Goodbye Smart Buildings; Hello Real-Estate-as-a-Service

CRE Game Changers:  IBM takes entire building in New York, to be managed by WeWork.  (The Real Deal)

WeWork is changing the real estate game, and they don't even own the real estate, or manage the facility itself.  They call their model Space-as-a-Service and it's changing how people use buildings.   Their value proposition resonated with IBM and thousands of other WeWork members. 

Many real estate operators are struggling to identify an energy efficiency based ROI within individual Smart Buildings (see From Smart Buildings To Real-Estate-as-a-Service, below) .    Should they instead consider transforming service processes, to create and deploy a Real-estate-as-a-Service model?  

At the core, Real-Estate-as-a-Service delivers digital (twin) buildings (see below) and measurable service processes across enterprise boundaries, which can be deployed across the entire portfolio, without major capital investment.  

RE-a-a-S addresses building services, but service means different things to different stakeholders.    For building operators, every service intervention means an increase in operating costs.  To other stakeholders, service means:

• Service...a labour cost incurred when a building is changed...is usually the second largest operating expense after property taxes
• Service...the action of helping or doing work for someone...is the competitive differentiator in front of the customer  
• Service...the use that can be made of an asset...is the competitive differentiator to the building owner or asset manager 
• Service...performing routine maintenance or repairs on building assets...is the competitive cost differentiator in the back-of-the-house  
• Service...supplying utilities such as electricity or water...is the competitive differentiator for sustainability of the built environment

Real-Estate-as-a-Service creates a platform that delivers measurable digital service processes (across all services) using IoT technologies.   By putting everything in one place, it changes the game for managed real estate portfolios.   

Digital Twins Are The Foundation For Connected RE-a-a-S

"A digital twin is a virtual representation of a process, product or service. While companies have been using digital twins for years, it’s only with the Internet of Things (IoT) that they’ve become cost-effective." 

“Digital twins are becoming a business imperative, forming the foundation for connected products and services.”  SAP

In real estate, digital real estate portfolios manage digital twins of physical buildings and building systems.    Digital service processes allow manual (people) and automated (sensors) services to capture and share data, in a single workspace.  

Both SAP and Gartner Group consider digital twins technologies to be in the top ten strategic trends in 2017.  At BuiltSpace, we have been twinning physical building, and offering digital service processes, across portfolios since 2011.

From Smart Buildings To Real-Estate-as-a-Service

I recently read an excellent 2016 paper by Deloitte real estate researchers, Surabhi Kejriwal and Saurabh Mahajan, titled Smart buildings: How IoT technology aims to add value for real estate companies .   The authors pointed out that in commercial real estate it's no longer sufficient to just have a great location; now that location must be paired with information, and analytics. (I don't think that's enough; analytics can only suggest actions, service processes record that action as it's taken.)

"You can’t afford to ignore the Internet of Things.”  Location is never going away, but with the IoT, the future of CRE just may be in location, information, analytics. ( Surabhi Kejriwal and Saurabh Mahajan)

Their paper described a comprehensive set of value propositions for Smart Buildings, to be controlled by what they describe as "integrated IoT-enabled building management systems".   They recommend that these individual IoT-enabled BMS be integrated into an "IoT platform" to deliver a variety of benefits, as described in Deloitte's economic value framework.

Integrating Finance, Operations, and Collaborative Processes

Kejriwal and Saurabh suggest that this IoT platform provide data aggregation, analytics and integration of operational and financial information, using a flexible IoT platform that can be easily changed over time.  A collaboration platform, incorporating digital twin technology is the secret to enabling this integration of operational and financial information.   

An integrated platform will eliminate or integrate enterprise data silos, to streamline processes, and reduce transaction costs.   Data will be entered once, and in real-time, at the point of service.  Direct operational efficiency benefits include:

• The ability to measure labour savings in real-time (not weeks or months later)
• Remote visibility to service work as it's completed, by all service providers
• Asset-level collection of service costs across the portfolio
• Financial cost data to building equipment/system level 
• Dramatically shorter service cycles
• Measured responsiveness to service requests (real-time measure of fault-to-fix)
• Capture of institutional memory (knowledge currently held in the minds of experienced staff and contractors)
• Collaboration across stakeholder groups for better decisions
• Aggregation of operational and financial data across the entire portfolio, not just individual buildings 
• Opportunities to identify sustainability measures based on collective knowledge of building stakeholders   

The Game is Already Changing

IBM takes entire building in New York, to be managed by WeWork. 

The idea is that big companies may appreciate an all-inclusive managed office space under a more short-term commitment than a traditional lease.

This deal gives IBM the ability to manage their space dynamically, to meet the needs of their changing work force; not just in a single building, but wherever WeWork offers space.   Instead of building out space that anticipate future needs, WeWork allows tenants to consume only the services they need, while allowing them flexibility to add additional staff wherever, and whenever the need it.   If they need a desk for a day, book a meeting room for an hour, or even send flowers to a customer, the WeWork platform provides access to these services.  "Members" pay only for the services used.   

For WeWork, the digital processes required to manage their space, service partnerships, and "memberships" is a far cry from traditional enterprise property/facilities management process.  As much as WeWork needs to manage their space inventory across multiple customers and properties, they need to collaborate with a IBM, over 250 member-facing service partners, and thousand of other WeWork members, to manage their space and service needs "on-demand".    Collaboration, information, and digital business process drives this new model.  

WeWork describes this as their Space-as-a-Service business model, where real estate services are delivered with flexibility, on-demand, using IoT technologies, across a rapidly growing portfolio of leased office space.  

The IBM-WeWork deal clearly changes the game for traditional landlords.  It's not about better buildings, it's now about better service processes, to deliver measurable financial value with Real-estate-as-a-Service.

Rick@builtspace.com