Coming to you live from the lobby of my hotel in San Francisco, a day after another great event by Michael Beckerman and the team at CREtech. It's been a whirlwind week – it was great to catch up with folks and we met so many new faces throughout the week and at our booth.
Now, I was only able to catch one panel at CREtech due to some intense traffic at our booth, but I picked up on a trend that I want to share with you here:
Landlords at CREtech are opting to partner with tech companies, instead of wasting time or money buying or building their own tech.
The second panel of the event had top landlords talking tech, featuring moderator Jak Churton, Managing Director at JLL, Breton Birkhofer, Innovation Lead at Prologis, Josh Raffaelli, Managing Director at Brookfield Ventures, Matt Griffin, SVP at Kilroy Realty Corporation, and Ryan Salvas, VP of Real Estate Technology & Innovation at EQ Office.
At one point, Jak brought up to the group the question that seems to be on the top of every landlord's mind right now:
How are you thinking about technology at your properties and are you planning on building, buying, or partnering with a proptech company to go about putting it into practice?
The answers were consistent across the entire panel: landlords do not see the benefit of building or buying their own proptech. Instead, they want to partner with proptech companies and one of the biggest benefits of partnering is the ability to conduct shorter term tests with the tech concept before they are completely bought into the strategy for a lot of money over years and years. Two quotes caught my attention:
"We're partnering with tech companies. For example, we're working with a drone analytics company. We are just not going to be the best at building drones. No brainer there..."
- Breton Birkhofer, Innovation Lead at Prologis
"We're taking the Android approach, not the Apple approach – partner instead of build. Everything that we do from a tech perspective, we're trying to be more agile. We run scrums to get quick wins. Before we make any big commitments, we're trying to determine if tech is useful with pilots & MVPs."
- Ryan Salvas, VP of Real Estate Technology & Innovation, EQ Office
This was positive to hear for a number of reasons. Since we launched back in January, we've had a number of conversations with landlords who were considering hiring developers and engineers to build their own proptech. Here's why we think building is a bad idea:
- Risk - There's risk in every tech investment, but hiring developers is an entirely new ballgame. For one, developers and engineers are some of the most in-demand professionals in the world from a talent perspective. The competitive nature of hiring a developer is one that even the top tech companies has trouble mastering. Commercial real estate landlords typically know nothing about tech development and so managing these hires takes a senior leader. Simply put, hiring an entire tech team is a huge effort and expensive investment – especially if it doesn't work out. It could result in a lot of lost time and money.
- Time - Hiring an entire tech team will take a long time. Then the team has to get ramped up. Then they have to actually build the technology. Then they have to get it into the hands of tenants. Then they will undoubtedly have to make changes and adjustments due to user data and feedback. Then the cycle starts all over again when market demands a new set of tech functionality and features. While proptech should certainly be viewed as a longterm investment, there is a lot of short term value to be lost if landlords don't take immediate action and roll out tech sooner than later.
One thing to note here – when landlords decide to partner with a tech company to implement an app for their building, they should be wary of development shops (mobile tech firms who create custom apps for various clients). We wrote about HqO vs. hiring a development shop at length here, but the major reasons for not working with a development shop center around industry knowledge, implementation, ongoing services, and cost.
Overall, we had a great week in San Francisco with the CREtech team, and it was especially encouraging to hear the current mindset of landlords when it comes to partnering with proptech companies. For anyone that we we're able to connect with at the event, I hope we can connect at the next one. In the meantime, sign up for our newsletter, the PropTake. Once a week, our CEO shares his thoughts on everything you need to know at the moment about the proptech industry and it's never boring.