At a REITworld lunch general session, REIT leaders discussed how new technology developments, including AI and data analytics, impact revenue management, customer acquisition, ongoing maintenance and repair, customer experience, and capital allocation. Nareit’s REITworld: 2023 annual conference was held in Los Angeles on Nov. 14-16.
Laurel Durkay, head of global listed real assets at Morgan Stanley, moderated the session. Panel participants included: Rukevbe Esi, senior vice president and chief digital officer at AvalonBay Communities; James Whalen, senior vice president and chief information and technology officer at BXP; and Chris Sharp, chief technology officer at Digital Realty.
Addressing revenue management and the early adoption of AI and other technology at REITs, the panel discussed the importance of balancing the short-term need for immediate capital expenditure against the long-term need for improvements. They agreed that although the upfront costs of proptech can be extremely high, early adoption can give businesses a sizable competitive advantage in the long run.
“I spend an enormous amount of my time on contracts and negotiating…[getting] the best deal we can and protecting us in the future state of these cost increases,” Sharp said.
The panel discussed how to get tenants on board after deciding on a great proptech initiative that now needs to implement at its properties. Esi noted that from a customer perspective, people are simply looking for solutions.
“If we’re delivering an experience that actually eliminates friction, it’s easy to adopt it,” he said. “When it doesn’t work, then we have challenges.”
He said that for every product deployment, AvalonBayhas a set of hypotheses that determine the metrics the company wants to measure and identify what success will look like. After defining a test period, Esi said the REIT looks at the data to see if the behavior they expected is actually occurring.
“At the end of said cycle, we’ll access those metrics to determine if we’re on the right track…or if we need to pivot and readjust,” he said.
Whalen added that REITs also can’t be afraid to close things down that are not scaling for the benefit of the company, and said that he is currently decommissioning two proptech initiatives, one in San Francisco and the other in Boston, that began during the pandemic.
“And then, [of course], we’ve got ones that do make that jump, that cross the chasm and actually scale for the company, and get effected across the entire company,” Whalen said. He also stressed the importance of building a business case for proptech to initially build consensus.
Sharp said that a lot of proptech requires a broader set of data to truly be meaningful: “We’ve really been running a software development team to stay ahead of [the disruptive nature of software], and, quite frankly, ideate rather quickly.”
He added that to stay relevant and aligned with the hyperscalers, or the large cloud service providers that sometimes pull his team into details at a granular level, it is critical to already be exposed to the future generations of products and have an idea about how infrastructure will be coming to market.
Addressing how proptech can advance ESG issues at BXP, Whalen said it’s impossible for REITs to compete and be successful in sustainability without data. He said that companies need to create a common denominator across the portfolio that allows the company to measure initiatives consistently, which in turn creates an opportunity to “move up the curve.”
Closing out the session discussing advice for others in the REIT and real estate industry who are just beginning a proptech journey: Esi talked about being intentional and strategic when launching an initiative; Whalen stressed the importance of proper and abundant data collection; and Sharp said to fail fast.
“The industry of…AI is in its infancy,” Sharp said. “By the beginning of next year, we will see tremendous advances. Get on the right side of that disruption.”