Real Estate and PropTech: Scott Addison
Rhys Phillips chats with Scott Addison, president, Brokerage Services at Colliers Internationals, about the wide-ranging effects PropTech is having on real estate development.
How would you define “PropTech?”
In my role we touch base with a lot of issues, so we look at PropTech as anything that touches buildings and real estate and [and that includes] people who are interacting with and in the real estate field. This is PropTech from my vantage point so it is really broad. You have all the sales tools, you have all the things that are driving building efficiencies and how tenants interact with buildings such as parking. It is a huge interest area so it will have a big impact on the commercial real estate sector. I see the concept as being super broad.
Would you include ConTech such as drones and sensors, for example sensors that monitor temperatures and adjust heaters when curing cement in winter?
I was down in Silicon Valley at an incubator and a professor from one of the eastern universities who had been involved with an athletic facility. He had designed a sensor that went directly into the concrete to tell you when it has cured. It varies by region-to-region, but let us say it takes 25 days for concrete to cure. Everyone in the industry would tell you what a plus it would be if he found a way to tell you the concrete had cured in 10 or 15 days, which is considerably faster than the traditional method, by using sensors and Wi-Fi. This would be a considerable advantages from a real estate commercial brokerage advantage point. We are constructing buildings and whether you are putting racking in, putting office furniture in or continuing to build the tower up, you need to know the concrete is cured. If you can make occupancy times a lot faster, it really helps clarify things for brokerage and simply helps having the building built faster.
I thought that was a really innovative, a cool idea. But when I spoke to friends in the construction industry they said, “Well, you know, it takes this long for concrete to cure” and they were not all that open to the idea of having a different way of sensing it and they also believed by-law and inspectors wouldn’t accept this approach. I think this is one of the things that slows technology down in terms of gaining acceptance in real estate. There are so many of those rules and regulations or bylaws, there is the engineering society or there are just resisters to technology that means it just takes a long time to have positive impacts. We are seeing all these rules and regulations that are put in there with good intent, but they can stymie the ability for new technology to break into the industry.
One of the major splits in PropTech are those digital tools that improve efficiencies in existing firms as opposed to those PropTech innovations that create competing models to these legacy firms. But there are also those that see broad digital impacts, such as autonomous cars, that may have major future impacts on real estate in the future. How does the industry absorb this information about future disrupters rather than simply those tools which might increase efficiencies within a firm?
People who are planning to build office towers three years down the road and are currently getting plans done at a time when autonomous cars are still five, ten or more years away are dealing with existing issues of zoning by-laws, rules and regulations and just getting investors to get their heads around the immediate issues. If you are going to construct a building in three years, the question you are not probably asking is what will we do with this garage when the building is twenty years old and there are autonomous cars out there. People are thinking about that, but I haven’t seen people yet saying “I am building commercial buildings but I am not building car parking.” Still, there is talk about what underground parking can be turned into. I have heard everything from video arcades to laser tag and that type of thing. There is still demand for document storage although again I think paper document storage is disappearing. I have even heard of storing peoples’ wines which is a growing business these days. What I have not heard is “we are building without parking because autonomous cars are coming.” I think everybody sees that as ten years out in reality.
What about e-commerce when you are going to be building or managing for example a big box mall? How does the industry not get caught out on these sort of developments? How does one monetarize such knowledge other than as a “futurist” for hire?
Like Colliers did in terms of getting involved with the PropTech accelerator, you can look at a thousand different ideas. While we are narrowing it down to a few, an awareness and an understanding is created of what potentials there are that allow and require you to adapt. If you want to stick your head in the sand and say technology is not going to change commercial real estate that is pretty foolish. You have to be aware of it. Is it going to be a big disruptor like Uber was to the taxi industry with different competitors in that space? I think technology is going to change how commercial real estate companies operate and how building owners operate their buildings; but I have not yet seen a big game changer, a major disrupter so to speak. It is what everyone thinks about, talks about but I have not seen it yet.
Is PopTech changing the real estate industry…definitely. It is now a lot easier to find big data and information on buildings at your fingertips. I have been in the industry 33 years and seen massive change over that period. People want information faster, they want it more conveniently on their desk. It may be one of the reasons why you have seen the growth of the big national real estate companies because they do have the financial capability and the scale to invest in technology and computers. It is expensive to be absolutely leading edge [and it may not currently make sense]. My analogy would be like 8K TVs. They are tremendously expensive and probably with the networks customer like Bell or Rogers you are not getting an 8K feed, So you have something you cannot use but in two years it is going to be a third of the price and you are going to be able to hook into a network that works. Being leading edge with an 8k TV in your living room now is just an ego trip. So a lot of real estate companies are sitting back and saying give me a proven technology, give me something that works.
In addition we are extremely large, at Colliers we are 17,000 employees around the world and to get people to use it they have to be able to change their habits. Technology is changing faster than people can change their habits. The attitude “what I am using now works quite well,” is prevalent in a big company.
There seems to be a consensus among many of those I have researched that Real Estate tends to be a laggard rather than a leader in digital technology. But has it not also been creeping through the sector since excel spread sheets and web real estate sites?
Oh, for sure. I can think of people who didn’t want computers on their desks in commercial real estate…”I don’t need that.” Sometimes they don’t even realize they are using technology to help them in their jobs. There is probably not a person in the office who hasn’t used Google maps or one of those satellite mapping apps to study a building, get a feel for it instead of driving out to the site for a physical walk around. You still have to do that at some point if you are going to be good in the industry, but it sure saves a lot of time. These things creep in. Think of the analogy of the frog and the boiling pot where the temperature can be increased but the frog does not react to its slow rise and eventually gets cooked. The technology seeping into commercial real estate has been happening consistently for years now and most people are adapting to it. On the brokerage side, which is largely commission, when they see something working for a competitor they want to get on it. Yes the industry is slow to adapt to new ideas, but once a new idea is proven everyone wants it.
We subscribe to Devin Tu’s MapMyProperties (MYP) which provides searches, maps and regulations as well as due diligence reports, MYP provides analytics with regulatory data sets. You can look at a satellite image of the property that shows the boundaries of the property, while the report analyzes the by-laws, etc. It provides ideas of what can be built on it. This can save hours and hours and hours of work per agent. We have forty people in the Toronto Region using it now. From data bases to apps, from laser measurement tools to measure floor plates to creating marketing campaigns, to using twitter, Facebook and LinkedIn [PropTech tools] have a tremendous impact on your life day-to-day. It’s just easier to do your job.
Let me see if I understand a point that I think that you are making with which I tend to agree. The focus tends to be on disruption and transformation; but would it be safe to say that PropTech is really more an enabler for legacy companies that are adopting and adapting as they go along?
Yes, definitely. It’s allowing us to use all this data that is floating around to bring it into reports more quickly and efficiently. The good people adapt to it really quickly. All this technology allows us to provide a lot more information to our clients than we did a few years ago on any given property or the company.
KPMG in an interview tended to agree, but also said that certain specific sectors like conveyancing will be at risk if Blockchain is fully utilized as an alternative model. Is this a possibility?
Yes, I think there is going to be certain things in there such as Blockchain and its impact on the whole invoicing, keeping property records area [that will be impacted]. If you are searching a property record, that is going to become so much easier. Right now we might outsource that and have someone go and conduct a search on a property, but in the future I think it is just going to so much easier. I think, however, that it is more than five years out although within these real estate companies will eventually get eliminated.
We have people doing GSP mapping and things like that; and, I think much of this is going to be made much simpler with apps on which you are just going to click. Click and it will do what would have come from complicated mapping and it will also pull information from multiple sources. If you are planning such things as building tours – and there are people who do that for senior sales agents – all that is going to be done by computer, etc. Building design, office layout and furniture layout, a lot of that will become much easier to do. Instead of having a turnaround time like five days to layout a 30,000 sq. ft. office floor plate, everything will be done within hours.
Yet, in Toronto there has been a significant blossoming of commercial real estate with world leading design architects, domestic and foreign, doing major office and residential condos. This suggests rote design may not be around the corner; perhaps digital design helps free up creative design to an extent.
You want to build a building and you want to build something that is iconic. Now you can go on Google and look at images all around the world. I think that is a great point because in Toronto there are a finite number of architects that build the towers. If you look from the 70s and 80s, they were rectangular boxes with coloured glass mirror on the front, maybe some other features. Now to your point, you are beginning to see interesting building shapes and designs. You don’t have to fly to Dubai or Norway to look at a building; you can do it through Google images or Bing. There are lots of apps [that show innovative architecture]. Will there be an app like HouseIt that lets you look at what is happening inside of houses. If you want to look at modern kitchens there are thousands of images and you can find out the prices. Do you think that will come to office spaces? I think it will.
Are there any useful ways of organizing the PropTech universe? Are there areas that are going to get the biggest focus in commercial real estate?
The definition tends to get set by what a business needs. As an example, we work with Upsuite. They analyse all the available co-working spaces in a city like Toronto. You can go on and say we need ten seats with Wi-Fi in my location. Much like a hotel, co-worker spaces range from bargain basement spaces to high end co-working facilities. Brands like Regis and others have spaces with different concepts just like hotels. This originally helped our brokers identify spaces but we are now finding out there are all kinds of other uses for that technology. It is helping landlords analyze whether to change a floor into co-working and can they advertise and market it directly themselves. Sometimes these apps and this technology leads people to think “boy, it was designed for this but it works well for other things.” Uber is a great example. It was designed for you to get a lift in a car, but now they are delivering food and other things. It allows restaurants to have takeout that never would have thought about it before. I think that’s what happens. This pushes the definitions, Upsuite was designed for sales and promotion but we also found out that it allowed people to share their tenant experience.
Does Collier deal with managing condominium buildings?
No, but our sister company First Services does. Colliers was originally a division of First Services Corporation. First Service Corporation runs and operates condo buildings but we have separated that business away from us. We are just commercial but we do help people sell apartment buildings.
From where you are sitting, what are the most important developments taking place?
I think it is the ability to analyze big data using things like Microsoft’s AI and utilizing sensor tools when operating a building. [With the latter] this means knowing if something is too hot, too cold, knowing what is the temperature, changing things remotely, monitoring a building from a different location. Big data is here today, monitoring is here today and marketing tools like LinkedIn are here today and it is having a pretty big impact on how we market. Digital marketing tools are becoming quite prevalent. You can’t tell who read a newspaper but you can certainly tell who has jumped on your web site or who has looked at your LinkedIn page. I see artificial intelligence and machine learning [that is, the application of artificial intelligence (AI) that provides systems the ability to automatically learn and improve from experience without being explicitly programmed] has not probably had much impact in our workings yet and I think is about five years out. But you are seeing such things as Cortana, [Microsoft’s free smart digital assistant that It gives reminders, keeps notes and lists, takes care of tasks, helps manage your calendar and help make calls and send texts], which can tell you that you promised to get back to that person in an email. Basic IA perhaps. It also attempts to analyze tone, whether a client is angry for example, although it is not very good at that. Still, the reminders are good. Emails can become the worst form of communication because everyone can send out emails from big lists and people get overwhelmed with email. But things like Cortana and similar tools can set up rules for determining important emails. So, you are beginning to see some impact on making things more efficient. Making emails useful again is the way I would describe it. Linkedin is pushing tools such as so-and-so has left their job and the tool has obviously determined that you have a connection with that person so you might be interested in them. Microsoft would like you to use CRM [a customer relationship management tool using integrated, data-driven software improves how you interact and do business with your customers. It helps manage and maintain customer relationships, track sales leads, marketing, and pipeline and delivery actionable data.]
As a major international firm centred on commercial real estate services and management, how is PropTech development playing out within the firm? Are you primarily a client reaching out and looking for useful products; or, are you developing such enablers internally? How does the Proptech Accelerator fit into that process?
By being involved in a PropTech Accelerator we get to see a lot of technologies and apps whatever might make our business more efficient. You have people running in saying, “I saw this Idea, this app, this tool to will make my job easier, my performance better” and as the manager you’re sitting there saying “well, that looks interesting.” What you don’t know is that there are five more out there that are perhaps better. The PropTech Accelerator has allowed us to look more broadly and say “hey, five other people are already on this.” How do you pick the winner, e.g. the old VHF vs Beta debate? It is hard for companies like ours to do so with confidence.
We need to determine first if this is a need for us, will it help us manage our buildings better, help our sales force be more productive second which option one seems to be better. The PropTech Accelerator gives us access to the ground floor and you can meet and mentor the people running the business. AS a result, you get a much better feel for the emerging ideas. Business people can have great ideas but can they bring it to market, can they get the financing, can they scale it across the world if they need to. And as we work with them, we really learn that, yes they have the capabilities to do that or not. The other thing as a client promoting PropTech, we get the technology sooner than other people. It doesn’t give us exclusivity – I have mentioned MapYourProperty and Upsuite – because for them to be economically viable they have to sell to our competitors as well. But we get to be an early adaptor, get our people on it a little faster sometimes. For our clients, the fact we are involved directly with PropTech obviously means Colliers is leading edge. That is the image we want out there.
Is the PropTech Accelerator internal to the company or is it like Fifthwall, which is outside but works with venture capital coming from real estate operators?
I see it as outside of our business, something that is not core to our business. But that said, we are developing our own proprietary apps and software such as for our Corporate Solutions Group. We are looking at our valuations of buildings which is about big data and artificial intelligence. Can it do a good job of gathering all the data and bringing it to an almost complete valuation even if you need a final hands on stamp? The big part is gathering the information and that that may change very quickly. We are, therefore, doing our own apps, our own software, our own tools. That would be Corporate Solutions and Valuations but our Property Management Division does not have a technology division.
Do you provide venture capital to start ups?
Part of our PropTech commitment is sponsoring companies through Corporate. Jay Hannickis, who is the CEO and Chairman at Colliers, is very entrepreneurial and has formed us into a worldwide commercial real estate company of which Canadians should be proud. He heads up the team that decides who we are going to invest in with feedback coming from users in the field.
I know we are investing heavily in our internal website. It will be much more client interactive so clients can go and pull out information directly from us. We have a large IT group working on that. Many real estate web pages are just advertising, but I think people want sites that are more interactive and able to provide the kind of information that will help them make decisions. [That is not without issues] Agents may have some concerns as they want to be the person you call to get and give the information. They may believe that is better to build that personal relationship that allows them to earn fees.
How do you see Canada standing internationally? KPMG suggests North America lags behind Europe and Austechhaus.com, an Australian organization promoting PropTech, seems to suggest that Singapore and East Asia is quite a bit ahead of us. Do you see North America as somewhat behind or do you think maybe but not Colliers?
Colliers, we’re never behind the Australians because I could never let my Australian friends think that they were ahead of us! This said worldwide the technologies within the commercial real estate companies seem to be fairly even. Best practices if they work it get moved around and adopted pretty quickly. Do the clients in Europe tend to go and find information using technologies more, I am not really sure. I think the North Americans are pretty adept at that too. I haven’t seen would be my answer.
Canada Real Estate Magazine sees Toronto as one of the four fastest growing hubs for PropTech internationally. Do you agree?
For a lot of reasons I do agree. When I talk to our agents across Canada the technology side of the business, the amount of knowledge is fastest growing in Toronto but certainly in Vancouver, Montreal Kanata in Ottawa as well as other regions in Canada the progress is also surprising. So yes.
The employment numbers suggests that Toronto is killing it on technology [generally]. Part of that is US immigration laws and climate which means talented people can’t get into the US and are coming to Toronto. Our banking sector has a lot of educated, highly trained people and there are many in this sector that are moving quickly and broadly into technology. Banks are now calling themselves technology companies. A large part of it is that we have a really well educated population. Our universities, in my opinion, are more affordable than many other parts of the world. We have a high percentage of people going to university and getting the needed training. That is attractive to companies that are moving in. Some of our universities like Waterloo have strong programs.
I was in Silicon Valley last year and many companies [located there] are coming up to get a footprint in Toronto/Kitchener-Waterloo so they can hire students. But a lot of the students don’t necessarily want to go down and live in the very expensive Silicon Valley region so you have seen companies like Google taking a massive amount of space in Kitchener-Waterloo.
Commercial real estate owes a lot to the waves of immigration we have experienced. Because if Toronto gets 100,000 people a year, that is the size of Barrie. Think of all the buildings; it’s great for construction, it’s great for our real estate industry; and it’s great for our technology industry.
Do you see any legacy areas in commercial real estate that are a potential Kodak or Blockbuster if they don’t adjust?
No, I have not seen that yet. I spoke to a number of our people about that question and I hope I am not sticking my head in the sand, but I think I am going to say “no.”