Smart-building technology — hardware or software deployed in a building to improve tenant experience or operations management — is poised to transform the commercial real estate industry.
A recent white paper from Navitas Capital looked at the state of the smart building subcategory of the proptech market and found “the application of technology and process innovations has been embraced by the early adopters and market leaders, has been de-risked in many cases from a technology perspective, and has become increasingly more attractive from a price-to-value standpoint.”
Smart-building technology is currently evolving from first-generation solutions — generally building-level sensors targeting core functions, such as HVAC, lighting, energy, etc., that were monitored by a facilities manager or asset manager — to solutions that now focus on machine learning/artificial intelligence and rolling out programs across an entire portfolio.
In its Smart Buildings white paper, Navitas identified several hot trends in smart building technology in 2018 and some of the relevant companies within each segment: tenant engagement (District, HqO, Workwell); Internet of Things (Aquicore, Comfy, Humu); artificial intelligence/machine learning (Truss, Cherre, Dynasty); space-as-a-service (WeWork, Common, Ollie): augmented reality/virtual reality (Matterport, Magic Leap, Google); and prefabricated construction (Katerra, RAD Urban, Blokable).
One of the key challenges facing the wider growth of proptech and smart-building technology is the innate conservatism of the commercial real estate industry. The Navitas white paper notes: “One of the largest impediments to technology adoption has been change management. While a large and moneyed industry, real estate is also somewhat antiquated, often likened to the finance industry 20 years ago. The real estate industry has been relatively underserved by technology, which has hit the medical, consumer, financial and Internet technology verticals much more immediately.”
Despite the underlying caution, the future looks pretty bright for smart-building technology — though perhaps not the designation of “smart” buildings. Navitas argues the next generation of “smart” buildings will be simply known as buildings, “whereby each building acts as a component of a city’s or community’s interconnected operating system in a work-live environment.”
A pdf of the report can be downloaded from the Navitas website.