Connect with us

Business

PropTech Innovation and Adoption is Being Slowed Down by a Lack of Interoperability

Over the past 2 years, since I started the PropTech Future blog, the sentiment and enthusiasm throughout many areas of the PropTech ecosystem has done a complete 180 degree turn.  We have gone from record amounts of funding and the continuous launch of innovative companies, to one of the most challenging funding environments that I have witnessed in my career.  Skyrocketing interest rates have contributed to these challenges and with the recent collapse of Silicon Valley Bank  (followed by the fire sale of Signature Bank and Credit Suisse), it is clear that there is still a lot more pain to be felt.

The challenges in the industry extend way beyond funding issues.  The macro environment is wreaking havoc on some of the largest verticals that make up the real estate industry.  The residential sales sector is facing enormous headwinds driven by record low inventory paired with the highest interest rates that we have seen in 30 years.  The office sector is faring no better as tenants continue to reduce their footprint to cut costs and address the changes brought on by the popularity of hybrid work.  Additionally, the technology sector as a whole, which has driven enormous demand for leasing activity for at least the past decade, is facing its own reckoning as tech valuations plummet.  The increased revenue that many pandemic darlings enjoyed has reversed course now that people are venturing out of their homes.  Investors have gone from a mindset of growth at all costs to a mindset of profitability.  We all knew that the party wasn’t going to last forever, but I was definitely caught off guard by how quickly everything changed.

I remain bullish on the long term prospects of PropTech, primarily since there is still so much work that needs to be done to modernize the industry.  With so many companies in survival mode, I worry that the pace of innovation will slow considerably (with the exception of AI, but I will leave that to a future article).  There have been many amazing articles that have been written recently by industry experts that dive deep into the issues of funding, return to office, interest rates, and inventory, but there is a more immediate concern that has kept me up at night.  This concern is around interoperability.  With all of the new tech that has launched in recent years, there has been a lack of focus around getting all solutions to work together in harmony.  While most companies offer APIs and SDKs to deliver integrated offerings, there is still a huge gap that has been created by a lack of an agreed to industry standards in PropTech.  As landlords and occupiers strive to activate new experiences for their tenants and staff, cracks are beginning to form due to this lack of interoperability.  These cracks are appearing in many places, but I have decided to highlight one that hasn’t received much attention yet; one that will surface more and more in the coming months.

Building Apps Vs. Tenant Apps

A fairly new category of solutions that has attracted a lot of attention (and tons of capital) in recent years, are Tenant Engagement Apps.   I have written at length about these offerings in the past.  In a nutshell, landlords and property managers deploy Tenant Engagement Apps throughout their Office portfolio with the intention of providing their tenants with an elevated experience to drive more leasing activity and increase the likelihood of renewals (similar Resident Experience Apps have become popular in Multifamily real estate).  

For example, Tenants can use these Apps to access the base building (perimeter doors, turnstiles, elevators, and amenity spaces), order food, book conference rooms, communicate with the building staff and other tenants, monitor air quality, and to keep up-to-date with events that the building hosts.  The building staff can use these Apps and data that they generate to do everything from measuring ESG compliance, to understanding occupancy, and to activate new experiences.  Even though these platforms are relatively new, a host of extremely well funded companies are quickly gobbling up market share in a very competitive environment.

Most of the target clients for Tenant Engagement Apps have been building owners and managers, but some of these companies have started to target corporate occupiers with a tenant focused solution.  Instead of deploying a Tenant App throughout a building, the new offering is geared towards multi-office enterprise tenants that can bring all of their employees – regardless of location – onto one unified App to handle everything from Access Control, to Communications, to Policy and Procedures documentation, and Occupancy at each of their locations.  There are considerably more occupiers than there are office buildings, so this offering significantly increases the TAM for these App providers.  Additionally, many companies would prefer to deploy a single App (designed around their specific needs) across their employee base, instead of each employee using a different App based solely on the office that they work out of.  There are many efficiencies, conveniences, and actionable data that a tenant specific app can provide to a corporate occupier, but the lack of interoperability between the different App providers is going to create massive headaches for all parties involved.

Tenant Dilemma

Tenant Specific Apps from one vendor do not play nice with Building Apps from a different vendor.  As an example, let’s use a law firm that has 500 employees across 6 offices in different cities across the country.  The law firm decides to deploy a dedicated Tenant Specific App for all of their employees to make it easy for their team to access their different offices, leverage company perks, book conference rooms, and improve intra company communications.  The tenant app ties together all of the law firm’s different software offerings so that their employees can access any of the company offices, communicate with their team members, reserve conference rooms, and submit IT support tickets, all while providing their corporate team with useful data which can inform everything from leasing/renewal strategies to measuring their ESG compliance against their corporate commitments.  However, their 6 different offices are located in buildings where each owner has deployed a different Building Specific Tenant Engagement App.  What happens then?  In this situation, the Tenant Specific App will not grant the employee access to the base building where they work, so they need to open that particular building’s App for access.  If the employee uses the building App instead of their own company App, then none of the data will be collected by their tenant App.      

These problems will be compounded by the growing popularity of hybrid work.  Instead of having one office that an employee works out of, it is becoming more and more common for an employee to work out different locations each day of the week.  A typical schedule for an employee may look like the following:

  • Monday – Work out of their Midtown office

  • Tuesday – Work from home

  • Wednesday – Work out of a Flex/CoWorking space

  • Thursday – Work out of their Downtown office

  • Friday – Work from home

In a scenario like the one above, the employee may need to use their company specific App, the building App from their Midtown office, the building App for their Downtown building, and a booking App from the Flex provider just to get into the different locations.  And none of the platforms would contain a complete database with all of the records.  The likely outcome would be the tenant using none of the Apps, and instead just carrying several access cards.  If solutions that are geared towards increasing tenant delight and efficiencies, instead end up creating more friction and a clunky user experience, people will just not use any of them.  Mass adoption of these Apps is a critical component of their success.  Otherwise, the data that they collect to activate the experiences that they are designed for will be incomplete, rendering the platforms useless.

For the record, I am a fan of both the Building specific Apps and Tenant specific Apps, and I am confident that they both can add tremendous value to all parties.  However, until the issues of interoperability are resolved, there is most likely going to be a lot of frustration and confusion between landlords and tenants.

The scenario described above is just one example of compatibility issues that are created when many different technology solutions are launched without an agreed-upon industry standard.  Unfortunately, I foresee these issues only increasing until these interoperability issues are solved for, and/or until mass consolidation leads to 1 or 2 companies that own the market (similar to IOS and Android in the mobile operating system industry).  

The CRE industry is heading in the direction of fully connected smart cities where the lines between live, work, and play will continue to blur.  The issues of interoperability will become more pronounced and impactful during this transition.  My next article will provide a deep overview of the future of smart cities, and why an industry standard will become a must have for a truly connected world.

Subscribe now

Share

Continue Reading

Trending

Copyright © 2017 Zox News Theme. Theme by MVP Themes, powered by WordPress.