Industrials REIT had an ambition to revolutionise not only how they operated, but also how their sector operated. With a portfolio of relatively low value industrial leases and a lot of customers spread over a very large area, they had the definition of a ‘high volume, low margin business’: technology was to play an important role in enabling them to build an efficient and scalable platform.
At SPACE UK, Industrial REIT’s Managing Director, Julian Carey, gave a keynote talk about their journey so far, hosted by VTS Managing Director, Charlie Wade.
Julian Carey is the Managing Director of Indusrials REIT. Julian joined Industrials REIT in July 2017 following the acquisition by Industrials REIT of C2 Capital Limited (“C2 Capital”). Through a combination of technology and personal connection, Industrias REIT focus on delivering a quality experience for their customers. They do this by creating a straightforward, supportive, transparent and frictionless process.
Charlie Wade is the EMEA Managing Director for VTS, the modern platform for commercial real estate. The fastest growing technology company in commercial real estate history, it has over 12 billion sq ft of office, retail and industrial assets combined managed on its platform globally. Prior to VTS, Charlie spent 10 years at JLL, working in London, New York and Silicon Valley, leading business development for the West Coast hub of JLL’s International Desk.
Digital innovation and the importance of
Wade framed the session by highlighting that good ideas don’t necessarily equate to innovation, and innovation in itself doesn’t always mean great ideas, adding: “There is plenty of great tech out there. Just because you’ve adopted, doesn’t mean you are innovating.”
He says that digital innovation today only happens with successful change management: “People and technology coming together is the key to successfully changing behaviour, and culture within a company is at the heart of successful digital innovation in our industry.”
Wade reminds the audience that four years ago he predicted we would soon be hearing from companies and landlords about practical examples, lessons learned, achievements and impacts, and what is to come.
With that in mind, Wade hands over to Carey to talk about change management at Industrials REIT. Specifically, he relates how the company has innovated its platform over the last five years, revolutionising the way it manages multi-let industrial property by focusing on innovation technology and people.
- Just because you’ve adopted, doesn’t mean you are innovating
- Culture within a company is at the heart of successful innovation
Innovation necessitated by a change in
Carey explains how five years ago, Industrials REIT sold £600 million of non-multi-let industrial buildings to reinvest in a multi-let industrial property: “We had to build an operating platform with which to manage that multi-let… but perhaps the greatest challenge and privilege was to be able to start with a blank sheet of paper – in terms of how we were going to manage those assets – with an ambition to revolutionise not only how we operated, but also how our sector operated.”
The company realised it would have a portfolio of relatively low value leases and a lot of customers [tenants] spread over a very large area – the definition of a high volume, low margin business: “As a result, technology was going to play a really important role in enabling us to build an efficient and scalable platform,” says Carey.
Industrials REIT borrowed the concept of ‘friction’ from a global giant: “Amazon has revolutionised the retail industry, taking friction out of online purchasing through things like one click ordering free shipping and customer reviews. In our industry, it’s no different,” explains Carey.
Friction goes by many different names – cost, lost time, inconvenience, and inefficiency, to name but a few – and Carey notes that a recent Forbes survey found that 70% of customers would pay more for a more convenient service (giving less friction), while 75% would switch to a competitor offering a more convenient experience.
Removing friction through “the Hive”
“Our strategy,” says Carey, “was to identify where the friction existed in our business model, and to try to cut it out.”
The earliest example of this was the introduction of the company’s “smart lease” to streamline the documentation process, cutting legal due diligence time on average from between four and six weeks to under two weeks. Customers loved this initiative, Carey says, and it showed the value of putting a platform in place to consistently try to remove friction from the customer experience.
Industrials REIT calls the technology behind the platform its “Hive”. “Ultimately, in everything that we do, the Hive is involved,” says Carey, pointing to examples from processes and policy, physical engagement, and technology.
“Identify where the friction existed in our business mode, and try to cut it out”
In terms of policy, every unit the company owns has pre-written marketing materials – as soon as a unit becomes available, it goes online instantaneously. On the physical side, Carey points to the on-site customer engagement manager, who shares the customer’s journey from their first viewing until they move out.
The technology side principally comprises an integrated finance, operating, and marketing system, but also includes a content management platform for online listings, a live chat functionality, and company websites.
Internalising core functions for data integrity
“As we built this platform, we realised one of the biggest challenges was that we were going to have to internalise all of our core functions, from rent collection and billing to leasing and marketing, facilities management, and ultimately customer support,” Carey expands.
“We felt this was critical if we were going to deliver a frictionless process to our customers. Much of this decision hinged around the technology and, more specifically, our data.”
Carey explains that data works like fuel for software solutions and, “like any machine, if you put poor fuel in, you’ll get pretty poor performance”. This requires investing in systems and processes to dictate how the team interacts with data, and creating an organisational culture that puts sufficient emphasis on data quality and accountability. Industrials REIT found this impossible through third party organisations, so it decided to in- source all elements of the business. “We could have a single operating system, which captured and managed that operational data, meaning we now have that core, stable, high-quality data from which we can fire up all our technology,” he says. “This also worked wonders for our customer service levels”.
A combination of technologies
Carey goes on to discuss how the technology, processes and policies, and physical infrastructure combine to reduce friction to customers. “It’s a combination of lots of different technologies, each supporting a link in the chain for the customer, and drawing upon and feeding back into that central data source, which ultimately supports our team to deliver that better customer experience,” he begins. “The system centralises all of that in one place. It collates the source, and ultimately prioritises inquiries, so our team can go back to the most important leads first. Furthermore, if you phone us and we haven’t got a building for you, you go onto our waitlist, and the system then tracks what you want, how big it is, where it is – and when the appropriate building comes up, we get in touch,” he expands.
“A combination of lots of
each supporting a link in
the chain for the
customer, and drawing
upon and feeding back
into that central data
source, which ultimately
supports our team to
deliver that better
“We’ve been genuinely astounded by the hit rate we get when we go back to customers, up to two years after initial inquiry: 20% of people take a viewing when we go back to them on the waitlist, so it’s really powerful,” Carey continues. “You can book a viewing there and then through our online calendars. So, we can make sure that we’re in the right place at the right time for you.”
At a viewing, Carey says that the system enables the customer engagement manager to meet potential tenants armed with all previous correspondence, enabling them to come across as highly competent, professional, helpful, and caring.
He then reiterates that the smart lease is key, helping to cut complexity: “For our business, that’s really important, because for well over 50% of our customers, this is their first commercial lease. They’re very scared that landlords are going to try to rip them off, so taking away those risk factors is really important.”
Carey emphasises that it is this combination of technology, process, policy, and people that removes friction for customers – in this case, specifically from the leasing process.
“In terms of proving the impact, this has meant that over the last 12 months, our leasing team managed to do 60% more transactions than in the previous 12 months, with no increase in headcount. That ultimately meant we got more customers into units quicker, but we also simultaneously maximised our revenues and cut our costs in the process,” he asserts.
Wade invites Carey to talk about the customers at the heart of Industrials REIT’s strategy, noting that while most associate the customer with tenants, there are still those in the industry that think of the customer as the investor and their capital: “How important is that differentiation to you and the whole approach you’ve taken and the attitude towards developing your solution?” he asks.
Carey responds that this is critical: “Every day it impacts decision-making within the organisation. I think the reality is that most of our team only interact with our customers – they don’t actually have any interaction with our investors. So really, the only customer they have is the tenant.”
Buy vs Build
Wade asks how Carey decides between buying and building technology, to which Carey says firstly, that mental process has changed over time as his knowledge of technology has increased and his understanding of the benefits and drawbacks of buy versus build have evolved.
“But our policy was always if we can buy off the shelf, we will. These solutions out-of-the-box can probably do most of the things you need. And when you want to go into a new area – like we were challenging ourselves to do to become a real operator, rather than a passive owner – it actually really helped us,” he develops.
“We just said, alright, there’s an out-of-the-box solution there, which has already been tried and tested by thousands of organisations. So let’s just try and take it as it comes… that (also) has subsequent ongoing benefits of maintenance and things like that.”
Tech for Decison-Making
An audience member asks Carey for specific examples of how technology has been used to help inform decisions that would have been made differently five years previously, without that data or technology.
“The thing about data, is that when you collect it, sometimes you don’t really know what you’re going to use it for,” replies Carey. He cites an example from during the pandemic, when Wade asks how Carey decides between buying and building technology, to which Carey says firstly, that mental process has changed over time as his knowledge of technology has increased and his understanding of the benefits and drawbacks of buy versus build have evolved.Industrials REIT had put in place this model of using the technology in all aspects of the business, doing “top of funnel” work.
“Those calls – the bid at the very beginning – we had that information when we went into Covid. Everybody shut down and we were all at home, and then the inquiries died… then about two weeks after the first lock-down, the inquiries started picking up, and by May they had really picked up – ahead of where they were before lock-down. By June, they were double what they were before lock-down!” he relates.
Despite thinking there would be no transactions, as nobody had done any lettings, says Carey, they could see that the demand was going to be there.“So we gave that data to our investment team and said, ‘go and spend all the money’! They went out into the market and spent a lot of money, and they were on their own; we had the pick of the market at the time and we did some fantastic deals. It’s a really interesting example of how you can use leasing inquiry data to actually guide your investment strategy.”
“You can use leasing inquiry data to
actually guide your investment strategy.”
To conclude, Wade asks Carey whether after five years of hard work the organisation can sit back and reap the rewards of this “beautiful model”, or whether there are further innovations to come.
“There’s always more to do – really exciting stuff,” says Carey. “Certainly, once you’ve got your data in the right place it opens up a whole range of different options and things you can do with that data… the flipside is once you put it all in, you have to keep it going. So there’s constant work going on, and there are lots more exciting developments to come over the next few years,” he concludes.
“In terms of proving the impact, this has meant that over the
last 12 months, our leasing team managed to do 60% more
transactions than in the previous 12 months, with no increase
in headcount. That ultimately meant we got more customers
into units quicker, but we also simultaneously maximised our
revenues and cut our costs in the process.”
The VTS Platform empowers leading CRE professionals to make better decisions around space
VTS is the commercial real estate industry’s leading technology platform that transforms how strategic decisions are made and executed across the asset lifecycle. In 2013, VTS revolutionised the commercial real estate industry’s leasing operations with what is now VTS Lease. Today, the VTS Platform is the largest first-party data source in the industry and delivers data insights and solutions for everyone in commercial real estate to fuel their investment and asset strategy, leasing and marketing automation, property operations, and tenant experience.
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