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edition 9 (244)
October 2019
Feature

Boldly biting the proptech bullet

The Euobuild and CBRE debate on the latest real estate technological systems

Ewa Andrzejewska

Boldly biting the proptech bullet

Investing in proptech involves a degree of risk, but unless we do it, a real estate ‘Uber’ could emerge and make us all obsolete. However, the pioneers of the digital revolution on our market are still often greeted with reactions like: “Man, why are you stressing out about this so much?” – according to the experts and office developers taking part a debate organised by CBRE and ‘Eurobuild CEE’

The discussion, which took place in WeWork’s co-working centre in the Raffles Europejski hotel in Warsaw, tackled the role new technology is playing in real estate and its impact on the market’s development. The most important questions were covered: What actually counts as proptech? Is it worth introducing it? What are the best practices in this field? And which systems are set to become the standard in the sector and when? CBRE, whose experts Daniel Bienias, Krzysztof Mogielski and Joanna Mroczek moderated the discussion, got the proceedings going with a presentation on the results of a survey they have just carried out on this topic. And then the debate began...

Krzysztof Mogielski, head of digital transformation, CBRE: Let’s start with the most important questions. What is proptech for you? Why exactly should our companies change? And are we ready for this?

Ewelina Kałużna, director of leasing and property portfolio management and board member, Skanska Property Poland: The change in our approach to new technology starts when we begin to perceive the real estate we are developing in a different way. We used to pay no attention to the fact that buildings generate and provide a great deal of information. However, they can actually act as a huge database, which we can use later on. The basic change in thinking is that the building ceases to be just a physical entity or a façade but also constitutes a set of data.

Waldemar Olbryk, board member, Echo Investment: It’s important to be aware of what we are introducing new technology for, why we are doing it. The goal is, of course, to improve the comfort of the users of these buildings, but it also for increasing the efficiency of their operations. In my opinion, technological systems should not be introduced for the sake of themselves but to serve specific purposes.

EK: I agree with that. With technology, we are now able to measure such factors as the areas of ​​the building that are not being fully utilised, which enables us to save energy because we don’t have to heat or cool the unused parts at certain times. Therefore, new technology ceases to be about gadgets and becomes more about the actual systems that are useful for the tenant and at the same time shows the tenant what their real needs are.

WO: I can assure you that we’re not just gadget geeks. When I gave my answers for the CBRE survey that kicked off today’s conversation, I realised that we are one of the few sectors with such a traditional approach to business. The reason may be that the real estate investment cycle lasts for many years, whereas elsewhere in the digital world everything happens much more quickly. But the development of a project takes a long time, as this includes the purchase of the land, the construction work and the delivery of the project. This is something of an anomaly considering the current rate of technological change. Therefore, today we should all treat technology mainly as a useful tool rather than as an end in itself, both in contacts with clients and in relations with employees. Let’s not forget that if we want to be credible, we have to bring the people we work with round to it. Thus it also involves changing the approach to work inside the company. However, we do all need to go through the digital transformation, we all operate in a sector that generates high profits but also requires huge commitment and financing.

KM: I have come to a similar conclusion. In my opinion, for an organisation to come to terms with these changes in fact means introducing technology at all levels in the long run. This can be rather difficult, because the process is so stretched out over time.

WO: We now live in a world where everything is in flux. Adapting to these changes and introducing new technology often involves coming out of our ‘comfort zones’. I’ve worked with constructors for many years. One of the basic materials they use is concrete – which is a symbol of stability. If we combine this stability with the flexibility and variability of introducing new technology, we can achieve remarkable results. For example, a bacterium has recently been discovered that repairs cracks in concrete – so in a way, the concrete ‘heals itself’.

EK: It may be worth recalling in this context that our sector is currently in second last position, only ahead of agriculture, in terms of progress when it comes to introducing new technology. Going back to what has been said, the investment process in this sector actually takes an average of five years, so the biggest difficulty is to design something that will still be modern in five years’ time. When designing a building today, we have to consider, for instance, how many parking spaces we can fit in it. But the thing is, we don’t know how transport will have changed in ten years, whether driverless cars will have taken over the roads, and therefore having so many spaces will have become unnecessary. So it’s very difficult to come up with something that will still be modern a few years down the road. One example of this are the Pendolino trains, which don’t have wifi because no one thought about it in 2008 when the technological specifications were drawn up for these trains. As a result, when we use a Pendolino today we get irritated by the fact that we don’t have phone coverage. So you can see how quickly technology has been changing recently. Some time ago, we asked internet trends analyst Natalia Hatalska to draw up five scenarios for a vision of the construction sector of the future. We wanted to know how to prepare for what is to come. In response, the analysis she prepared indicated that all buildings will cease to be traditional structures as we now know them. In each scenario, the buildings had become huge databases rather than structures that people necessarily physically worked in.

WO: I think we are touching on a problem here related to the unwillingness to change. This is often the case because we are such creatures of habit. There are also sectors that don’t yet feel any pressure to introduce new technology, and that’s why they are not ready for such changes. It also happens that when we try to get people to embrace the digital revolution, we encounter responses such as: Man, why are you stressing out about this so much? I have been able to build, rent out and sell my assets so far, so what do I need all this tech for? This attitude basically boils down to: why the need to change and why take the risk? In my opinion, however, it’s sometimes worth getting out of your comfort zone and finding out, for example, which direction cities are going to develop in, what makes young people tick today, and so on. It’s worth opening yourself up to such scenarios so that you can think about what else you can provide.

Joanna Mroczek, Poland and the CEE head of market research and consultancy, head of marketing and communication, CBRE: We have no choice, we all have to change our thinking. There were once, for instance, only specialists for the engines of cars or aircraft. But now the car as well as the plane have each become one big computer. The same is happening with real estate. And it is those who notice this sooner and adapt to this process quicker who will come out on top.

KM: Twenty years ago, technological development was mainly being driven by large companies. Is it not currently the case that these roles have been reversed and most of the change is being pushed by the B2C sector?

WO: We are noticing this in our own backyard. We’ve recently introduced a system that allows you to hand over apartments to their buyers without the usual paper chase. All you need is a tablet with an electronic signature – of course, if you want, you can still use paper documentation, but you no longer have to. As a result, our clients are delighted and simply say: you’ve made our lives so much easier!

KM: How would you now define a ‘smart home’?

WO: The apartments we develop all have thermal comfort control and security systems installed. They also come with apps for controlling such home appliances as the fridge, the washing machine, the vacuum cleaner and loudspeakers.

KM: Do you think a competitive advantage can be built with proptech? To what extent will we be competing with each other, and when will we be cooperating?

Grzegorz Strutyński, commercial director, Globalworth Poland: You don’t need to buy a television factory in order to see how a television works. I think that the competitive advantage will not involve proptech itself but actually a combination of many elements – the whole of what we call the development process today. Therefore it’s worthwhile using the new tools that are on the market and you don’t necessarily have to develop your own systems. I’ve seen many companies that have created their own systems and specific applications but without necessarily having any spectacular results from all this.

Emil Kamiński, research & innovation manager, Ghelamco: I agree with that. I come from the communications sector, which has undergone one of the greatest transformations. In this sector it was realised at some point that there’s no point in creating new, individualised systems because everything is already on the market. Competitive advantages were thus built by using existing systems. In my opinion, in the case of proptech it is worth using solutions that already exist and combining them skilfully. Unfortunately, many technology suppliers on the real estate market are set against cooperation today. It’s difficult, therefore, to combine many systems into one and this is currently the biggest proptech challenge.

Daniel Bienias, managing director and board member, CBRE: There’s interesting book called ‘Make Real Estate Great Again’, whose authors took a look at the real estate market across the world – and it turned out that the latest initiatives tend to be very similar worldwide. In my opinion, we are currently at the stage of development where whoever is able to quickly introduce systems across the world wins. All the more so because the internet has turned the world into a much smaller place and everything has become possible. Today the real challenge is the ability to consolidate the various systems and create a single common platform.

Sebastian Świstak, leasing director, Cavatina: It’s a fact that we don’t have a universal system or market leading system on the real estate market today. Each building owner uses different software and thus the market is very fragmented for such services. There’s no market leader that would provide a single, good system that everyone could use. For example, an investment fund buying five office buildings from various developers is going to end up with as many as five different systems. Certainly, it will ultimately focus on just one of them and install that one in its other projects, but this requires more time and expenditure.

EK: But it is only a matter of time when things will change, and it could be through building users forcing the pace of change.

Ewa Andrzejewska, editor-in-chief, ‘Eurobuild CEE’: But when is this likely to happen? Can we predict this?

GS: It’s difficult to give an unambiguous answer to this question. Do you remember exactly when we started to make payments by phone on a large scale? Not really, we just started doing it. It’s a similar thing in our case: certain standards are needed from the outset before something can spread. The ball is in our court in terms of establishing and promoting the new technology.

EK: We try to be open to new ideas at Ghelamco. But on our market we could all be so open, our suppliers would also be more open to change. Therefore, the key thing is openness to the new tech.

JM: The real estate market is now not so far away from introducing common standards. The history of the Warsaw Research Forum provides is an example of this. Before it was established, companies had to collate the data themselves. However, the agencies got together and a single platform was set up. Things are similar now with technology – everyone has access to the same information, but having a competitive advantage depends on the way you use it. Two scenarios are currently possible on the real estate market: either one player will appear and create a single universal proptech platform, or we will agree to do it ourselves. On the subject of phone payments, I’ve been paying this way for just a few months because my bank only gave me the ability to do this recently. So this is another example of how long it takes for competing companies to start working together.

EK: European companies are currently often more advanced when it comes to introducing new technology than, for instance, American ones. Our colleagues in Boston or Seattle sometimes say to us: “You’re so bold over there in Europe.” It’s often the case that what we introduce in our buildings in Europe only later appears in the States. So it’s not the case that everything new comes to us from the West.

EK: Europe is, however, a hard market for start-ups. For example, there are only a few major telecom players in the US. That’s why it’s easier to increase the scale of your activities on such a market. In Europe, by contrast, you need to approach at least 100 companies instead of four in order to enter the same market. We don’t lack good ideas, but we have a problem with the ‘scalability’ of our start-ups in Europe and their reach.

JM: In this context, we would like to turn to our study of the proptech market in the CEE region. For this research we analysed individual buildings in each of the capitals of this part of Europe. As a reference for the study, we chose The Edge building in Amsterdam, which is considered one of the most technologically advanced office buildings in Europe. We defined the fields and criteria that every building should meet with reference to it. The first main area is related to building’s economics and management, and the second to the building’s users. In the end, we looked at a total of 29 buildings. It turns out that Austria and the Czech Republic are currently the most advanced countries. Poland, unfortunately, fared poorly in comparison. Our ratio in relation to The Edge ranges from 52 pct to 57 pct. While in this ranking we are the best in terms of management and savings, we are the least advanced in terms of developing the technology to access buildings, specifically, with systems other than an access card. A building in Milan doesn’t even have card access – it has an app designed for all aspects of accessing the building. In contrast, our access control is often multi-stage: in the car park, at the reception, at the gates, in the lift and at the entrance to the offices. This doesn’t exist in Italy. The conclusion? Each country is technologically advanced in a different way.

KM: We are talking in WeWork’s recently opened Warsaw headquarters and we are still thinking about the best way for controlling the room temperature. Our surveys and other research show that we are still at the research and experimentation stage for this kind of thing. Why is this happening? What has to happen for us to emerge from this stage?

EK: This is not an easy question to answer. We have lived without the latest technology for many years. Besides, allocating funds and investing them in new systems involves risks. The argument for doing this, however, is that if we don’t do something, a real estate ‘Uber’ is likely to emerge and make us all obsolete. The development market has been changing rapidly and unless investors see this, they could wake up in another reality in which someone else has taken their place. Of course, sometimes we ‘miss the memo’ and things pass us by – and we have to take that into account and be able to eat some humble pie. So a great deal of courage is needed today.

DB: We’ve actually all been doing too well and have become complacent because the real estate market keeps on growing. And we are still hostages to our annual budgets. But without investing substantial sums in proptech, we won’t be able to embrace these dynamic technological changes. And the problem is, you can only invest up to a certain point before it’s necessary to obtain returns on it.

EK: It was a similar situation with environmental certificates – no one could work out what benefits these would bring.

GS: There was a time when people wondered what building certification was for, but today it is the standard. Another thing is that it doesn’t always translate into savings. Maybe with the same will be the case for proptech systems. They will become the standard because someone will make the first bold move who will not concern themselves with the profits it will bring. Another approach could be to wait for a market consensus to form – and then we will all have to introduce similar standards if that happens.

KM: Is it just down to courage or are there other factors?

GS: It’s important to show that such activities make sense. It also probably needs to be demonstrated that proptech systems, for example, make our buildings better than the competitors’ and that they sell better.

DB: This is probably what we are heading for. Perhaps the next stage for the market will be the emergence of a standard for smart buildings. As a result, there is likely to be a clear-out on the market. The smaller players will not be able to grow their businesses, while larger companies will gain a tighter grip on the market.

EA: If we have to start somewhere, let’s start with agreeing on some common standards.

GS: From my point of view, it’s important for the people who use buildings to be satisfied with them, both now and in five years’ time.

KM: I’ve noticed that there’s no culture of receiving feedback. If we don’t do such ongoing evaluations, we could miss important conclusions that could help us do something better next time. What does this look like from your perspectives?

GS: From my point of view, the views of employees are becoming more and more important. This has even been having an increasing influence on the choice of future head offices. Once it was the CEO who played the decisive role in choosing a building; but today things are different and very often the staff are consulted first about re-locations.

EK: During the introduction of Connected by Skanska, we regularly asked for feedback. With this continuous evaluation we were able to introduce changes on an ongoing basis – and this is still happening.

KM: What else can we use proptech for?

GS: One such area is definitely the creation of smart cities. Let’s imagine, for example, that through the use of technology the car parks in all buildings become accessible to the public. This optimisation of parking systems would make city life much easier.

JM: But someone has to have an interest in it. You always have to follow the money.

SŚ: We are currently aiming to make buildings more autonomous and energy-efficient. In order to achieve this, it’s necessary to combine two elements: meeting the needs of users and getting a return out of such an investment. Fortunately, the rapid development of renewable energy tech has made these systems cheaper and thus the period needed for obtaining returns on an investment has been shortening.

EK: We are all still at the beginning of the road. Sometimes, however, it’s worth focusing on partnerships. One example of this can be found at the Warsaw Spire, where we have introduced a car sharing service run by Innogy Go.

KM: It often happens that there are several partners who come to the conclusion that it’s worthwhile doing something together. Is it not the case that when introducing new technology, it’s always worth having a partner for such a venture?

GS: I believe that such cooperation will make life easier than innovation for the innovation’s sake. It must always have a business application. Therefore, it makes more sense to build partnerships than to introduce individual innovations. The example of Innogy Go is a very good one. It’s much better when companies from different sectors are able to find a common language.

The experts around the table:

Daniel Bienias

Poland managing director, CBRE

Daniel, who is also a member of the CEE management board, is responsible for business development and the team management of almost 500 specialists across Poland. He has been employed in the sector for twenty years, in which time he has gained professional experience in the leasing and sale of residential and commercial space, the management of the commercial division of a real estate agency, and the leasing of an investment fund’s real estate portfolio. During his career he has advised many local, international and global companies, such as PWC, IBM, State Street, Accenture, Jerónimo Martins, Genpact, Polkomtel, Skanska, HB Reavis, Globalworth and many others.

Ewelina Kałużna

leasing and asset management director, board member, Skanska Property Poland

Ewelina is in charge of a team of more than twenty people and supervises development and leasing strategies for the company’s commercial projects. She is responsible for the cooperation strategy for tenants and business partners, as well as for increasing the value of investments and their property management. As a board member she is responsible for the company’s strategy in Poland. She also sits on Skanska’s co-working subsidiary Business Link, where she is responsible for its strategy in Poland and the Czech Republic. She graduated from the Warsaw School of Economics and holds MRICS, CCIM and LEED Green Associate titles.

Emil Kamiński

research and innovation manager, Ghelamco

Emil, who was formerly the head of R&D at Ericsson, believes in improving human experience and real estate operations through the effective application of such technology as Cloud, IoT and machine learning techniques. He is a keen advocate of the Smart City concept and cooperation with start-ups.

Krzysztof Mogielski

head of digital transformation, CBRE

Krzysztof is expert with over ten years of experience in the digital and technological field. He creates and implements digital transformation strategies by developing projects in the areas of CRM, marketing automation, e-commerce, data analytics and digital back office. As the leader of the CBRE’s digital transformation department, he supports companies with the implementation of new technological systems that improve internal processes and services for clients.

Waldemar Olbryk

management board member, Echo Investment

Waldemar is responsible for the residential development division. He joined Echo Investment in August 2017 and was appointed to the board in October 2017. Previously he was employed by the Skanska group, where he held such positions as director of business development and team manager responsible for new business, including public private partnerships and shared services. He is a graduate of international economic relations at the University of Łódź, where he also completed MBA studies and at the University of Maryland.

Joanna Mroczek

senior director, head of CEE research and marketing, CBRE

Joanna is a member of CBRE’s management team and is responsible for the cooperation of six countries: Poland, the Czech Republic, Slovakia, Hungary, Romania and the SEE Region. She manages teams that combine analytical and marketing specialisations. Joanna has over 15 years of experience of working on the commercial real estate market. In 2007, she became the manager of the research department at CBRE and since 2015 has been managing the marketing and communication department, which supports the company’s development at various levels. She is a graduate of the Warsaw School of Economics and completed the international management development programme of AMP IESE Business School. She is an experienced conference speaker and jury member of awards competitions.

Grzegorz Strutyński

commercial director, Globalworth Poland

His role in the company is to build long-term, collaborative partnerships with current and future tenants seeking office space in Poland. Grzegorz has over 20 years’ experience in the commercial real estate market. In previous roles he has coordinated such departments as leasing, office development and marketing at well-known companies, managing teams both in Poland and abroad.

Sebastian Świstak

director of the Warsaw branch, Cavatina Holding

Sebastian is responsible for managing the local leasing team for the Chmielna 89 development in the city centre. He has twelve years of experience working for office developers and international consultancies. Before joining Cavatina Holding, he was an associate director at Colliers International and was responsible for the leasing of such projects as the Warsaw Trade Tower, Plac Unii and Equator II & IV. He graduated from the Warsaw School of Economics in economics and management and is also a Certified Commercial Investment Member (CCIM).

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