 2019 conference, held before an audience of more than 800 attendees at the Shrine Auditorium last week.
The event, which featured executives from the worlds of coworking and co-living including WeWork, real estate investment trusts such as Macerich, to micro-mobility operators like Lime, focused on many of the transformative aspects of tech—from the utilization of data to better reach target audiences to the automation of commercial real estate processes including valuation and cash flow modeling.
A panel of heavy-hitters from WeWork, including Granit Gjonbalaj, the chief real estate development officer, opened the two-day event by addressing what moderator and CREtech CEO Michael Beckerman called “the elephant in the room”: “How is it that technology when it comes to real estate is so slow—that the deployment of technology is so slow, whether that’s because we don’t want to share the technology or are not used to the technology?” Gjonbalaj said. “That’s the biggest obstacle in our industry.”
WeWork, he went on to say, would not have been able to get to where they are today without the ability to incorporate technology effectively into its operation. Despite reporting a staggering loss of nearly $2 billion due to rapid expansion, the New York-based company’s revenues more than doubled to $1.82 billion, mostly from leasing office space, The Wall Street Journal reported early last week.
“The amount of technology today, if implemented, is incredible,” Gjonbalaj said. The question now is how to incorporate that technology and bring it to scale.
“There have always been great ideas in real estate, but they just haven’t been brought to scale,” said Craig Robinson, the global head of Powered by We Services, who formerly served as the CEO of global corporate services for Newmark Knight Frank and, before that, the president of the U.S. region at Colliers International Group, before joining WeWork in 2018.
“It’s our job to bring the serum to the fragmented village,” he said.
Sometimes, however, the village doesn’t want what you’re hawking. Kevin McKenzie, an executive vice president and chief digital officer for Macerich, spoke about the switch in the REIT’s business approach and how it’s been received thus far.
“Our business is different—it’s retail,” he said, during a panel with executives from Industrious, Common and AvalonBay Communities. “What I see as a company is we’re going from a traditional landlord—probably a lot like Industrious has done with its services—to becoming a solution provider, a service provider.”
“There’s got to be a cohesive experience for our tenants. We’ve got tenants who don’t have [Application Programming Interfaces] for us to cross-correlate data, to package that to make it intuitive for our tenants,” he continued.
In terms of creating a “holistic tenant experience” at its properties, McKenzie took a pragmatic view.
“We made a conscious decision, which is—if we’re creating these new tenant experiences, not all of the tenants are going to appreciate it,” McKenzie said. “In fact, lots of tenants provide their own capabilities that they’re going to service and operate themselves independent of us and our buildings.”
Digitally native brands, which build their business on the web, he said, are more appreciative of the company’s efforts.
“We learned that if there was one market that would really appreciate bringing all the services together, it’s digitally native brands, brands that built their e-commerce on Shopify or AWS [Amazon Web Services], which could provision everything. We think not all of it will apply to the older market, but we think the older market will start to adapt that in time based on what we’ve learned from the younger market that’s engaging with us.”
During another panel, “The Revolution Will Now Be Mobilized,” dedicated to creating value between property owners and alternative transportation options and services, the speakers seemed to learn something from the audience.
Alan Dowdell, a vice president of business development for ChargePoint, a company that supplies electric charging (EV) stations was taken aback by the audience response to a simple question, “How many of you came here in a vehicle that needed to be charged.”
When, by his estimates, just 10 percent of the audience raised their hands, he said, “In a talk I did in Silicon Valley, it was almost everyone,” underscoring perhaps the ongoing digital divide between the tech world and more traditional industries like CRE. (Though, instead of the usual sea of business suits, many attendees opted for blazers and well-pressed jeans.)
Ride-share and alternative mobile options like the ever more present e-scooters and e-bikes offered by companies like Bird and Lime have become an ever more important part of the commercial real estate landscape. As Commercial Observer reported last July, Fifth Wall Ventures continued its investment in Lime upon realizing it was an “innovation amenity” many of their commercial real estate partners (the VC is backed by major property owners such as Hines, Macerich and Rudin Management Company) were interested in adding to their properties.
Companies like Lime, in turn, have fine-tuned their use of data to target would-be customers. Ryan Foutty, a senior director of business development for Lime, said on the mobility panel that his company is aggregating data to create “heat maps” of cities to figure out where there is the greatest need “from a demand perspective.”
The through-line to many of the talks centered on finding that very “white space,” or unmet need, to create products and services that “solve pain points.” However, tech companies looking to make deeper in-roads into the city landscape would do well to consider some of the unintended consequences of their offerings.
Even in tech-progressive cities like Los Angeles, the lack of forethought can be a deal-breaker.
Aria Cyrus Safar, the economic policy manager (tech) for L.A. Mayor Eric Garcetti, spoke about the disconnect during a panel with top city deputies.
“I feel like I’m a translator between tech and government,” Safar said. “I think the way tech likes to move—really fast—is terrifying to government, because when things break, government has to fix them. I think a lot of tech companies don’t think enough about what can happen. For instance, scooters in the city are great for users, but not so great for people when they are left on sidewalks and blocking bike lanes.”