The Changing Landscape of Asset Management
The BWT Tribe discuss a future where Asset Managers will manage people, technology, and outcomes instead of assets.
This conversation is lead by Andrew Miles, CEO of CoStar’s Realla commercial property portal, and centres on the realities of operating and managing portfolios by converging the physical and digital, emphasising the shift to data-driven decision making.
Technology's Impact on Asset Management
Sally Jones, Head of Strategy for Digital and Technology at British Land, says that there are two big factors affecting the use of technology in offices, starting with the demand for flexible services, which must be enabled via a digital platform for deploying story.
“We’ve recently launched an app at Broadgate in partnership with Equiem, which is going to be really important for how we deliver for our customers. The second point is on smarter buildings, which are going to transform how we deliver for our customers and our asset management strategies. Here, 100 Liverpool Street is at the forefront of what we’re doing.” Integrating apps with buildings can be a challenge, but Jones highlights aspects like customer forums, retailer offers and offering world class building entries.
Simplifying Operations, and the Convenience of Space
Rachel McIsaac, MD of AEW UK, points out that being diversified both nationally and sector-wise brings challenges data-wise, but that technology definitely simplifies operations, mentioning the use of data rooms and the property investment software, Coyote.
“Things that used to take weeks now take hours, which frees up time for our asset management team to focus on their core role, which is capital and income enhancements on all assets, from the bottom up.”
Miles finds it refreshing to see people talking so positively about the benefits of technology, despite the challenges of cost, picking the right solutions and integration.
Things that used to take weeks now take hours, which frees up time for our asset management team to focus on their core role
McIsaac emphasises that skills must be matched to problems. When projects fail it is usually not the technology’s fault, but because you have assigned people who do not understand or enjoy using the technology.
David Hunt-Cuadrado, Managing Partner at global real estate and infrastructure private equity firm Thor Equities, believes technology has drastically changed the fundamentals of investment.
He points to virtual tours, drone footage and data availability as useful tools that have preserved business during pandemic restrictions.
“The things we are focusing on – life sciences, last mile logistics and data centres, as three fundamental asset classes – are all driven by changes in technology".
We’ve put a smart predictive system in place to analyse big data, from occupancy levels and rents, to changes throughout macro and micro
David explains that Thor Equities are pivoting into the sectors that make sense because of transformations.
"We spend a lot of time analysing data. We’ve put a smart predictive system in place to analyse big data, from occupancy levels and rents, to changes throughout macro and micro that ultimately give you a predictive scoring of that particular asset class, that you can target to achieve repositioning.”
Customer-Centricity and Consistency
Jim Eaton-Terry, CTO at Quintain, says that their top technological priorities right now have focused on moving from a development business to an operating business. Because of this, Quintain now has a significant build-to-let business, as well as a designer outlet and various event venues and commercial spaces.
“One piece for me is making sure we have consistent infrastructure and a consistent approach, and then to see where we can get synergies out of different areas, because they have grown very differently. Bringing them all together, we can start to unlock the insights from shoppers to feed into the residential journey and vice-versa”. He agrees with McIsaac that automation is important to free up time to focus on other aspects of the business.
Ian Mair, MD of Digital Innovation at Grosvenor, highlights customer centricity as a central point, saying that we should be asking where to draw the line between provider and tenant, whether in office or retail.
“We are curators of spaces and places, so it matters to us." Mair says. "It’s no longer good enough to lease space to retail or an office tenant and let them get on with it. We need to attract people to places likes Mayfair and Belgravia…for us that’s about how you provide the technology solutions for services that are in partnership with retailers.”
We are curators of spaces and places, so it matters to us.
Effective Partnerships and Back to Basics
Mair reiterates that it is important to point technology at the right problem. One way to achieve this is by partnering with a technology company, he says. Technological companies can often only be truly effective when partnered with people who understand how places work and what tenants really want.
Mair reflects that most of the time partnerships are more effective than a pre-packaged solution in developing the right technology for the right situation.
Ronen Journo, European Head of Operations at vertically integrated asset manager and landlord Hines, advocates going back to basics to manage different asset classes in the most efficient way possible, to reduce carbon footprint and energy consumption and ensure a safe environment. After this, you can move on to the experience platform – how to enable people to interact with environments and the services and amenities on offer.
As examples, Journo points to Hines’ UK student accommodation, Aparto and their Südkreuz residential development in Germany, where they have partnered with scaleups to look at both the building and how they engage with almost 700 tenants.
Journo adds that the industry is very fragmented, with multiple stakeholders including one-off investors, funds and tenants, so it is necessary to think about what technology you can use to bring value to everyone.
Miles agrees, saying that pragmatism is essential when looking at your technology stack, possible suppliers and possible solutions to implement. Find what is driving value, whether that be place making, consumer experience, or the environment.
Using Big Data to Drive Decision-Making
Miles opens on this topic by pointing out that “big data” is a term often thrown around, but not always properly understood, and asking his co-hosts to share some of their experiences.
McIsaac says that AEW UK has launched an urban recovery fund, buying end-of-life shopping centres and converting them to other uses. This has required extensive modelling of conversion costs, in parts of the country not necessarily inside the traditional £350+ per square foot resi bands inside the M25.
“That has been a really exciting project in terms of modelling big data all over the UK to work out what you can acquire this stuff for, what it’s going to cost to develop it, and where we can make a profit – it’s not always obvious”.
You can get big data sets on virtually anything you need to plug into models, but it is important to know what you want to gain from it. Buildings, for example, are relatively static assets with multiple data points that can provide valuable information.
“We have employed Zigitech to understand energy consumption across our portfolio. If you look at that data point and then at occupancy and engage clients in a dialogue, you’re able to paint a picture of how that static environment is actually dynamic, and what that means for the people using that environment".
you’re able to paint a picture of how that static environment is actually dynamic, and what that means for the people using that environment
Journo adds that multiple data points for one location can help to prioritise where to drive efficiencies and how to make informed decisions: it is not just about driving down costs.
Jones does caution, however, that sensors supplying data points can be prohibitively expensive, pointing to British Land’s mistake of getting an all-singing all-dancing sensor that was way too expensive (at around £1/ft2).
They are now looking for ways to deliver and integrate sensor technology cost-effectively, and hope that better platforms come forward, because it needs to be much cheaper and easier to implement than it is currently.
Eaton-Terry points out that as well as installation costs, you should keep in mind the cost of replacing infrastructure, while Mair says having a clear vision of what you want to accomplish from the outset is imperative. Ronen, meanwhile, believes that smart buildings will soon become part of real estate industry DNA, rather than a novelty.
“I think in the next few years we will probably see the giant tech players stepping into our industry… (they) will turn it into a commodity and offer tools and sensors that are truly plug-and-play.”
Tenant Demands for Sustainability and Innovation
Pressure to be innovative and drive sustainability seems to be coming from tenants rather than investors.
“To deliver performance, we need to attract tenants to our buildings. (This is) a very customer-centric business and you do need to provide sustainable options," Hunt-Cuadrado says.
This is a very customer-centric business and you do need to provide sustainable options.
"For example, we have PV (photovoltaic) cladding on our roofs. We’re not pressured by our investors, but we do feel that we will drive value for our investors by implementing sustainable factors”.
Jones agrees that in her experience investors do not seem to care how technology is actioned, they just expect it to be part-and-parcel of the offering.
It is interesting that large tenants are pushing the agenda. Hunt-Cuadrado believes that the industry has generally been very unsustainable up until quite recently; he says it is great that landlords and owners of real estate are being pushed in this direction.
Ronen says we are still in the early stages and that once the Covid crisis ends, many trends that were gathering momentum will become ingredients of the new norm: whether it’s sustainability, seamless experiences from journey to destination, or time spent at destination.
Mindset Shift of Digital Transformation
Jones notes that clients often lag behind the available tech, explaining that British Land has to walk occupiers through the capabilities of the fully tech-enabled 100 Liverpool Street building, and they often remain reticent.
Mair builds on this by saying that while digital transformation and technology are often used interchangeably, digital transformation is much wider than just the tools being used – it is a cultural phenomenon and a mindset shift. The most cited reason for the failure of digital transformation is not the technology itself, but the market not being ready to transform.
Eaton-Terry stresses that you must have the end-to-end experience working before trying to implement technology, saying that while there is a huge tendency and temptation to add things into the product, people are used to having control over their environment.
When moving into a larger scale residential, for example, it is vital to balance this control between landlord and residents and make sure it doesn’t end up being much more difficult than it needs to be.
Technology can greatly simplify operations if you focus on solving the right problems
Customer centricity and bespoke solutions rather than plug-and-play options are currently the way to go
Big data and collecting data points from your buildings both open a world of possibility, but currently come at a high price, with several inherent challenges
Digital transformation is about more than just the technology tools you need to use. It’s about shifting your mindset to recognise new possibilities.