Digital Transformation of Real Estate: It’s not about digital buildings it’s about becoming digital landlords

Digital Transformation.  IoT.  Smart Buildings.  Technology marches on, disrupting traditional real estate.  Within a few years it’s almost certain that most commercial buildings will be “digitized”.    What may not be so clear today  is “how?”, or “why?”  For the real estate industry, the biggest question remains “What’s the ROI?

In early June I will be participating in a panel session at Realcomm/IBcon in Las Vegas, where we will discuss the digitization of buildings, to create “digital twins” of physical real estate.    Some of the presenters will likely treat an individual building like a machine,  using the twin to capture operating data about the building, and ultimately using that data to provide “actionable insights” about that building.     Others, like myself, treat buildings as financial assets used by people, where process, experience, productivity,  efficiency and cost savings will drive asset value.   The core message; digital transformation will change processes across millions of buildings.   Transformation will not start with thousands of devices in individual “Smart” buildings, it will start with the digitization of business processes, across entire portfolios.

Here’s how I see the digital transformation of real estate:

Digital landlords will operate digital “twins” of their physical real estate, in the cloud.    These twins will enable cross-enterprise digital business processes, integrating operational data from buildings with financial data from these processes, to drive financially driven management decisions.

Digital landlords will see real estate through a single financial pane of glass

Automation will reduce labor costs, primarily, but will also enable better management processes to improve energy efficiency.    Quite simply, operating costs in buildings today are maybe 20 percent energy (to drive machines) and 80 percent labour.   It may be possible to get those costs down to 50-50.  Much of today’s labour may be wasted.  Digital processes can reduce that waste, and for the first time actually measure services delivered.

Services will be delivered as real-time data, providing visibility to how costs are incurred and reducing  administrative costs required to verify and account for those services.   Providing real-time visibility to these costs is a game changer.  Potential, now measurable,  benefits $1-2 per square foot or more, annually.

Cross-enterprise security will drive digital transformation

Real estate is seldom operated, maintained and used entirely within a single enterprise, so efficient digital business processes will cross enterprise lines.   Keeping these processes secure has become a daily challenge.

Broken processes are creating a very real security risk for enterprises.  Traditional, paper-based processes resulted in an eventual paper invoice, by mail addressed to “Accounts Payable”.   The paper process was well accepted and reasonably secure.   Today, paper has given way to PDF invoices, and a whole host of new security threats.    If you have email, you probably get phishing emails almost daily.   Many phishing attempts end up in junk folders, but hackers are becoming more an more ingenious.  If a hacker can get access to credentials for your email address, what shows up in your customer’s inbox may be a bogus invoice, another very realistic phishing attempt, or worse.   Email is no longer a secure communication channel for secure business processes (if it ever was).

Digital landlords will automate secure business processes that avoid fragile, and insecure, exchange of documents via email.    Internal communications between business partners, as data, will remove these vulnerabilities, and very importantly, these exchanges will entirely occur outside of enterprise systems, in a neutral platform;  containing millions of digital asset twins.