By Hugo Britt
According to the Property Council of Australia’s latest Office Occupancy survey, workers are slowly returning to the office following record lows due to the Omicron outbreak. As of the second week of March 2022, Melbourne CBD had an occupancy level of 15%, Sydney 18%, and Canberra 21%. Brisbane and Adelaide were looking stronger, at 41% and 47% respectively.
While these figures were presented as good news after a tumultuous two years, there is clearly a long way to go. In March this year, SmartCompany noted that flexible working arrangements are here to stay and that demand for office space will never again reach pre-pandemic levels.
While adjusting to this new reality, asset owners and managers are using several strategies to make their properties more attractive to commercial tenants. Proptech, which made headlines during the pandemic due to its potential to enable office-based social distancing and health-checks, is seen by many as the key to lifting occupancy rates in the year ahead.
We spoke with four commercial real estate experts to understand their views on the most sought-after proptech on the market and how it can best be leveraged to attract tenants.
What proptech makes a property more attractive to clients?
Proptech needs vary significantly depending on whether you are an owner or occupier, notes Kathleen Stubbs, CIO Australasia and APAC Head of Technology Operations at JLL. “Historically, technology has not been a determining factor [for occupiers], however as sustainability requirements increase and well-being measures expand, we are looking to technology to monitor, measure and improve the services for occupiers.”
Stubbs also points out that landlords are taking a risk in providing a particular technology: “They are betting that their future prospective tenants will need that particularly technology, not already have it, and be willing to accept and pay for the ‘brand’ of technology the landlord has chosen to include.”
John Preece, Chief Property Officer at Hub Australia, believes proptech should offer a lot more than the automation of manual tasks. “All technologies should have a positive impact on the end user of the space,” he says. “For too long, the proptech industry has focussed largely on replacing manual tasks with automated tech solutions that don't actually change ways of working or improve the customer experience. For example, a great facilities management system or property accounting tool is just a 'hygiene' factor that does not enhance the customer experience at all.”
That being said, here are some of the more popular types of proptech identified by our interviewees:
Efficiency-related tech
Melissa Hardy, Director – Business Performance and Technology (Real Estate) at QIC, believes tenants are increasingly on the lookout for efficiency-related tech: “Smart buildings enable tenants to reduce their environmental footprints, along with operational costs,” she says.
Stubbs agrees: “We look at energy and sustainability functions where a landlord can offer tenants the peace-of-mind that the building they choose caters for progressive environmental standards and can make a WELL certification easier to obtain. This may include environment monitoring solutions or arrangements with particular technology vendors or existing infrastructure to support sensor deployments.”
Consumer insight tech
Preece says that when customers come into an office space, they want to know which colleagues will be there at the same time so they can arrange collaborations. “As far as I am aware, not a single property owner out there is getting heavily involved [in this area] in order to create a compelling proposition for their customers – they see it as a tenant issue.”
“What occupiers are trying to resolve right now is what the future of work looks like (hybrid, office, WFH, liberated work), and how people are going to use office space, when, and for how long,” says Preece. “As such, tech that helps occupiers create accurate real-time data, and then interpret this, will be exceptionally valuable in the short term as they reset work strategies for the next term of occupation.”
Similarly, Hardy believes there’s great value for customers in knowing who is visiting, where they go, and how long they stay.
3D virtual tours
Digital twinning proved particularly useful for office inspections during COVID-19 lockdowns. Glenn Lampard, Victoria Research Manager, Business Development Services at Cushman & Wakefield, says Matterport provided the ability to inspect office space with a virtual visualisation using AI powered software and 360-degree interactive tours. “Its continued use in commercial property isn’t as abundant today with physical inspections available, however it certainly provides ongoing advantages for properties where ‘open for inspection’ times are often at similar times on a Saturday.”
Portals
“The use of a tenant portals, such as Equiem, can be quite effective at engaging with tenants whilst also helping streamline building management processes and reporting,” says Lampard. “I have seen it being used very effectively in providing services to tenants of business parks that don’t necessarily share a single building or entrance, where landlord branding or engagement can often be difficult.”
Hardy agrees: “Portals can be a real value-add for tenants or occupiers. The visibility they create means they can become a very effective community building tool.”
Stubbs notes the growing popularity of access control, which offers a whole-of-building approach to who and who does not enter. “Apple, for example, have recently sparked an arrangement with HID via the Apple Wallet app, whereby granting access to a building can be done in a similar way you might expect an airline to submit your boarding pass.”
Building-wide digital toolkit
Having every tenant using their own suite of digital tools is inefficient when there are plenty of opportunities to share proptech applications.
“Utilisation data, space booking tools and collaboration software will all be critical to assess the use of space and for making arrangements for social and professional collaboration in a world where hybrid work, or distributed work, will become the norm,” predicts Preece. “For users to do this at an individual business level would be costly and time consuming, but for owners to implement helpful tech on a portfolio-wide basis that customers can then tap into could be extremely valuable, and would set their assets apart from others in an office market with rising vacancy and less utilisation.”
“It’s about building partnerships and creating technology platforms that can integrate and create complimentary functionality between the tenant and the landlord, sharing information as required in a trusted manner,” says Hardy.
How can agents better promote proptech to make a space more compelling for prospective tenants?
Our experts agree that proptech is best promoted using a “show rather than tell” approach to unlock the “wow” factor when prospective tenants see what proptech can do for them. There is also the knowledge factor: as the technology is still emerging, tenants may not yet understand what is meant by terms like “tenant portals” and “digital twinning” until they see it in action.
“Promotion of technology and the experience it can provide is best done in person, as it gives the full experience – covid challenges aside,” says Stubbs. “In UX design, we talk about a day-in-the-life of your employee and what this would look like. This helps to paint a picture of the final state of your day-to-day experience. Choose a building as a case study – somewhere central – design it, make it smart and bring as many people in to look at it as possible to create that compelling case.”
Lampard says proptech is best promoted by showing the technology in use. He makes the point that the people promoting the proptech should have a grasp of the challenges tenants face. “Promoters should at least have an idea of digital practices in order to advise tenants on the benefits or the different types of available technology.”
Preece says that property owners can better equip and prepare agents to sell the full benefits of proptech. “Most agents will focus on the 'tenant app', as if this is the cure for all ills. It really isn't – and customers may be frustrated at having to download yet another app onto their smartphones. Owners should equip their agents with the tools to sell the benefits of genuinely smart buildings and smart premises.”
Hardy has a similar message for owners about setting agents up for success: “Leasing can work closely with the building operations teams and technology teams to really understand and therefore better communicate the value proposition to tenants,” she advises.
Are the right people making decisions about proptech?
Are the people making purchasing decisions about proptech qualified to be doing so? Do they understand the needs of tenants, the technology landscape, and emerging trends?
“I would suggest not,” says Preece. “Development managers, property managers, asset manager and facility managers are typically charged with the smart tech for buildings, but they are all mainly focusing on the physical asset and its operation. What needs to be the focus is the end user experience – the hospitality service level supported by helpful and intuitive technologies.”
Lampard notes that most institutional owners today have a technical director in the business or a creative hub with the expertise needed to explore the opportunities in proptech. “We have a Global Innovations Hub at Cushman & Wakefield that advises us on technology opportunities and solutions. It was through this process that we discovered the opportunity to partner with Matterport for virtual visualisations during lockdowns.”
According to Hardy, the best outcome for an organisation’s digital agenda involves distributed engagement and interest, plus accountability for introducing new technology. “There is such a wide variety of use cases for different proptech categories that no single team can be tasked with making the decisions. The best approach is alignment under a common strategic direction, combined with deep subject-matter expertise in each domain where proptech is applied.”
Stubbs says the risk of making the wrong decision with proptech can be mitigated by partnering with the right consultants and taking a strategic approach to answering business challenges, such as the utilisation of common spaces.
Are discussions about proptech generally a one-way sales pitch, or a two-way conversation?
Are agents simply telling customers what is available, or are they engaging in a two-way dialogue to find out what they want and then sourcing the proptech to meet their needs?
“Largely I would suggest it is a one-way sales pitch where [agents] are selling tech that has minimal benefit to the customer experience or their use of the space,” says Preece. “It is critical that the needs of the customers are understood, and that property owners then use their scale and expertise to deliver helpful solutions to their customers. This is almost definitely not happening right now.”
Similarly, Stubbs believes landlords can do a lot more to understand customer needs before having a conversation about proptech:
“Few tenants come with preconceived ideas about the proptech they want in the building they are about to occupy. Sometimes they refer to lessons learnt on previous tenancies; however, true innovation comes from knowing what lies ahead. This responsibility certainly lies with the tenant, their representatives, and whichever party is doing the due diligence on the property options for their next move.”
Both Hardy and Lampard want to encourage more discussion about proptech and the value it can bring. “This is still an emerging area, and as such is not discussed as much as it should be,” says Hardy. “The way landlords and tenants interact and collaborate regarding best-fit, value-add and commercials is inherently evolving and becoming a much broader conversation.”
“The landscape is changing,” says Lampard. “Discussion around proptech is happening across the board, from the landlord, agents and occupiers of the space. It’s in the interests of all parties to optimise space, then innovate and subsequently invest in [proptech] assets.”
In conclusion, it is clear that a lot more can be done to improve the discussion around proptech and understand how to sell its benefits. Hardy sums this up succinctly: “There is still an evolution occurring where tech can be seen as an overhead or cost, rather than a value-creation mechanism. In my opinion, this is gradually changing and we can still do better in promoting the benefits that have been delivered, as well as take more calculated risk in pilots and trials.
Interested in learning more about how to leverage proptech when leasing commercial space? Join us at Australian Proptech Summit 2022.