Commercial real estate tech | When is tech too much?

The essential guide, in partnership with Coniq, to commercial real estate tech selection and application within retail and mixed-use environments.

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As technology increasingly becomes a staple asset in commercial real estate, the question has shifted from ‘should we be using technology?’ to ‘how can we get the most out of technology?’.

This shift has opened up further discussions around:

• How do I pick the right commercial real estate tech?
• How do I streamline my tech stack?
• Should I buy or build my own?
• What’s the best way to keep costs down?

The implementation of technology is in no doubt here to stay. However there have been many lessons learned over the past few years, due to the over adoption of technology, mass use of single point solutions that can be expensive, or simply choosing the wrong partners.

Kinexio and Coniq, two of the longest serving and established technology solutions serving the retail sector, and wider commercial industry, have created this paper to address some of these questions, and provide insight into how to bring technology to life in a way that ultimately achieves goals and improves performance.

How is retail tech shaping up?

2023 seemed to be a year where the industry suffered from a lot of uncertainty. In particular rising costs and management of debt were the key focus for real estate teams, which has of course had a trickle down impact on the whole industry. Everyone has felt pressure from times of uncertainty, rising costs of living, and the impact of global political and economic situations.

The reimaging of retail landscape

Whilst the retail sector might have faced challenges, it has opened up areas of opportunity. The 2024 consumer is focused on experiences. This has led to a reimagining of retail, with a shift towards building destinations that people want to engage with. With the rise of flexible and hybrid-working, a new real estate strategy is being defined – one built around community.

Mixed-use developments like Battersea Power Station in London, Irvine Property in the US or Cadillac Fairview in Canada, are becoming centralized hubs where people want to live, work, shop and spend time, as people adjust to how they use a campus like space. Not only has this created a focus on larger leisure offers that are mixed with more traditional retail, it is also creating greater competition in physical retail in those properties.

From challenge to retail opportunity

Shopping centers and outlets are seeing some of their best performance. This is particularly evident in outlets, where uncertainty has pushed budget conscious consumers towards outlet malls.

Real estate destinations must reflect consumer habits

Increased interest rates are having an impact, leading to a slow down of new builds coming to market. There has been a focus on maximizing returns on current assets – and building out their offering, as opposed to focusing on new development. The reimagining of spaces to reflect changing consumer habits is driving creativity, and a change in how assets are approached – connecting the physical and the digital.

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Retail experiences

It is not just the destination that is changing, but how retailers act as well. Consumers are now looking for better experiences, and new brands – especially new niche brands that step away from the conformity of mass marketing. There then becomes a great opportunity to connect niche consumers to niche brands. There is a shift to brands testing their products online, but then knowing what exactly they can bring into the physical retail space to have impact. 

Essentially this means we are seeing the beginning of the death of ‘one size fits nobody’ marketing.

Bespoke communications that target consumer needs

The knock on effect of this, is that retailers need to be more targeted in their communications, building connections to brands as a way of drawing consumers to their location. Essentially this means we are seeing the beginning of the death of ‘one size fits nobody marketing’.

People are being more discerning as to why they are going to a physical asset, so there is a real sense of the need to switch from a mass approach to a more personalized approach to communication and marketing.

It’s important to take a new approach to communication – not simply sharing information for the sake of it. You need to take reason A to be on location and transform that into reason B. This is where being targeted and personal has real impact. You need to deliver the right message at the right time.

For example, there is no use letting people know about a sale 10 mins after they have already left the store. You need to engage with them, about the things that are important to them, when it will have the most impact.

Activate through engagement

It’s no longer just about having the right message (although that is important), it’s about having the right timing of that message, and having it reach the right people – this is how you really start to drive traffic and build up loyalty.

Technology becomes a real enabler, when looked at not only through the lens of how consumers are engaged with, but finding out what interests them.

Communicate differently

Communication isn’t just for shoppers. It’s not simply about a B2C app, it’s for retailers too. It’s important to allocate time and resource where it’s needed the most to help build organizational trust.

The most important feedback loops are created when you have:

• Streamlined communications
• Actionable reporting
• Risk mitigation

Empowering the entire ecosystem to be successful, from operations, facilities management, retailers, security, through to end-users – is what activates a destination.

How does consumer data help?

Technology enables the collection of data, creating slicker, lower friction ways to make decisions. It then can become actionable – painting a useable picture to drive targeted engagement, ensuring that a balance can be found between owner/operator needs and those of the end-user.

What property management need to understand

Understanding an assets performance is key to being able to make strategic changes that can drive success. Understanding sales data, tenant sentiment, security issues, or the impact of operations is hugely important.

We are no longer in an era of best guess, experience, or gut-feel. With technology asset owners and operators can build a clear picture of what is happening at their asset. Not only that but they can communicate effectively with each of these groups of stakeholders, creating alignment and loyalty, in a way that wasn’t previously possible.

• Want to understand how Kinexo can help streamline your property management? Contact the team today

Commercial real estate tech in practice

The use of technology and data for visibility has impact on the entirety of the community that touches any destination – including the end-user.

1. Imagine for example, being able to deliver timely communications, such as through the use of Geofencing, helping to disseminate information in a way that it becomes useful and relevant to a consumer. Wouldn’t it be great to know that a specific lunch-time deal was on as you exit the train station, before you have gone and grabbed any old, uninspiring food instead?
2. This picture becomes even more powerful when done on mass, and you can really start to see behavioural trends. For example if you can understand the behaviour of 1 million people interacting with an asset or campus, you can really build-up a picture of what is working, what isn’t working, and what can be improved upon – to target individuals.

How has commercial real estate tech been adopted?

There was a period during COVID-19 where the retail and wider commercial real estate industry realized that it needed to adopt technology – quickly. However, due to the speed of adoption, this was often done without any centralized technology strategy in place.

Point solution overload

This led to a tech overload with an increase in adoption of single point solutions. Many of these acted as sticking plaster, rather than solving for a deeper problem or challenge that the real estate industry was facing.

Whilst there is still some adoption of single point solutions, this is starting to be undone, in favor of taking a more centralized approach.

Like every business, real estate companies need to communicate effectively, provide real time information and drive customer loyalty in difficult times.

Tech partner for success

This has led to a more discerning approach to tech adoption, focused on partnering with more established tech companies that truly understand their needs.

There has also been a shift as more dominant technology players have emerged. These are the ones that focused on solving a problem, and were focused on understanding what’s needed instead of what is new and shiny, or trying to discover the so-called ‘silver bullet’.

Strategically integrated future

There is now a push to consolidate and build integrated data strategies, so that asset managers can get more information and insight into the performance of an asset.

Solutions that don’t have data at the heart of what they do, or the ability to integrate with your ERP tech stack will gradually be phased out and replaced. Afterall, what is the point of having lots of data that you can’t access, or use in an actionable way.

The technology solutions that are having the biggest impact are those with a proven track record and a trusted customer base. They are the solutions that have been used in, and developed for CRE companies. They are the ones that are trusted, and therefore, have a reduced risk of failure of adoption.

Technology that is being paid for but not used, is a bigger detriment to a business than not having the technology in place at all. It’s also important to plan for the journey. Make sure that you have partners with a solid roadmap, and that can flex with you as your business changes.

Understand the bigger picture

Equally it is important that real estate companies looking to adopt tech don’t cut corners. If you look at this as part of the bigger picture, and the impact on NOI, having the RIGHT technology isn’t expensive.

We’ve seen it in the past, that businesses wary of overspending on technology chose, what they consider to be, a more cost effective solution to their problems.

However, they end up with multiple solutions that aren’t fit for purpose, don’t properly integrate, and aren’t used. Importantly, they aren’t able to adapt to the changing real estate climate fast enough with the technology creating friction, and not always performing.

The long term vision for your property

Choosing a company that grows with you, understands the world in which you are operating is hugely important, as they will already be building what you require as the industry adapts over time.

Whilst more established players might seem more expensive in the short term, they provide the ROI in the longer term, and prevent costly mistakes.

The benefits of AI in commercial real estate

The real estate industry has gone through different stages of tech adoption, so it’s important to learn from experience that having something new and shiny is not always the best option. It is better to look at the SLA, data security etc, and what the technology is bringing to the table.

For example, there is a lot of debate around AI. It is not a fad. It will improve how work is done, and become more prevalent in everyday work in the future. It will create more personalized experiences, and add efficiency.

However, it is important to pick those that are built for purpose, and not over promising things that are impossible to deliver.

How does tech help asset performance?

Improve Net Operating Income

When we think about a high performing retail asset, it is all about increasing income. This is achieved through driving sales, leading to increased rent, and therefore better overall performance. So any asset subject to turnover based rent should be looking at technology to increase efficiencies, and create an environment for increased sales.

Technology must support businesses by either increasing revenue or decreasing costs. One of the key things to consider is how technology can support retailers to drive more sales, as this will ultimately increase revenue.

One of the best ways to decrease costs is through the consolidation of multiple point solutions into a more enterprise solution that has multiple benefits through the property management lifecycle.
This technology can then decrease costs by increasing operational efficiency, and providing the ability to reallocate resource in a way that better serves the cost-effective management of an asset.

Reduce operating costs

It’s important to find efficiencies, save on capex and opex costs, and to do this it is important to understand asset usage and performance. Without that it wouldn’t be possible to know how to effectively budget.

One of the biggest pitfalls is falling into the feeling that the only way to solve a problem for a specific asset, or portfolio is to build new technology from scratch.

There is often a belief that each business or asset is unique. However, whilst this may be the case in terms of brand or specific workflows etc. behind the scenes there are the same base problems that need solving.

Therefore, whilst it could seem sensible to build a solution from scratch, it is extremely expensive, and there are mature tech businesses that can already provide great partnerships that deliver across every asset.

The great technology debate: Build Vs Buy

There are a number of companies that have tried to build their own solutions as it can appear cheaper in the long-run, and can be a capitalized development cost rather than an ongoing operating cost. However, problems begin to arise after the initial MVP (minimum viable product) is built.

At this point, development teams become internal SaaS companies, but without the experience to iterate and deliver to their internal customer demands. This leads to rising maintenance and development costs, which outway the flexibility of using an existing SaaS solution that can adapt with you, or that you can change if needed.

It’s interesting how companies will think so differently about operational or data led technologies than they will consumer facing ones. For example, an owner-operator wouldn’t look to make its own lift, develop occupancy tracking sensors, or create AI that analyses user sentiment. That is because they are not technology companies. Their DNA isn’t to build tech.

Partnering with tech companies that really understand how to work within the industry and understand what is needed to achieve specific goals, will be completely game changing. It’s important to listen to experience, and see the transformation that is happening already with real estate companies who have successfully adopted technology, and have a working digital strategy.

5 times more expensive to build your own technology…

Out of the small number who ultimately chose to go down the build route, many of them end up with burnt fingers, from spiraling costs and inability to continue to innovate.

It’s a factor of 5 times more expensive to build your own technology, it’s difficult to control costs from increasing headcount and budget, all the way through to ongoing opex. To build great technology you need to run a team of people with a particular skill set, one that isn’t usually within a real estate company – it’s a great cost to any business. Budgets are often underestimated leading to significant problems in build and ongoing maintenance. Further to that there is the additional problem that most look to build something that answers one need, so doesn’t have the flexibility that established tech companies with real nuanced understanding and clear roadmaps have.

The (mis) conception in SaaS product development is that when you build something that is tailor made to your business needs, it will ultimately be better and more custom fit to your company than anything you could buy.

So what is the best way forward? BUY A PARTNERSHIP