Our relationship with technology has changed over time from a one-directional view, seeing it as merely a tool to be used for one purpose, to a multi-directional multi-purpose approach with feedback more akin to an extension of ourselves. With technology working as ‘eyes, ears, and nerves’ of sorts, wrapping around and through a built space, it has never been clearer that technology is fundamental to understanding the new human-urban experience and landscape.
In the newest edition of Asset magazine (March issue 123) [1], the article about technology in the real estate sector by Wayne Burger and Peter Levett caught our eye. It was a fascinating read, and discussed the opinions of Mc Kinsey & Company [2] that technology is key to forging new paths to success in the real estate sector. We couldn’t agree more, so we decided to weigh in our take on McKinsey & Company’s thoughts, from a Managed Security and Operations Services perspective.
The 6 Technology imperatives :
The article describes how digital sophistication can help groups in the real estate industry in rapid analysis and decision-making. They state that there has been a fundamental shift in tenant needs and requirements post-COVID, and that property managers who overlook this “may underperform and lose share”.
In the current economy, it’s not enough to build a site and expect people to flock in, rather as Mc Kinsey & Company put it, the emphasis should be on the client experience, and the operation of a site, where “if you operate brilliantly and please tenants, they will stay.” They describe how real estate success will be based on a business’ ability to utilise technology to adapt to this new demand, and adopt the following six imperatives:
1. Create solutions for clients, not just physical spaces.
Properties have shifted from being an area with a pre-defined meaning to a tool to actualising meaning for the businesses or individuals operating within. An office is no longer just an office, or at least, to thrive it needs to transcend being ‘just an office’. For Mc Kinsey & Company, “expanding into problem-solving requires a new operating model”, that uses technology in fundamentally unique ways compared to previous years.
This shift from a “static product” to an active solutions-oriented service should be recognised as it creates new business opportunities for real estate players. From smart parking and access control solutions, to IoT for increased efficiency and enhanced sustainability, and analytics into shopper dynamics for enhanced business intelligence, real estate players need to utilise the value add that technology can play in all elements of the property.
From our perspective, these measures should be seen as the status quo, they have been available and have been utilised for several years already. Most large real estate players have numerous technologies running, and know that the data generated is where the magic is. The difference comes in the value add that effective systems integration, data interpretation, and operational management can provide.
We further view that the term ‘solutions’ should not be seen as linear, but rather circular in nature. A solution is only as good as solved if it informs future decision-making. Utilising feedback systems at your disposal to understand what the technological nervous system running throughout your facility is telling you transforms your space from a ‘dead’ space into a ‘living’ space.
2. Use developments to generate momentum, not merely to capture momentum.
Well-designed properties can become “magnets” for top-tier businesses, but for Mc Kinsey & Company, this is true only if they are successfully curated for the ways in which people will want to use spaces in five years or further. These “innovation hubs”, they say, pull in an additional 10 to 12 percent average premium in commercial rents compared to properties with under-utilised technology.
Beyond the increased premiums from attracting top-tier businesses, think about the daily cost savings that come with enhanced security measures and techno-management measures through IoT devices, and business intelligence insights generated through the data mined to utilise your existing resources more efficiently. These measures will ultimately do more for your business’ reputation than hinging everything on having a few ‘big fish’ clients.
You can also leverage the unique selling point provided by technology as part of your marketing drive. Create a curated client experience with effective operations, advanced security and concierge features, and A.I powered analytic capabilities, and let it do the talking. We utilise technology to proactively help our clients reach the goals they set rather than use technology in a catch-up game.
3. Find value creation opportunities throughout a project’s life cycle, not just at the end points.
From our perspective, technology and off-site security is often considered a ‘nice to have’ or treated as an afterthought, so it’s refreshing to see that Mc Kinsey & Company identify technology as a key driver in value creation throughout a project’s life cycle. Utilising security technology during construction results in theft or vandalism prevention, using smart access control/ parking measures and LPR (License Plate Recognition) can double as preventative security and user experience enhancements, and IoT utilised within the building can help reach sustainability targets while reducing energy costs.
One of the important touchpoints Mc Kinsey & Company identify is the emphasis on site operations, one of the drivers of a competitive edge in property management. Effective management of a site, with transparent reporting and technology-driven analytics is one of the best ways to retain and attract top-tier tenants and investors.
One differing opinion we have from Mc Kinsey & Company is their notion that you have to invest in owning the operating platforms you use. The idea was for large players to take advantage of their scale to justify and offset the licensing fees and on-site expenditure to boost their returns. In our experience larger players and managers of small-medium properties equally benefit from off-site managed operational and security solutions for numerous reasons. There is a reduced capex cost for the servers and equipment needed as well as the licensing fees that come with the technology, and a reduction in the need for well-trained and experienced staff needed to operate the operating platforms, and address technology-related issues that crop up.
We agree that owning the operating platforms used can benefit clients due to scale, but let us take on the burden of licensing fees, staff training, and managed operations, while providing transparent reporting and backup/redundancy from strategically remote locations. By continually self-adjusting and self-assessing through the use of site simulations and establishing effective channels of feedback, we specialise in constant assessment to ensure value creation opportunities are seized. Below is a spot sample from a monthly report showing data generated regarding high-risk days and times, valuable feedback that can fundamentally alter site operations, and security efforts.
4. Embrace sustainability as an opportunity, not a compliance process.
Sustainability is a major buzzword, for good reason. While usually the first connotation with sustainability tends towards environmental-related ideas, business sustainability is a major factor to consider, one Mc Kinsey & Company overlooked to a degree. Growth shouldn’t always be onwards and upwards, but rather growth should be focussed on ‘stabilising the base’. If your property is plagued by inefficiencies, crime, incidents onsite and the like, this may seriously jeopardise the long-term sustainability of your property investment.
Where we agree with Mc Kinsey & Company is the emphasis that creating sustainable operations “will require cutting-edge digital and analytical tools.” Beyond Business Sustainability, the specialised technology-driven security and management services we provide can ensure the environmental sustainability measures you implement remain functional, effectively operated, and on the property! With solar/environmental sustainability technology infrastructure, if it’s under-performing, down, damaged, or stolen, then that’s not sustainable.
5. Embed digital solutions and advanced analytics in everything, not just by sporadically adopting individual solutions.
Gone are the days of on-site security guards only focussing on security, or site managers only focussed on client relations and daily operations. Or at least, this model is outdated. There are feedback loops in every system, so sporadically focussing on individual solutions misses the point, and misses opportunities to “solve the problems” mentioned by Mc Kinsey & Company, that creates value in the eyes of your clients or tenants.
The data is there whether you capture it or not. The same vehicles frequent malls whether they are captured on LPR (License Plate Recognition), the same pumps malfunction whether there are IoT (Internet of Things) devices to notify technicians, and there are ebbs and flows of people in facilities, whether there are reporting/operational dashboards for business managers to utilise. So choose technology, choose to see the invisible threads woven throughout your properties. Mc Kinsey & Company state outright that “the largest real estate owners are collecting and harnessing the power of their vast data troves to make better decisions”, investing in developing their own ‘proptech’ systems to maximize the value created.
6. Focus on operating efficiency, not just on income.
Utilising your existing resources or natural advantages, while using technology to counter any natural bling spots allows you to “flex all [your] levers” and tools. The focus should be less on what you can get from tenants or clients, but on what you can provide them to make sure their business will thrive, guaranteeing client retention and partnership in the long run.
A beautifully designed property in an ideal location, without operational efficiency, will quickly become an empty beautifully designed property. By not focussing on income and instead focussing on leveraging technology to have an accurate operational overview of the property, and empowering the management team to back the insights generated, clients will be happy to pay the price to get top-tier service. Below is a reporting spot sample from an extensive monthly report tailored to our customers’ requirements:
By incorporating IoT into operational efficiency systems, and by reporting on these devices accurately and timely, patterns soon begin to emerge. We were able to notify the client that one specific escalator was increasingly breaking down or off-line. We scheduled a maintenance check, and ensured the escalator system was working as it should.
Due to continuous data captured from multiple sources we were able to identify that this escalator was in a high-traffic zone, and was then placed on a more frequent service schedule with the correct technicians, replacing any parts with replacement parts with the correct specs. The cost of a large replacement due to system negligence, the inconvenience to tenants and customers, and the potential for issues (such as a lift stuck between levels) that may affect the property (and property management company’s) reputation were effectively mitigated through preventative measures.
In closing:
Mc Kinsey & Company conclude that to align yourself with the established six imperatives real estate players will need to invest in or partner with service providers to access the technology, analytics, operations, and climate science capabilities needed to remain in the game. While investors and developers have traditionally shone in real estate organizations, the spotlight has another focus.
The value created by technology “may come to equal that created by “traditional” real estate people”, but that’s not to say technology and real estate players are at odds. Rather this should be seen as a synergistic partnership where both parties reflect the spotlight to highlight each other’s competitive edge. Technology solutions are key to attracting and retaining quality staff, and tenants alike. The returns generated through technology-driven holistic management and operational performance undoubtedly opens up new paths to success for managed real estate.