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The Office of the Future Resides Somewhere Between Hardware and Software

Imagine a futuristic world where the moment you are pulling into the parking garage of your office, your phone tells you there is an open spot on the second floor near the elevators. As you leave the garage, you walk up to the building door, which opens for you after sensing the Bluetooth ID on your phone. Stepping into the lobby, the lights illuminate and the elevator opens, whisking you away to your floor. As you move up through the building, your phone notifies you that there are two open workspaces, one by a window, one by the bathroom. You subconsciously wrinkle your nose and select the window desk, when your phone asks if you want half-caf or full-caf coffee today. You step out of the elevator and across the office you see your selected workspace light up, the air conditioning lightly increasing directly above you as the sun shines in on your desk, and in the kitchen you see your coffee mug steaming with your fatigue-defeating latte.

This scenario isn’t something from the Jetsons or Black Mirror. This is the future office we will see in the very near future and that many are beginning to see today. At our recent Propmodo Metatrends 2019 event in Los Angeles, we convened a group of experts to discuss the role of sensors and IoT optimization hardware in the future of commercial real estate. The panel was comprised of Allison Ballard, Executive Director of Tapdn, Eric Roseman, Vice President of Innovation with Lincoln Property Partners, and James Segil, President of OpenPath.

So how exactly does hardware impact CRE?

In the futuristic office space conceived above, the optimization doesn’t come from some magical, all-powerful office robot or employee chip implant, but simply a combination of sensors and hardware that communicate based on tenants’ office behavior. I use the term “simply” figuratively because, as anyone in the building of managing a building knows, getting all the pieces to work together is anything but simple.

But the fate of the industry lies in being able to connect software and hardware. For example, while software like smart calendars can tell you if a conference room is booked, sensors can go a step further and tell you if that room isn’t actually in use so you can pop in for an impromptu phone call. Additionally, while you can use your phone to tweak temperature and lighting settings, smart HVAC and lighting systems can remember your preferences when you occupy an office, automatically kicking those settings into gear when you approach your workspace.

Segil’s company, Openpath, focused on the first step of amenitization by enabling Bluetooth connections to allow tenants to easily enter a building. But he notes that landlords must offer perks that go beyond this. By further amenitizing a building through sensors and hardware, Segil states, property managers can help commercial tenants achieve their primary goal, attracting the best talent to work in comfortable and progressive office spaces. By enhancing business tenants’ ability to bring in the best employees through optimization, property managers can increase their tenant retention.

A secondary, yet possibly more valuable benefit of optimization is that it offers property managers data on their tenants’ behavior, how they interact with the building, and what optimization they can install to increase efficiency. As Ballard noted, understanding tenant behavior allows building owners to understand what a good investment looks like in the future. “Sensors enable all kinds of objective data insights to be ingested and decipher how to best plan for increasing ROI from a productivity level and an investment in real estate perspective.” Roseman agreed, noting that the role of a landlord no longer means simply negotiating with a tenant to fill space, but paying attention to data on the tenant’s behavior to improve their experience in the building and consequently increase the odds that tenants will stay in the building for longer lease periods.

The panel then outlined the multiple benefits that optimization gives to landlords. In addition to extending leases, property managers can increase revenue by offering extensive amenities and charging for their use. For example, if a landlord sees that an office gym is not being used extensively by a business tenant, he can offer other benefits such as a wellness program to reward this behavior and earn revenue from gym memberships. An added benefit in the age of WeWork’s business model of a customer-focused property management, is that landlords can increase the perception of their management company to ensure they offer a similar level of customer service or risk losing clients. By utilizing the optimization data from sensor and hardware, property managers can offer rewards and perks to further delight their tenants. It is this type of “extra mile” behavior, Roseman stated, that property managers will need to exhibit to match what tenants already expect with the expansion of the WeWork model. “Collecting information about a building, how users use the space, is the DNA that feeds the property manager.” They must understand, he said, that “I’m working on a living breathing organism which is my building.”

Ballard agreed with these ideas, but extended it by noting that landlords must adopt technologies like sensors and hardware to have real-time data to confront issues that arise in buildings before they occur. This will ensure that their tenants’ business operations are not impacted, making property managers “heroes” in the eyes of their tenants as well as building owners.

What will the future hold?

While sensors are already used in buildings, there is still a lot of work to be done. First, Segil outlined that a key challenge is creating awareness of a building’s amenities among tenants. This must be confronted by finding a way to convince people to use their phones to interact with the building and its optimized hardware. Ballard agreed that Bluetooth beacons on phones is the crucial technology, but no adoption will occur unless the tech offers a benefit to users. This can occur with sensors’ ability to operate unseen to help understand each user’s preferences and working to it. In order for people to begin to see the benefits in their day such as not having to manually alter their environment, like lighting or air conditioning, the data of each user will have to be passed seamlessly between systems. Integration will have to be so flawless that it will have to work silently in the background, unbeknownst to the user at all. Only then will workplace sensors be able to optimize an occupants day work instead of waste time with the minutiae of daily office jockeying.

Whether an office space is fully-automated with an interconnected web of sensors and IoT devices constantly updating one another, or landlords start smaller by simply employing Bluetooth door technology, it is clear that optimization is the tool that defines the future of commercial real estate. Regardless of how building optimization is employed, property managers must implement integrate technology into the core of their product offering to improve data insights on their buildings, please tenants, improve lessee retention rates, and drive future revenue possibilities. With this technology becoming more and more prevalent, adapting business models and optimizing space is the key to the property managers and owners remaining relevant in the future of commercial real estate and ensuring their assets remain profitable.

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