Technology is upending relationships between commercial real estate landlords and their tenants. “B2B interactions are in the past; the most forward-looking landlords are focused on a B2C future,” says Yardi’s Bernie Devine (pictured above).
In Yardi’s latest instalment of the Proptech Insights series, Senior Regional Director Bernie Devine sat down with Hitachi’s Director of Smart Cities and Real Estate Tech, Jack Fitzgerald. The insights the pair shared were illuminating.
During his eight years with Lendlease, Fitzgerald oversaw the development of Singapore’s Paya Lebar Quarter, played in the experimental sandpit as Lendlease’s head of innovation for Asia and launched Propell Asia, Singapore’s first proptech accelerator. He also built one of the first databases of proptech companies.
In 2020, Fitzgerald seized the opportunity to “change the future” with Hitachi and is now working with everything from AI to EVs, driverless trains to robots.
The frictionless customer experience is some years away from commercial offices, Fitzgerald said. “The dream is that the building knows I’m arriving, the lifts are waiting for me, the latte is heating up, and the lights are turning on as I sit at my desk.”
The baby steps – digitising tasks once managed by spreadsheets – have been taken. Now, we are in the “early teenage awkward years” where buildings are getting smarter but this is not obvious to the user. But today’s leading-edge technology is tomorrow’s business-as-usual. As soon as tenants experience smart parking or destination lifts in one building, they expect it in all of them, Fitzgerald said.
Devine noted that savvy landlords no longer see their buildings as bricks and mortar. “A building is a device.” When landlords look at buildings through this lens, they gain a laser focus on the user experience. How good is the user interface and functionality? What hardware and software will power our device? And what platform will help us create the best user experience?
“This mentality allows landlords to unlock new revenue streams,” Devine observed.
The old model of build it, hand over control to the tenants and then collect the rent, is “slowly being eroded,” Fitzgerald added. When commercial real estate is consumer-driven rent will account for just a fraction of revenue.
Some landlords are taking a tiny commission when people order lunch through tenant apps. Smart carparking, EV charging and distributed energy generation are all areas where landlords can profit.
Tenant apps – currently considered an optional extra with low ROI – are natural extensions of the retail or hospitality loyalty platform. In time, they will allow landlords to offer their customers everything from discounted insurance to cheap WiFi.
What does the future look like?
“Proportion of rent as a part of total revenue will get smaller,” Devine said. “It’s not that rent will get smaller. It’s just that other revenue streams are going to grow. The really successful real estate companies will figure out how to enable a service, how to deliver a service and how to bill for a service.”
Now that’s something to lose sleep over.
Watch here the latest instalment of Yardi’s Proptech Insights, with Bernie Devine and Jack Fitzgerald.