At the start of last week, I spoke at the Amsterdam Smart Building conference. The goal was to present the greatest opportunities in proptech for this year and beyond, and I want to share the takeaways from that talk with my Forbes readers.
The evolution of proptech is actually pretty straightforward. As we become more and more engaged with spaces and their users, both through sensors and digital applications, we capture data. This increasingly big data, in turn, can “feed” the algorithms that power the AI and ML that allow us to fine tune the real estate-as-a-service offering to the segment of one. Off the back of this, owners and operators can confidently build more flexibility into their real estate business models.
As we discussed in a recent article, marketplace tech and self-contained platforms are amongst the verticals that are now quite saturated, whilst smart building tech is at the cutting edge of innovation in the sector. With this in mind, let’s take a look at some exciting categories of smart building tech, courtesy of research carried out by the team at Concrete VC!
Retail is a multi-trillion dollar market, with the top 250 retailers globally boasting a cumulative revenue of 4.4 trillion USD according to Deloitte. The market is changing, with e-commerce expected to grow at double the pace of store-based retail through 2025, and online sales doubling to 35% of all retail by 2030, whilst physical stores continue to close. However, physical stores will retain a predominant share of the market, and it is vital that they adapt to changing customer needs. Today’s customers expect their retail experience to be omni-channel, frictionless, personalised and experiential.
It is also worth noting that there are three very much interconnected stakeholders in the retail value chain: the customer and the retailer, of course, where the latter is competing against e-commerce and struggling with the death of the high street…. But also the operator, who owns the retail assets and needs to innovate to serve its two clients: the retailer and the end user.
For each of the customer needs detailed above, these are the opportunities available to retailers and operators:
1. Retailers can use analytics to profile customers across channels, whilst operators can leverage the omni-channel approach by leasing space to digitally native brands and building customer profiles both across different retailers and across channels.
2. Whilst retailers can personalise their offering through loyalty programs, in-store customer tracking and beacon-driven location marketing, operators can once again leverage their cross-retailer reach for even more detailed personalization.
3. Retailers are already investing heavily in online to offline integration, as well as in-store tech such as smart mirrors and self checkout, whilst RFID tech allows them to manage inventory seamlessly. Operators can enhance this by aggregating logistics services in their offering and supplying retailers with the tech they require.
4. Finally, immersive tech and in-store product discovery helps retailers give their users an outstanding experience. There is a reason why sports retailers provide fitness classes in store, for example! The operator can support this by running analytics on activities across its portfolio, as well as driving experiences by integrating co-working and co-living in underused spaces.
Many aspects of a warehouse can be made “smart”. Whether it benefits the occupier, the owner, or both, the value add from the tech you can see in the Venn diagram will fall into one of three categories:
1. The first is efficiency gains – these increase sustainability and productivity for occupants. For example, A Building Management System (BMS) integrated with motion and occupancy sensors can regulate air-conditioning and lighting in real time, thereby reducing energy costs. This also allows for better portfolio-wide benchmarking for owners, and facilitates efficient operations and digital services as more flexible warehouses are demanded. With tech, you can for example pre-empt repair or maintenance issues by enabling building managers to take the appropriate corrective action.
2. The second category is product ifferentiation: an owner can differentiate its product offerings by identifying unmet consumer demands, such as providing occupants with data insights and developing better designed buildings.
3. Finally, tech allows warehouse operators to explore additional revenue streams by providing analytics-as-a- service, through the combination, analysis and presentation of insights gained from specific occupants and aggregated data sets. In fact, through data the owner can provide energy efficiencies, flexible warehouse opportunities and additional logistics services.
BIM and Digital Twins
According to PWC, the use of Building Information Management (BIM) and of digital twins will produce 3% savings across whole-life costs of the project. It may not seem much… until you remember that returns on real estate are mostly in the single digits. To clarify, the BIM model is for the purpose of designing and constructing a building, whilst its Digital Twin takes the as-built model, layers a continuous flow of sensor data over it, and produces value-generating analytics.
The benfits of both are plentiful. Designing and building in BIM allows for the reduction of costs and delays, as it permits a more precise execution. BIM collaboration allows for error detection before work is carried out in the field, and procurement can be tightly managed through the platform, shortening timelines and reducing stocking issues. Further, a 3D map already exists for future operations.
In the operations phase, a digital twin model can help reduce costs though a host of tools such as waste & water management, predictive maintenance, intelligent HVAC systems, smart lighting, and ESG data and certifications. Revenues can be boosted with occupancy and utilisation analytics, data-driven space planning and more. Security can be boosted with access control solutions and AI over CCTV.
When selling the asset, the digital twin can help reduce friction and increase returns from the sale. The former is thanks to the implementation of digitised leases and smart contracts, as well as intelligent data rooms which improve transparency.
Last, but by no means least, let’s look at the office market. Buildings and leases are getting smart. The two main ways they are doing so is through flexible offices and… you guessed it, smart buildings.
Flexible leases are vastly better aligned with evolving business needs, as occupiers can focus on their business instead of worrying about real estate operations. Flex operators are currently on track to reduce their costs to below comparable fixed leases, meaning they will entrench a significant competitive advantage. There is also a shift in market geography: the APAC market is expected to overtake EMEA in volume of supply during 2021.
According to JLL, “By creating an interactive, dynamic environment that responds to occupants’ needs seamlessly and in real-time, smart building technology helps businesses to bridge that gap between the built environment and the occupant experience.” In essence, the smart building model is the digital twin model we looked at earlier. Bear in mind that global revenues for smart commercial building Internet of Things (IoT) is expected to increase to $84 billion by 2022, a 19.4% CAGR, according to KBW.
Smart building IoT provides both operational and human data, each adding value as we already discussed. Operational data can fall under three macro buckets which are energy consumption, asset health, and environmental data. Human data also has three buckets: occupancy analytics, access control and tenant engagement. As the offering in each of these becomes more and more sophisticated thanks to positive feedback loops between tech and data, proptech will get ever closer to targeting the segment of one.
The full article can read here.