Commercial Real Estate, Innovation & Technology, International, Real Estate Events, Real Estate Technology, Uncategorized

CRE Technology: On The Verge

 

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View from the conference floor

Last Thursday, I attended the DisruptCRE New York conference  held downtown  on Wall Street. I went last year, was very impressed by both the content and attendees, and perhaps even more so by event co-founder and organizer  – Mariel Ebrahimi. Based on the success of last year, I had pretty high expectations and I am happy to say that this year’s event was as good as last year’s, if not better. In its second year running, this event has managed not only to bring together various stakeholders in the Commercial Real Estate (CRE) space, but positioned itself as a powerful summit that summed up the progress in New York City’s CRE environment and established a new baseline.

The CRE tech field is now completing its 1st phase of streamlining data collection, engineering and delivery on demand. As this phase is running its course, it not only solved the obvious issues  and brought added efficiency and productivity to the industry itself with its direct participants (such as owners, brokers, asset managers, etc) but also allowed other ancillary services startups to launch their operation (such as cleaning, construction, various utilities, etc).

As CRE tech moves onto the 2nd phase,  according to Jordan Nof, (who spoke very eloquently about this, more on this below),  new technology and going through the 1st phase allowed us to come to the point where we can see a different reality and gain better understanding of the possibilities. Now we can start exploring and learning about a new set of issues that we have not even been aware of it until now.

Hence the name for this post.The 2nd phase is equivalent to being  on the verge of something new and very exciting. My own feeling and ideas before the event were further solidified by what I saw and heard at DisruptCRE, the 2nd phase will be truly be disruptive. 

Spoiler alert: this is going to be a fairly detailed description of the event, so if you missed it, this is your chance to get all the information, plus my humble commentary.

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Michael Gross, Vice-Chairman, WeWork

Michael Gross was the keynote speaker and spoke for about 15-20 minutes. After stating some of the familiar stats and facts(⅓ of U.S. workers are now self-employed, people want more independence, both because of corporate environment changes and because of their desire to be more independent, etc), he talked about the need to have better solutions for space management, more specifically buildings that are digital ready and that have all the necessary scalable resources in place. Assuming a somewhat emotional tone, he spoke beautifully about the two founders of WeWork (one of whom was an Israeli that grew up on a Kibbutz), the philosophy that keeps driving them until today. What WeWork wanted from the get-go to do is to build office space with community in mind. Even now as they are expanding so rapidly and work with Fortune 100 companies they still feel that that the core concept of community is important and their commitment to small business and entrepreneurs must be preserved, no matter how big they get (and everyone expects them to get much bigger). Short, sweet and straight to the point.

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James Connors, VP of Asset Management, Fosun International

James Connors from Fosun International stepped onto the front of the room to speak briefly about Fosun’s acquisition of 28 Liberty St from Chase and their future plans that include 4 elements of value-add:

  1. Four levels below 28 Liberty will be converting into retail.
  2. Investing in the infrastructure, HVAC, upgrading all the systems.
  3. Services in the plaza and other way to reinvigorate the local community.
  4. On the 60th floor, there will be a restaurant and a redesigned brand new event space that will open by 3rd or 4th quarter of 2017.

I think that overall this is great news for the building and even more so for the entire FiDi area.

After taking a short break, reconnecting with some old friends/business partners and meeting/getting introduced to some new ones, we jumped right into the 1st panel, which was State of #CRE Tech, Executive POV. Of all the other panels, I chose to cover this particular one in depth, as – it seems to me – it contributed the most to the story of where CRE is now and where it is heading. (If you are interested in more details from the other panels, which were very interesting, feel free to send me an email and I will be happy to send you some of my notes). Aaron Block from MetaPropNYC did a terrific job as as a moderator.

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Left to right: Adam Stanley (Cushman & Wakefield), Jordan Nof (Tusk Ventures), Mitchell Moinian (The Moinian Group), Kevin Maggiacomo (SVN International)

Adam Stanley from Cushman & Wakefield, Jordan Nof from Tusk, Mitch Moinian with the Moinian Group, Kevin Maggiacomo, the CEO of SVN Internatioanl and last but not least, Aaron Block from MetaPropNYC as a moderator…A lot of quality people on that list. 

Kevin Maggiacomo started by talking about how personal life experiences, including our personal technology use, influence our experiences in our work and business lives. SE: It has been my view (and I agree with Kevin completely on this), that not only the work place and our personal lives has been intertwined like never before technologically speaking, but that now the pace of innovation on the consumer side is at times outpacing the speed of change on the corporate/business side. We can see a similar trend in military-civilian industries relationship, where in the past our (and other countries as well, i.e. Israel) military complex was a major source of innovation and inspiration to the world of commerce and now the same phenomenon mentioned above can be observed there as well. Reputable publications, i.e. The Foreign Affairs Magazine and others, of course wrote about this, and current government officials and Army generals addressed this issues in both print and live events.

Mitch Moinian told everyone that the key is not what has played so far and what has not, but the opportunity for modernization in real estate, the voids. Many initiatives are there, yet for him the question is who will prevail out of all of them. What he sees from the ownership perspective is that many owners are getting older and the next generation of owners are coming in. SE: I have been observing this myself for a while, having business partners and friends who own significant amount of assets in Manhattan and beyond, who are now slowly and gradually passing the reigns into the hands of their children, who are much more tech-savvy,  opportunistic and receptive to new ideas and ways of doing business. Mitch is right on the money here when he says that this new generation will determine what the future will look like.

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Next question Aaron raised was about the biggest opportunities : Product vs Geography

Kevin Maggiacomo: Eastern Block countries

Mitch Moinian: Hospitality

Jordan Nof: Multifamily and Hospitality/Hotels

Adam Stanley: 3rd tier cities in China


At this point the conversation turned to what
panelists’ priorities are while investing in CRE tech

Jordan Nof wants to know what problem technologists and entrepreneurs are solving. He believes that while there used to be obvious issues with data and transparency, he is now looking for the 2nd bucket of innovators. Bigger ideas, more capital and labor intensive, bigger issues and longer-term solution with greater reward.

Adam Stanley said that him and his organization are looking for things that help their clients connect with their tenants. Landlord and tenant relationship. In his own words: “We are not looking for the shining big ball, we are looking for real value and return, which might not be as flashy at times”. Great point.

Mitch Moinian mentioned that their approach is two-pronged: one as a direct user themselves selves and the other one is something that the group can invest in. “We are focused on the business part of everything. We look at the basic and business fundamentals of every business idea and product. We look at the bottom line. Every tool is looked at it from a very business point of view and the bottom line.” I loved his down-to-earth, humble yet very pragmatic approach to technology. Sometimes this element is now always there. Yes technology can be exciting, but at the end it is never an end in itself, but a tool, even if a mighty one at that.

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Tech Tools panel. Left to right: Rich Sarkis (Co-Founder, Reonomy), Carol Britton (Chief Procurement & Real Estate Officer, BNY Mellon), Nick Romito (Founder & CEO, VTS), Kevin Guy (CEO, Real Liquidity)


How important is
technology for your hiring policy and employee retention?

The moderator gave a longer introduction here and it was important. He stated that in his opinion millennials have now been starting to really effect and leave an imprint on the CRE space. They care about ethics, they want to work smart. We removed all of our training to the cloud, we provide flex time to all workers. There are not many organizations in CRE that use all the available tools in the technology world.

Kevin Maggiacomo is of the mindset that the millennials are teaching us more than we care to admit. The technology habits that people acquire in their personal lives outpace the technology innovation at their workplace.

Jordan Nof (who made quite a few on the spot observations) expanded further by saying that it is not about the millennials, it is about when you were born and what you grew up with, in terms of tools and technology. Business are trying to understand how to manage that reality in terms of personnel and clients as well as business partners.

Mitch Moinian got everyone’s attention by declaring: “I am a millennial, I am 27 years old. I grew up as technology was evolving, we grew up together. We are now developing one of our new sites at 34th Street and 11th Ave and we are looking for an anchor tenant. The biggest common denominator at all the meetings is Millenials, along with other elements of build and design, environmental elements. This is what everybody cares about in terms of our potential tenants.”

Block chain came up next and all the panelists weighed on what its effect and benefit on/to Commercial Real Estate will be:

  1. It is going to affect every transaction and every institution
  2. Buying assets across geographies, a company can buy anything without any FX issues or FX aspects to that transaction.
  3. Ability to analyze and understand risks
  4. Title storage on a blockchain
  5. Transparency in mortgage markets
  6. Ability to access data quickly.
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Yours Truly at the event

Adam Stanley does not think as of this moment that Cushman & Wakefield is going to be affected by block chain in the immediate future. He said that that “we should be viewing block chain as the evolution of the sharing economy. But as service provider, this can also be a challenge.” Very realistic view, in my opinion. Much remains to be seen on this front.

Mitch Moinian felt that block chain is “mind blowing in the very impressive way. It is sort of gratifying and making me nervous at the same time, the insecurity and instability of financial technologies. I don’t think governments and establishment are ready to tackle all the issues.”

Jordan Nof loves the accountability and transparency elements of block chain.


The last part of conversation was focused on what every panelist felt
most excited about in the CRE Tech field right now.

Jordan Nof: how people are going to be viewing ownership and owning property and how technology is going to change that.

Mitch Moinian loves seeing how many new young entrepreneurs are coming into this space. He thinks that we are still in the early stage of the process. We have addressed the low hanging fruit, the obvious inefficiencies. Now is the time for the next wave of innovation that will take us to the next level of things that we have not even conceived it yet, something really radical. It will bring more opportunities and challenges but it is part of business.

Kevin Maggiacomo is looking forward to the industry to come together and collaborate more. He is very curious to see which models and concept are sustainable. As far as tech is concerned, for him property management represents a huge opportunity. That includes other ancillary services management companies , such as cleaning services, other support services that go along with that.

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A few words to conclude.

First, let’s talk about the suburbs. Most of the conversations at the event focused on the cities. It is natural and makes a lot of sense. After all, cities in most countries are the concentration point of money, people and resources. Yet, one of the great benefits of technology is that it allowed people to commute less, work smart, enjoy better work-life balance, in other words to have a better quality of life. It made the world “smaller” and more accessible and interconnected

But cities –  by design- always enjoyed these benefits. I argue that it is the businesses and residents of suburbs that might be the greater beneficiary of the evolutionary process in commercial (and residential) real estate. The Wall Street Journal reported last year that not only the suburbs are far from done with, they are being reinvigorated by the new technology. I personally know more and more people that are choosing to work from home. That includes senior software engineers, directors for big ERP companies, executives in software procurement, etc. All of them live in suburbs. I think on one hand, this will have a future impact on CRE in the suburbs as well as office buildings, which will need to find better ways of space maximization. Carol Britton from BNY Mellon addressed that issue (as part of another panel I did not cover here). In that sense, companies will have a lot to learn from the likes of Google, who has a very interesting desk use policy. (If you ever visited any of Google offices or read How Google Works, you will know what I am talking about)

One other thing that I would like to see more of is bridging the gap between pure technologists and veterans of real estate. As Richard Sarkis from Reonomy admitted during his panel, while today he could consider himself an expert in his own right when it comes to on the ground realities of CRE, he did not know nearly as much when he got started. Most of the companies, including the Disruptors at the event that had a 1 minute chance to address the conference, are very young, tech-savvy and ambitious. Yet there is something to be said about having 20-30 years of real estate experience under your belt. As the “old guard” becomes more comfortable with new tools and toys entering the field and feels less threatened by the change, greater benefits can be realized by both sides working closer together.What will certainly help this process is the generational changes, especially on the ownership side, will change the conversation. One could clearly see it by listening to Mitch Moinian.

Last but not the least – and to me it was the somewhat understated elephant in the room – is crowdfunding. I would love to hear more people talk about it. As someone who is currently advising a Chinese crowdfunding company that is building a great product that will create so many liquidity and ownership opportunities on both ends, I see crowdfunding as an amazing disruptor (or enabler) in its own right. The person that did draw a lot of attention to this topic was Kevin Guy from Real Liquidity. He spoke about it during the last panel (not mentioned here) and he and I had a good chat after the event. He is 100 percent right when he says that most people all over the world, and specifically here in the U.S., never had such access to this asset class (Real Estate), yet we now see major shifts in FinTech. It is going to open up the industry and allow new players on all sides to come in.

The future of the CRE in New York and globally is bright and I am excited to see what the next year will bring. See you at DisruptCRE NYC 2017.

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Full disclosure: the author of this post is in no way affiliated with DisruptCRE, its founders and organizers. All notes, comments and observations are strictly my own. All comments are welcome.

 

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