It’s safe to say that technology is rapidly changing the condition of real estate management. JLL, one of the most prominent players in commercial real estate, has been heavily focused on their technology strategy, by investing in proptech companies through their global venture fund, JLL Spark, building technology products internally or acquiring companies. Over the past year alone, JLL’s technology division– JLL Technologies (JLLT)– has evaluated over 50 companies to add to their roster. The most recent among the flurry of purchases that made the cut is Building Engines. This Boston-based property management software company provides a “comprehensive, easy-to-use system that unites all the technology and applications used to run buildings in one place,” according to a statement.
There are plenty of reasons for JLL to buy Building Engines, the cloud-based property management solution was recently recognized at the Eighth Annual Real Estate Tech Awards as a runner-up in the Mature Growth category, for one thing. For another, Building Engines is already trusted by hundreds of commercial real estate organizations, including CRE, Beacon Capital Partners, Unico, and more. Although JLL is best known as a commercial brokerage, they are also one of the largest outsourced property managers in the world as well. Then there is the rocket-like growth potential of technology for buildings. Global IT spending will hit $4.5 trillion in 2022, and most buildings are currently under-equipped for the technology that tenants and owners are now demanding.
JLL’s decision to buy well-established technology companies like Building Engines goes hand-in-hand with its internal tech investments. When asked about the overall strategy behind the many recent purchases, Sharad Rastogi, President of Revenue for JLL, said, “our primary focus is to help our customers, so we look at their problems and the solutions we can bring to help them. If the solution already exists, we don’t need to build it again. We can just partner with the company providing that solution and offer their services to our customers.” Not all of the products that JLL has spun out have come from acquisitions, though. In 2015, JLL launched HiRise, an online marketplace where tenants and landlords can connect and complete their entire real estate transaction. It seems that JLL thought that developing HiRise was the best option, whereas recent acquisitions, like Skyline AI and Building Engines, were better bought than built.
One blatantly obvious question for a large company rolling out third-party solutions is whether or not they will make it available for its competitors to use. “There’s a term in the tech world that we use: co-opetition,” Rastogi explained. “You cooperate in some areas, and you compete in others. As these investments mature and as things consolidate, we’ll see more co-opetition in real estate.” According to Rastogi, Building Engines (and other startups that JLL purchased) will still get to maintain the autonomy and comfort level they’ve always enjoyed before becoming a subsidiary of JLL. This is important because it marks a separation between the parent company and the data pouring in from the subsidiaries, much of which comes from JLL’s competitors.
JLL’s thinking on investing in tech is twofold: first, there is an abundance of data in real estate– but that data is not being used “effectively,” hence the headfirst rush into integrating building software. “You need a system of record first that puts the data into a way that you can analyze it,” said Rastogi. “There is a massive opportunity for building software.” The second belief is that there are three sets of customers no matter the market: customers with internal IT teams who will deploy the technology themselves, customers without IT teams that just want to buy the technology but need help setting it up into their existing systems, and customers who would rather outsource the entire process. “JLL is the only company in commercial real estate that can offer all three,” said Rastogi. “The beauty is that we can help our customers pick the right technology, but also deploy and enable them to get value from it, and we can fully outsource as well.”
These big investments by JLL are part of its thesis that tech is changing commercial real estate as we know it. JLL’s current strategy is to look at the best technology for both themselves and their customers, and frankly, it seems to be working. JLL stock shot up almost 100 percent since the same time last year. Incorporating technology to help better serve their customers is an essential piece of the JLL strategy, but it’s not the whole picture. “As the industry matures,” concluded Rastogi, “we want to bring an integrated stack of technologies. Whether it is energy management, air quality control, or whatever, we want to have it all in one single place.” By looking for fresh ways to invest in, build, or purchase technology tools that they can turn around and sell outside of their organization, JLL is looking to double-dip on their tech investments, proving that it is good to both build and buy technology when trying to change an industry.