Exploring how emerging technologies affect real estate and our built environment

www.propmodo.com
JULY / AUGUST 2019
Ask What Your
Workplace Can
Do for You
Connecting our physical
workplaces with our digital lives
using Tenant Experience Software
BY FRANCO FARAUDO
Cherre’s Award-Winning
AI Platform Empowers You
To Make Better Investment
And Underwriting Decisions
DATA DISCOVERY
Automated data discovery
of all relevant sources and
types ensures full access to
internal and external data.
DATA COLLECTION
Proprietary and automated
data collection and extraction
allows for seamless leverage
of all data sources.
DATA MAPPING
Industry leading data resolu-
tion and mapping creates a
unified single source of truth
for the entire organization.
 WE S H A PE
O U R
BUILDINGS,

A N D A F T E R WA R D S ,

OUR BUILDINGS

S H A PE
US.

PAGE 17

ARTWORK BY WRAPPED
www.wrappedla.com
5
ANALOG Who are the flamekeepers
of modern tech?
Pop quiz.
1.Name a data scientist alive today (Base-
ball statistician Nate Silver doesn’t count).
2. Fine then, name a statistician who
lived in the last 150 years. I’ll wait.
3. Okay, name a mathematician who
lived anytime (Einstein doesn’t count, he
was a physicist).
How did you do? Don’t feel bad. It’s a
difficult test. Everybody should have an-
Travis Barrington swered number three. Plato? Archimedes?
PUBLISHER I’ll even accept Isaac Newton.
Question number two begins to sep-
arate the sheep from the goats. A list of
the best known statisticians of the past
150 years would have to include Florence
Nightingale (circular histogram), John
Tukey (computer science), Ronald Fish-
er (successor to Darwin). Some of these
names may be familiar, but probably not
for statistics. Nightingale is best remem-
CO-FOUNDER & PUBLISHER bered as the founder of modern nursing;
Travis Barrington Tukey as the inventor of the term “bit” —
travis@propmodo.com the smallest unit of data in a computer.
But question number one is the killer.
CO-FOUNDER & EDITOR Without data scientists, so-called Big Data
is useless. And with more and more orga-
Franco Faraudo
nizations collecting terabytes of data, data
franco@propmodo.com
scientists should be any CEO’s superhero.
Why? Because correct analysis of data is
ASSOCIATE PUBLISHER leading to major cost savings in just about
Logan Nagel every industry from healthcare to real es-
logan@propmodo.com tate. On the other hand, bad data can cost
organizations billions of dollars a year.
CONTRIBUTORS Many CEOs have developed a stutter:
Connell McGill “I can’t explain the math behind it, but…”
Dror Poleg Can’t explain usually means “don’t under-
Aakash Ravi stand.” The implication being that there is
Phil Russo someone who can explain and does under-
stand. Behind most tech company CEOs
Jeff Wheeland
is an unsung data scientist. But why un-
Guy Zipori
sung? Why don’t we see him at the cock-
tail party?
Propmodo Inc. Perhaps part of the reason is that it’s dif-
PO Box 130802 ficult to talk to a data scientist about what
Carlsbad, CA 92013 USA he does. The conversation quickly slips
into algorithms, machine learning, and
© Copyright 2019 the relentless search for bias error. It’s not
simply a matter of getting up to speed. If
Propmodo Inc. All rights we could talk with a mathematician (data
reserved.
www.propmodo.com
science is a new field) from a century ago,
we would be no less puzzled. Then the
popular topics were the arithmetic of in-
finity and the calculus of invariants. Prob-
ably the only people who can comprehend
the mathematics from a century ago are
the mathematicians and data scientists of
today. They are the keepers of the flame.
Some mathematicians have been carried
away by the loftiness of their art. Bertrand
Russell said, “Mathematics rightly viewed,
possesses not only truth, but supreme
beauty—a beauty cold and austere, like
that of sculpture, without appeal to any
part of our weaker nature.” A modest take
for sure.
Comparing mathematics with sculp-
ture might suggest that perhaps mathema-
ticians and data scientists are like artists:
nice to have around, but not essential.
Even the American mathematician Mor-
ris Kline said, “mathematics is a body of
knowledge, but it contains no truths.” De-
spite this, mathematics, statistics and the
new field of data science is more import-
ant than ever.
The Greek geometers made possible
such groundbreaking, however mundane,
skills such as navigation and architecture.
Later their twentieth-century disciples led
an ongoing physics revolution. Today’s
torchbearers are using many of the same
skills to lead tech (and non-tech) organi-
zations across uncharted seas of Big Data
— the lifeblood of the future economy.
The modern flamekeepers of math are
spinners of intricate networks of logic,
out of which they construct castles in the
sky. And once in a while a scientist comes
along, pulls one down, and finds a part he
needs. Computer scientist John von Neu-
mann put it this way: “When the most
abstract and “useless” disciplines have
been cultivated for a time, they are often
seized upon as practical tools by other de-
partments of science… as if one bought
a top hat for a wedding, and discovered
later when a fire broke out, that it could
be used as a water bucket.” < >
CONTENTS

8 11
THE LOOMING REAL DON’T BELIEVE THE
ESTATE DATA OIL PROPTECH HYPE
BOOM
13
BY FRANCO
WHY THE FUTURE OF
BY JEFF WHEELAND FARAUDO
WORK WILL LOOK A
LOT LIKE AMAZON
WEB SERVICES
22 BY DROR POLEG
HOW SMART BUILDING TECHNOLOGY
ACTUALLY WORKS
50
BY CONNELL MCGILL
PROMOTED
FINDING THE RIGHT

17 34 DEAL IS ONLY THE

FLEXIBLE WORKSPACE IN BEGINNING
ASK WHAT YOUR
THE ERA OF WEWORK ALTUS GROUP
WORKPLACE CAN
DO FOR YOU BY LOGAN NAGEL

BY FRANCO 47
MICROSOFT
FARAUDO
37
WANTS ITS AZURE
REAL ESTATE IS
PLATFORM TO
31 44 ADJUSTING TO OUR
BECOME “THE” IOT
THE MOBILITY A COMMERCIAL REAL CHANGING MORAL
CLOUD
REVOLUTION ESTATE EXECUTIVE’S COMPASS
BY FRANCO
BY JEFF GUIDE TO AI BY AAKASH RAVI
FARAUDO
WHEELAND BY GUY ZIPORI

24 26
54 REAL ESTATE DATA
ZILLOW POISED TO DEVOUR THE iBUYER
RELEARNING LEASING RIDING TO RETAIL’S
MARKET
BY TRAVIS BARRINGTON RESCUE
BY JOSHUA FRASER
BY PHIL RUSSO

57 42
THE NEXT BIG TECH FLEXIBLE
COMPANY MIGHT BE OFFICE DESIGN
MORE HUMAN BY JEFF
THAN TECH WHEELAND
BY FRANCO FARAUDO

THE LOOMING
REAL ESTATE
DATA OIL BOOM
The genie is out of the bottle for data’s impact
on real estate.
BY JEFF WHEELAND
If data is indeed the “new oil,” then
real estate is lingering in the era before
the invention of the automobile. Prior to
the boom of Ford Motors, due to the lack
of a universal application, gasoline was a
cheap and relatively useless byproduct of
oil refinement—used in lamps and stain
removal—that was often dumped into
rivers. That is, until the Model T was
born. While data is consistently used to
drive decisions, real estate is still strug-
gling to figure out how to unilaterally
harness this invaluable commodity for
the benefit of the entire industry. Just as
the oil business was awash in gasoline in
the early 1900s, it is clear that real estate
needs to find its own application for the
massive trove of data it sits upon. The
industry needs its own Model T, in the
form of high-quality, standardized data
to drive smart investments, rather than
metaphorically dumping this precious
asset down the river.
The real estate industry’s sluggishness
in capitalizing on the power of data is due
in no small part to several sizable hurdles
in its path: a lack of quality public data,
the disparity of a standardized data for-
mat, and a death grip on proprietary data
by many large real estate firms.
To fully examine the trends and chal-
lenges of widely incorporating data usage
in commercial real estate, we brought
together a panel of experts—Dhinaker
Dhandi, Vice President of Product at
Altus Analytics, Josh Fraser, CEO of
Estated, and L.D. Salmanson, CEO
of Cherre—at our recent Propmodo
Metatrends event in Los Angeles.
Why hasn’t data been more
effectively utilized in CRE?
The blame for not applying data
effectively in real estate doesn’t lie with
building owners, property managers,
or landlords, it’s an inherent problem
underlying the entire industry. While
there is abundant interest in compiling
data from the $50 trillion real estate asset
class, as noted by Fraser, the first chal-
lenge stems from obtaining good public
data. There are over 3,100 counties in
the United States, with varying levels of
size and sophistication when adopting
technology. This means when requesting
building data from counties, the response
can range from an Excel spreadsheet—
sometimes with valuable data, but often
loaded with numbers of dubious qual-
ity—to an obsolete CD-ROM or even in
the most extreme cases a dreaded pile of
yellowing paper documents.
The lack of standardization
Salmanson agrees that the lack of
quality from public agencies greatly
exacerbates the data problem real estate
is facing. He adds that high quality,
standardized data is the holy grail that
the industry needs to pursue in order to
reach “data-driven decisions from data-
driven results that lead to a higher alpha
for everyone in the industry.” Currently,
Salmanson noted, despite an abundance
of information on 140 million properties
in the United States, it is hard for inves-
tors to be able to trust the data coming
in, let alone understand it, due to a lack
of homogeneity. He uses the example
of half- and quarter-bathrooms in res-
idential real estate, which he notes has
come a lot further in standardizing than
the commercial sector. In most cases,
a half-bathroom is a toilet and a sink,
whereas a quarter-bathroom is just a
toilet.
The problem arises, however, when
housing information comes in from
countless sources and has to be standard-
ized into one field; if a house is listed as
2.5 bathrooms, how does an investor
know if it’s one full bathroom with three
half bathrooms, or two full bathrooms
and one half-bathroom? This is the
inherent problem facing standardization:
the source data of several different MLS
systems doesn’t have the granularity that
is needed to ensure that the information
is reliable and easily understood. In com-
mercial real estate, Salmanson notes that
OSCRE is moving to fix this problem,
but there is a level of cooperation that
needs to be established before it can be
solved.
Another concern is that with the adop-
tion of more robust data analysis will
come a desire to incorporate real-time
data into real estate investment. Both Sal-
manson and Fraser agree that commercial
real estate may not immediately reap the
rewards of real-time data and with such a
disparity in data sources and lack of stan-
dardization, implementing real-time data
could actually end up resulting in much
poorer data quality. They both agree that
standardization should come first, then
quality real-time data access will follow.
Proprietary data as an
advantage
The lack of standardization also faces
an inherent problem with the business
model of the larger industry actors that
actually have access to good data. These
companies rightly understand their
advantage, and hold onto their data
tightly to “weaponize” it for their own
gain. While software companies like VTS
are pushing the industry towards a stan-
dard data model like the one driven by
OSCRE, the competitive advantage that
the large investment companies hold is
driving them away from joining the push
for standardization. Dhandi—whose
company Altus Analytics moved away
from the standardized OSCRE model—
explained that the problem of shared data
is that while it is beneficial to the entire
industry, certain clients have proprietary
platforms that they want to continue
using without sharing data to maintain
their competitive advantage.
The holders of quality data have an
advantage over their competitors with
less data, meaning they can make wise
investments to drive profits and gain mar-
ket share. Although data standardization
is clearly in the industry’s best long-term
interests, the holders of quality data are
stuck in a quandary: to share or not to
share. As Dhandi notes, sharing their
proprietary data is “either the best idea in
the world or the worst. It’s the best idea
in the world because you’re the source of
the data, people trust you, and come to
you. But it’s the worst idea in the world
because you’ve given away your com-
petitive advantage.” With this in mind,
he notes that the most important next
step in building a robust data standard is
building effective partnerships with the
key players in the industry to push for
standardization.
While OSCRE and the Real Estate
Standards Organization (RESO) are
making progress in standardization,
Fraser argues that there is a long way to
go, primarily with the problem of propri-
etary information being the primary asset
that many of these long-established com-
panies are protecting. “Trying to force
a lot of these businesses that have been
around for 10, 20, 50 years, to adopt
technology standards is not their top pri-
ority. So, where it goes from there and
how much adoption we can truly have is
questionable in the next few years.”
What does the future hold?
While the silver lining on standard-
izing data in real estate needs a major
polishing, there is hope. Fraser explained
that although quality public data is dif-
ficult to obtain, a lot of the counties in
the U.S. are open to standardizing and
digitizing, but it’s a problem of scarce
resources and motivation. Enter technol-
ogy: both Dhandi and Salmanson agreed
that county tax assessors will begin to
adopt tech to share their public real
estate data in the next ten years, which
will greatly help the data standardization
process move forward. No longer will
investors have to trudge through years
of data in obsolete formats to drive their
decisions. “We’re learning every sin-
gle day how hard this is,” Fraser states.
“But there is a lot of data out there that
is incredibly valuable and a lot of very
smart people working on it. Give it five
to ten years and it will be a significantly
better situation.”
As another means of confronting poor
quality data, both Fraser’s and Salman-
son’s companies are turning to machine
learning. AI has allowed Estated to map
virtually any CRE data set in twenty
minutes, freeing up valuable resources
to build QA checks into the process
of reviewing data. For Cherre, AI has
allowed non-technical people to import
data which frees up the engineering
team’s time to build out new data schema
as they arrive from new clients.
Despite progress being made, all three
panelists agreed that there is a long way
to go until data can be standardized,
aggregated, and consumed in one uni-
form way. In the short term, not much
change will happen, but over ten years,
they can begin to see the ground-shifting
changes that will benefit the real estate
industry as a whole.
Fraser sees a fundamental shift in the
residential real estate market by 2030
with the growth of iBuying. Zillow has
moved heavy investment into this arena
and is aggregating a lot of data to ensure
that they are making smart buying
decisions on these houses, which with
iBuying is a nearly instantaneous pur-
chase. If the next ten years indeed shows
a growth in iBuying to 60-70 percent of
all homes sales as predicted, the quality,
standardization, and accuracy of data will
have to improve industry-wide. This will
be bolstered by heavyweights like Zillow
throwing their backing into the process
to ensure this happens. While this change
may initially begin with residential real
estate—which is typically where changes
in the industry occur—Fraser believes
it will translate over to the commercial
sector in due time. Salmanson, however,
was skeptical that iBuying would be as
impactful of a model as Fraser believes.
“The jury’s out if the model’s been tested.
It’s been tested in an upcycle, but can it
survive a down cycle?”
In lieu of iBuying being proven in a
down cycle, Salmanson believes that the
productization of real estate is going to
drive the market forward. Homebuy-
ers, especially younger buyers, will want
to see a standard level of housing that
they understand and can trust, such as
a gold, silver, and bronze rating system
to clarify how each home is classified.
His belief is this productization over
the next ten years will drive better data
to be developed, helping buyers become
more comfortable with buying real estate
as they understand clearly what level of
investment they are undertaking and
what they get in return.
Unleashing data’s full potency in real
estate will propel massive, data-driven,
intelligent investments, a seismic shift
such as the oil industry experienced
when the automobile was invented and
mass produced. But until the day that
standardization arrives, data will still be
utilized to push smart investments in the
industry, but it may have to be manually
inputted into a spreadsheet from a binder
of printed public documents by the light
of an oil-burning lamp. < >
JEFF WHEELAND is a regular
contributor to Propmodo.
9
 PERSPECTIVES
Don’t Believe the PropTech Hype
BY FRANCO FARAUDO
If you have been paying attention to
the stream of predictions coming from
PropTech world, you would think
that we are on the precipice of a seis-
mic shift in how the property industry
functions. There are a lot of potentially
transformational topics being talked
about including blockchain, AI, VR,
and autonomous vehicles. While these
make for inspirational content they are
things that might not affect the day-
to-day operations of a real estate pro-
fessional for quite a few years, if at all.
This comes at the expense of other, less
sexy topics that are actually impacting
how the gears of the property industry
turn.
The reason for this is obvious: pub-
lications measure success with clicks,
events with ticket sales. Topics like
robot workers, augmented reality and
A Tale of Two Property Industries
virtual assistants are more interesting
than organizing a CRM or integrat-
ing a building management system.
Unfortunately, there is often a big gap
between interesting and useful. We are,
admittedly, one of the many prognos-
ticators of the narrative that real estate
is about to be transformed by cutting
edge technology. But even though we
have swallowed the PropTech pill and
drank the Smart City Kool-Aid, we
have to be open to the idea that we are
completely wrong.
There are many examples of why it
is dangerous to be too sure of tech-
nology’s ability to change an indus-
try. At the end of the 90’s there was
a similar sentiment. Internet compa-
nies were being fought over by inves-
tors looking for the returns associated
with an “internet company” valuation.
11
 Everything was going to be bought
online soon so the race was on to be
one of the retailers of the future. At one
point in 1999 the market cap of the 199
internet stocks tracked by Morgan Stan-
ley’s Mary Meeker was $450 billion. Of
these companies, the total annual sales
only came to about $21 billion and their
collective losses totaled $6.2 billion.
The result, we all know. From its peak
in March of 2000 the Nasdaq, the stock
market that houses most of these over-
inflated internet stocks, was down 34
percent in a month and 80 percent just
two years later. Tellingly, it wasn’t the
gain-hungry venture investors who were
on the receiving end of this downturn.
“ In
By 2002, 100 million individual (or as
one ear I hear they are affectionately referred to “main
street”) investors had lost $5 trillion in
a conversation the stock market. A Vanguard study
showed that by the end of 2002, 70 per-
happening cent of 401(k)s had lost at least one-fifth
of their value, 45 percent had lost more
about flying than one-fifth.
One of the things that spurred this
cars and in rapid fall from grace was a slow rise in
interest rates and an attitude from insti-
the other tutional investors that technology stocks
were overvalued. Sound familiar? Even
people are still though there are some big strides hap-
pening in commercial real estate tech-
talking about nology right now, the test of time has yet
to be passed.
setting up an To move the industry forward we
need to talk about the incremental gains
integrated as well as the breakthroughs. This means
having often mundane yet pertinent
accounting conversations around how to use and
improve the technology that exists—and
system. has existed for years. In a recent conver-
sation I had with one of the designers of
the ARGUS valuation software, it struck
me how they understood that in order to
onboard the most users, they needed to
import and export into Excel. This goes
against the ethos of the tech industry:
spreadsheets are old school, having every-
thing on a cloud based app is the future.
But, spreadsheets have been around for
a long time. Not because of monopolies
or walled gardens but because they are a
really great tool.
It isn’t just spreadsheet that get dis-
missed by nascent PropTech culture.
CoStar, Yardi, RCA and ARGUS all
draw the disdain from startups and
investors alike. The truth is that these
companies have all created something
incredibly valuable, long before most of
their competitor’s founders were even
out of college.
Small innovations from the creators
of the tools that real estate professionals
already use every day are silently moving
the industry forward. One of the people
that shares this view is Jim Young. He
is the founder of the Realcomm | IBcon
conference, which has been going on
for twenty years now and is by far the
most well-attended real estate technol-
ogy event in the world that we know
of. In fact, to this day Realcomm is the
only place I have ever seen Anant Yardi,
the founder of Yardi Systems, in person
(although if anyone from Yardi is read-
ing and wants to invite me to Santa Bar-
bara for an interview, consider my bags
packed).
Jim recognizes that many of the sto-
ries being told in PropTech are not
necessarily representative of what is actu-
ally taking place in the boardrooms of
brokerages and property management
companies around the country and the
world. “In one ear I hear a conversation
happening about flying cars and in the
other people are still talking about set-
ting up an integrated accounting sys-
tem.” Of course, innovations like AI
and Augmented Reality are part of the
conversation, but Jim makes sure to also
incude a lot of very useful seminars, like
cybersecurity and valuation modeling—
even if it doesn’t have the same kind of
sex appeal as some more futuristic topics.
Part of our job as industry observers is
to inspire. Talking about bleeding edge
technology and changes on the distant
horizon achieve that goal, and so those
ideas have a place in the commentary.
But this should not come at the expense
of the innovations in the way the indus-
try is using existing tech or the new
products being rolled out from the leg-
acy companies in the space. We want to
see the industry move forward as much
as anyone but we understand that there
is danger in overhyping trends, even
though hype can turn heads, sell tickets
and bait clicks. < >
Why the Starting an internet business
used to require an investment
in a server. Not only were
Future of they expensive and required
space and power, they only

Work Will allowed users to buy storage

in large blocks meaning that

Look a there was almost always

unused space. Then Amazon

Lot Like came along and decided to

create a hosting service

Amazon Web
that would allow users to
buy space in one of their
data centers. Can flexible

Services workplace providers do the

same for office leases?

BY DROR POLEG

13
THE FUTURE OF WORK
In the early days of the World Wide
Web, companies were forced to buy phys-
ical servers and build their own data cen-
ters, spending on more computing power
than they needed or failing to respond to
demand due to lack of available resourc-
es. Today, the public cloud market has
grown to $206.2 billion and business-
es have fundamentally changed the way
they think about assets and resource allo-
cation, scaling their usage up or down
depending on their shifting needs.
Amazon Web Services has revolution-
ized the way we think about digital space,
enabling the birth of countless enterprise
software companies in the process. That
revolution lowered the barriers to entry
for would-be entrepreneurs, enabling
them to start businesses with much less
capital and experience than the previ-
ous generation. More importantly, cloud
computing gradually became the pre-
ferred solution for large organizations
with complex technical, privacy, securi-
ty and performance needs, such as Dow
Jones, Kellogg’s, Netflix, Expedia, and
even the CIA.
Now, the dynamics that reshaped the
way companies access digital space are
making their way to the physical world.
Companies are growing and contracting
faster than ever before. Software-as-a-Ser-
vice is able to move at the same pace, but
physical space is a constant bottleneck,
limiting growth when times are good,
increasing costs when changes are need-
ed, and impacting overall productivity.
From Assets to Liabilities
The commercial real estate industry
has been relatively slow to adopt new
business models, preferring the stability
of multi-year leases to the kind of inno-
vation we’ve seen in other sectors. Ten-
ants used to prefer this kind of stability
as well, but in our “fail fast” startup cli-
mate, most new business owners have
no idea what their staffing and space
needs will be that far in advance. Mean-
while, large enterprises are constant-
ly moving and reshuffling their spaces
to accommodate new business units or
in search of fresh talent, as exemplified
by recent announcements from Ama-
zon, Apple , and Google. Thanks to the
rise of artificial intelligence and automa-
tion, for the first time in history, busi-
ness growth might actually mean having
fewer employees. These shifts mean larg-
er companies also have significantly less
insight into their future space needs than
they once did.
Long-term leases have become even
more of a liability in 2019 now that
IFRS 16, a new global accounting stan-
dard, has gone into effect for public com-
panies. In 2020, we’ll see that standard
apply to private companies as well. IFRS
16 requires businesses to list any leases
with a term of more than 12 months on
their balance sheets unless the asset is val-
ued at less than $5,000. Many companies
currently use off-balance sheet leases as a
way to bundle space costs under oper-
ating expenses, downplaying the size of
these commitments. The new accounting
standard makes that impossible, impact-
ing the way these companies are taxed,
how they are valued, and their ability to
borrow.
At the same time, established norms
around work are evolving. The best-paid
humans are those whose jobs cannot
be automated or replaced by machines.
These employees value flexibility, and
while they are at the office, they need
access to a variety of spaces to fit a vari-
ety of tasks: focused work, brainstorming
sessions, client presentations, or working
on the road. As Leesman’s recent work-
place experience survey of over 400,000
individuals in 3,000 workplaces around
the world points out, employees should
be empowered to “do both their individ-
ual and collaborative work in spaces that
they decide suit them best at that point
in their working day.”
In a world where people have grown
accustomed to getting just about any-
thing (a ride, a massage, a dress, a gour-
met meal) on-demand with just a few
taps, employees increasingly expect the
same level of flexibility in the work-
place. Accommodating this preference
helps companies attract great people, and
allows them to produce their best work.
The Rise of Space-as-a-Service
The combination of these econom-
ic forces is giving rise to a new kind of
SaaS or, perhaps, SPaaS: Space-as-a-Ser-
vice. Less than a decade ago, cowork-
ing took the real estate world by storm
by catering to freelancers and entrepre-
neurs. Today, interest from larger enter-
prises is driving the industry away from
the original shared spaces and is fueling
the growth of new companies and busi-
ness models. Convene is catering to cor-
porate tenants in large office buildings,
The Office Group converts whole build-
ings into private and shared suites, and
Breather (which I advise) lets anyone
rent private workspaces for hours, days,
months or years.
Customers (formerly known as “ten-
ants”) are not simply changing their taste
in workspace. Instead, they are choosing
dynamic solutions that provide access to
the spaces their teams need, on demand,
anywhere — in the same way that enter-
prises use Uber for their mobility needs
instead of operating a fleet of compa-
ny cars. Advancements in Internet of
Things (IoT) technology will soon add
another layer to this experience, allowing
employees to walk into workplaces that
remember their preferences and adjust to
their needs.
Real estate giants are waking up to this
opportunity, with large players experi-
menting with new concepts and designs.
They’re just in time. PWC predicts that
at least 30 percent of all urban office
space will be delivered as a service with-
in 5-10 years, offering tenants access to
furnished, customer-friendly space with
maintenance and other services built-in.
Right now, only about two percent of
space in New York City is delivered this
way, which means we’re on the cusp of
a massive transformation in a multi-tril-
lion dollar market.
We’re still in the early innings of this
shift, but the real estate game is in for a
shakeup once companies of all sizes real-
ize they can pay for space only when and
where they need it. If the humble begin-
nings of AWS are any indication, Space-
as-a-Service has the potential to mature
into one of the most consequential mar-
kets we’ve seen. Are you ready? < >
DROR POLEG (@drorpoleg) is the
founder of Rethinking Real Estate.
She will spend
$639,000 on a new
home this year.
Make her journey great.

Your trusted source for industry-leading property data.

Starting at $449 a month – No hidden fees.

See the data in action

estated.com/demo

15
ARTWORK BY WRAPPED
www.wrappedla.com
“We shape our buildings, and afterwards, our buildings shape us.”
There are few better words than these that define the relationship
between people and the places they occupy. They were uttered by
Winston Churchill in a speech on October of 1943, to a room full of
his fellow politicians, all of which had just weathered a Nazi bomb-
ing raid that had burnt the iconic House of Commons building to
the ground. The words were used as a tool to convince a grieving
Parliament to rebuild the House of Commons to its original layout.
And they worked.
Remember that this was in the middle of World War II, the out-
come of which was still very uncertain. The people he was selling
the idea to were likely thinking about everything but the design of a
room: war preparations, budgetary concerns and how their political
opponents were going to play this latest attack. They had just lost
one of the most important buildings in the empire. The House of
Commons, previously the Royal Chapel of St. Stephens, was given to
the newly formed Parliament during the country’s religious reforma-
tion. Once a place of godly worship, it was given a second meaning
as a room for the country to conduct its democratic experiment; the
building is the physical embodiment of one of the defining parts of
British history.
But Churchill was able to make the shape of a room the issue
of the day. He explained that, “its shape should be oblong and not
semi-circular [...] The semicircular assembly, which appeals to politi-
cal theorists, enables every individual or every group to move around
the center, adopting various shades of pink according as the weather
changes.” He was adamant that the room maintain its rectangular
shape. The shape was not intentional, of course. It was a relic of the
building’s previous life as a Catholic Church: a long hall of pews that
a priest could easily pray down from his elevated alter at the end.

Ask What Your

Workplace Can
Do for You
BY FRANCO FARAUDO

Connecting our physical

workplaces with our digital lives
using Tenant Experience Software

17
 COVER STORY: TENANT EXPERIENCE
But it had become a way to divide a com-
plicated political system into two sides.
Churchill thought that this was what
ultimately lead to a two-party system that
made governing more streamlined, if less
democratic.
Since then there have been countless
studies validating the importance of our
surroundings to our mindstate. Everything
from the room color to the ceiling height
seems to have an effect on how a space is
internalized. But Churchill was interested
in something even more powerful. He
was thinking about the way that the room
facilitated communication—or opposition
as is often the case for the House of Com-
mons. How our spaces connect us dictates
our ability to do what humans do best:
communicate, build, argue, emote. What
could be more important than thinking
about the design of such an important
room, even if a war was raging just on the
other side of the channel?
The idea that a room is only as valuable
as what it can facilitate its occupants to do
is nothing new to the property industry.
Offices themselves derive much of their
value, their hard monetary value, from the
way that they facilitate the productivity
within them. Incredible wealth has been
created in places like New York’s Wall St.,
London’s Lombard St., or Silicon Valley’s
Sand Hill Road, for both the tenants and
the landowners.
People outside of the commercial real
estate world often find it hard to believe
that office is one of the most valuable
commercial property asset classes. In 2018
the value of office real estate in the U.S.
was estimated to be around $2.3 trillion
and growing. While there is only around
half as much office space as industrial in
the US, its average market price makes
the total value quite a bit more. But, the
distribution of the deviation is incredibly
skewed. Approximately one-third of the
total value of all commercial real estate
resides in “gateway” markets such as New
York, Los Angeles, Boston, Atlanta, San
Francisco, and Washington D.C. Offices,
more than any other property type, have
a huge disparity in how much wealth gets
18
created inside of them and thus has one of
the largest spreads in its leasing prices.
So how do we get even more from our
offices? How can they play an even bigger
supporting role in the work that we do
inside of them?
There are a number of companies that
think that this can be done by connecting
our physical workplaces with our digital
lives. They think that if they are able to
build a digital communication network
around a building they will be able to
save building managers time and money,
make tenants happier and more produc-
tive, and create a sense of community in a
neighborhood.
In order to find out what the impacts
of these new digital arms of the modern
workspace we decided to do some investi-
gation. We tasked our team of researchers
to examine the impact of tenant engage-
ment technology on a building’s perfor-
mance and write a comprehensive report.
To do so we talked to dozens of building
owners and managers to understand their
perspective of the benefits of using tenant
engagement apps. We examine all the ways
that increased tenant engagement could
boost a building’s value, both immedi-
ately and over time. We took an objective
approach to understand the likely future
of workplace engagement technology by
throughout testing our hypothesis that
these apps were able to increase a com-
mercial office asset’s performance.
We realized early on that direct cor-
relation, with any sort of statistical sig-
nificance, would be hard to establish.
The industry is so young; only a tiny per-
centage of the total office space is using
digital applications to increase tenant
experience. The ones that do have often
not been using them long enough to have
gone through an entire lease cycle. This
means that the way that the property
industry values income generating assets,
based on their cash flows and profitability,
doesn’t take these new technologies into
consideration.
Obviously, licensed appraisals and
“official” assessments of value for prop-
erties are only estimates. What really
matters to the price of a building, just like
any asset, is the market for it. Companies
are increasingly willing to pay a premium
for spaces that will help them increase
productivity or retain the talent that is the
lifeblood of the innovation economy, so
the future seems bright.
We also learned that there were a lot
of different reasons that landlords are
thinking about engagement, besides the
immediate boost to their top or bottom
lines. From operational efficiency to mar-
ketability, from amenity activation to
data collection; everyone seemed to have
an opinion about what the future of this
nascent industry might be. Many have
hopes that these apps might become a
new channel for retail, changing the way
we shop much like websites like Amazon
did just a decade ago. Others think that
connected workplaces will lead to bet-
ter work/life balance and help create the
sense of local community that we have
lost to modern rhythms. Even still, the
property community still has its concerns.
Some doubt the ability to introduce yet
another app into most peoples daily rota-
tion, others worry that the cost of keeping
engagement in a noisy world might be too
much for their teams to handle.
More than anything, our research made
me realize that tenant engagement apps
represent the future in how our buildings
interact with our digital lives. As our work
requires more from us the lines between
our work and our workplaces, between
our offices and our homes, will start to
blur, requiring our buildings to be as flex-
ible, customized, and intelligent as our
tech stacks.
Our spaces shape us, just as we shape
them. But for them to shape us into a bet-
ter version of ourselves, they will need to
use every means possible, be it the shape
of the room or the interface of an app.
There is a war raging for our attention
and our buildings are finding new ways to
direct that attention to what really mat-
ters, each other. < >
To learn more, visit www.propmodo.
com/research
Tanya
ANYTHING THAT CAN BE INTEGRATED TO IMPROVE THE WORKFLOWS

NECESSARY TO OPERATE BUILDINGS

IS ANOTHER STEP TOWARDS “SMART,”

A PROCESS WHICH HAS NO DEFINED END.

BY CONNELL MCGILL

How Smart Building

Technology
Actually Works
 SMART BUILDINGS
IT’S NOT
ENOUGH TO
SIMPLY SAY
“MACHINE
LEARNING” OR
“ARTIFICIAL
INTELLIGENCE.”
By now, everyone has heard the trope:
smart building technology, driven by the
internet of things and artificial intelli-
gence, is poised to revolutionize the built
environment by dynamically adjusting to
occupant needs in an integrated and effi-
cient fashion. Unfortunately, that string
of words means almost nothing to the
people in a position to invest in technol-
ogy for commercial real estate portfolios.
When the jargon overload becomes
too much, owners and asset managers ask
the only sensible follow-up, how much
money would this system deliver and
what is the payback? While the short-
term economics are obviously critical, the
lack of clarity about what smart building
technology is (and isn’t) has led landlords
to miss the big picture.
Technology is not a standalone invest-
ment, it’s a tool meant to be infused into
every team, every process, and every deci-
sion. Smart building technology is no
different; anything that can be integrated
to improve the workflows necessary to
operate buildings is another step towards
“smart,” a process which has no defined
end.
On the most fundamental level,
whether through complex automation
or by hand, buildings are operated by a
series of workflows. The two goals these
workflows are straightforward: to keep
the building “working” for the tenants so
they continue to pay rent and to limit the
expenses paid by the landlord as much as
possible.
Some buildings are designed from the
22
ground up to incorporate more sophistication into these workflows. For
example, The Edge developed by OVG Real Estate in Amsterdam, auto-
matically finds tenants a workspace that fits with their calendar for the day,
adjusting the light and temperature to match personal preferences.
The Edge may very well be the smartest building in the world, but that
wouldn’t be due to the insane level of sophistication it displays. Sophisti-
cation and automation are expensive and simply get priced into the lease
like anything else. The single tenant of The Edge, Deloitte, even admitted
that their philosophy on the project was that anything with a return on
investment of less than 10 years was worth a try. That is not a luxury many
can afford.
The goal of smart building technology is not necessarily to add sophisti-
cation, it’s to identify and systematically eliminate the inefficiencies within
the workflows in place, whatever those processes may be. This waste can
be found everywhere, from equipment maintenance and repairs to tenant
utility cost recovery, CapEx planning and forecasts, utility costs, vendor and
staff management, due diligence, documentation storage, and more.
Turning Data into Action
Everyday, millions of Americans step on the scale to read their weight
and use that number to understand their relative health. Unfortunately, in
addition to only being a proxy for health, weight is a lagging indicator. It is
not useful on a day-to-day level and by the time you get the information,
it’s not actionable.
The same is true for building operators aiming to keep tenants happy
while keeping costs down. In most cases, the only information to go off is
what can be pulled by the building management system or energy manage-
ment system. Like weight for personal health, this data is only a proxy for
asset efficiency and is a lagging indicator, potentially interesting to review,
but not actionable.
That is why smart building technology is often synonymous with build-
ing data, although they are two different things, one cannot work without
the other. Granular building data can be derived from sensors placed at
critical points in the electrical, mechanical and/or plumbing infrastructure
as well as from digitized versions of the documentation that operators use
to understand equipment such as nameplate information, operations and
maintenance manuals, and riser diagrams.
Generally, sensors are set up to capture data and send it wirelessly to a
central database. This raw data is often visualized with charts and graphs,
but this does not solve the lagging indicator issue. No matter how rich the
dataset, it’s like an open book test, an operator would need to know where
to look to find answers.
More importantly, the operator would have to be able to look. The work
of a building operator is necessarily hands-on and largely occurs in the field.
In addition, many operators are too busy to get to their routine tasks after
handling the unexpected issues that occur throughout the day, let alone
attempt to analyze unfamiliar datasets.
What are needed are “insights,” meaning specific recommendations sent
to operators the moment a problem or potential efficiency is identified.
The question is how the software being fed data from sensors could do this.
It’s not enough to simply say “machine learning” or “artificial intelligence.”
How is an owner or operator supposed to know which vendors’ machines
are the most intelligent?
It’s not as complicated as it might seem. Let’s say you wanted a com-
puter to be able to pick men out of a crowd and categorize their clothing.
The way to do this is to simply show the computer ten million pictures of
men in various kinds of clothes and it will eventually start to identify pat-
terns. That’s really what is meant by machine learning. It’s not intelligence
as much as the brute force of having ten million examples to choose from.
This is exactly why most building management systems, which also lever-
age granular data from equipment, are not necessarily “smart.” These sys- THE STRENGTHS
tems never amass enough examples to determine patterns because the data AND WEAKNESSES
is often kept on premises and is only stored for a few weeks. Smart building
technology is different in that it learns from every piece of equipment across OF COMPUTERS
all the buildings it is installed in.
AND HUMANS
Patterns are Not Insights PERFECTLY
With the knowledge that “artificial intelligence” is nothing more than
access to a huge number of examples, owners can understand which ven- COMPLEMENT
dors have the most “intelligent” machines by comparing the size of their
datasets. EACH OTHER.
But that’s not the full story. Computers are smart enough to identify
patterns and anomalies, but they’re not smart enough to know what those
events “mean” without the help of humans.
The truth is that a boiler suddenly failing, and a boiler being shut down costs are low and falling every year. Every
for routine maintenance, look indistinguishable in the raw data and there- building performs maintenance and
fore to computers. But to building operators, these events couldn’t be more repairs in some way or another. To this
different; one is a drop-everything-you’re-doing type of emergency, the end, by leveraging the right technology,
other is nice to know. any building can become smart, not just
This is where technology gets infused into the workflows already in place. ground-up developments with robust
The strengths and weaknesses of computers and humans perfectly comple- automation systems.
ment each other. Computers can digest and categorize enormous amounts
of data in the blink of an eye, but struggle with context. Humans are very Conclusion
slow at digesting data and forget previous learnings, but understanding con- Smart building technology is not about
text happens unconsciously. the return on investment that can be
Instead of sending a false positive alert that the boiler is down every time achieved through recommendations on
there’s maintenance, technology can be infused into the workflow. When how to configure existing building man-
maintenance is being performed, the building operator or third-party ven- agement systems. It’s not even a stand-
dor can leverage a mobile app to tie their work to the specific boiler. alone investment that should be evalu-
By combining a logged maintenance event with verification through ated based on simple payback periods.
sensor data, the landlord has effectively streamlined their maintenance Instead, it is something to infuse into
and repair workflows, bridged the disconnect between on-site teams and the DNA of the organization and the
management, and ensured that third-party maintenance vendors are being fundamental tool to wield to evolve and
accountable to their contract. When the boiler shuts down unrelated to improve every aspect of the organization.
maintenance, operators will be notified and can be fully confident that the While smart building technology is based
alert is real and urgent. on cutting edge innovations in sensor
This streamlined process will produce the direct return on investment technology and machine learning, the
that owners are looking for. In 2018, maintenance and repairs passed util- workflows that are being targeted are as
ity expenses as the largest non-fixed operating expense line item in CRE. old as building themselves.
Much of these costs are wasted due to operators being unaware when (or Many of the problems faced in oper-
if ) maintenance has been performed and being reactive to equipment faults ating commercial real estate have no
rather than proactive. In addition, in terms of bottom line cash flows, bet- textbook solution. Landlords now have
ter maintenance extends the lifetime of equipment and thus lowers CapEx the opportunity to think through their
requirements. business, their pan points, their tenant’s
But the value is not limited to direct return. The property has gotten needs, and their physical assets and work
“smarter” because it is working better for tenants by ensuring hot water with technology companies collaborate
is available and, in some unquantifiable way, encouraging them to renew smart building technology that works,
their leases. In addition, owners and asset managers for the first time have regardless of starting point. < >
transparency into what is happening in their assets, an intangible, but enor-
mously valuable change from the status quo.
The magic of the technology described – sensors, managing an enor- CONNELL MCGILL is the co-founder
mous database, pattern recognition algorithms, mobile apps – is that the
and CEO of Enertiv.
 ZILLOW POISED TO DEVOUR
THE iBUYER MARKET
Rich Barton was announced CEO in 2019 and set out a series
of longer-term goals, including buying 5,000 homes a month

BY JOSHUA FRASER

Imagine you knew nothing about

real estate. That you had never heard of
an escrow, natural hazard disclosures or
title insurance. In this world, what does a
home transaction look like? Do you have
to worry about mortgage rate increases,
all cash offers or seller contingencies?
Or, if your only frame of reference was
the frictionless process in which we buy
everything else in our daily lives, would
you assume that you would be able to
find a house that you like, enter your
payment details and buy it.
This ignorant, idealized version of the
home buying process seems like pure
thought experiment but, in fact, it’s a
lot closer than any of us ever imagined.
The end-to-end customer experience for
real estate transactions has seen billions
of dollars poured into companies called
iBuyers, who’s very business model is
to buy houses instantly and sell them
without the hassles that we have come
to accept. This trend is still in the early
stages and there are no signs of it slowing
down.
The iBuyer business model is pretty
straight forward, a real estate company
uses data science and property data,
both public and private, to create valu-
ation models that identify home with
high investment potential. They can
then make an instant offer that provides
liquidity to homeowners that doesn’t
exist on the traditional real estate
market. Typically, iBuyers charge a 7-10
percent fee compared to a standard 6

24
percent agent commission and will offer
an 80-100 percent of the market value
for a home. They might charge a higher
fee for convenience but many sellers will
be willing to pay for the benefit of being
able to have a sale finalized within weeks
or even days. You may take home a bit
less than the traditional method but
you can save time and all the headaches
that come along with selling or buying
a home.
One of my favorite industry experts,
The Notorious Rob recently predicted
that 60 percent of home sales (not
transactions) will be iBuyers by 2025.
Quick math, 5.3 million homes sold in
2018 would mean that, if the sales stay
steady, 3.18 million homes sold in 2025
via iBuyers. That’s uber growth, no pun
intended. In 2018, iBuyers represented
around 0.2 percent of the national
market share of home purchases and up
to 5 percent in the markets they operated
in.
There are five companies leading the
charge in the U.S. with Opendoor so far
having the most activity. But will Open-
door still come out ahead at the end of
2019 with some of the largest real estate
companies entering the space?
There are three critical factors,
customer acquisition cost, capital and
data, that I believe will influence who
ultimately dominates the market this
year but to no surprise, it is my predic-
tion that the one with the best data will
have the biggest advantage.
THE PLAYERS
First, Zillow. At this moment, with a
market cap of $7.35 billion, they have
the largest war chest, the most employees
and resources to fuel their iBuyer growth.
Rich Barton was announced CEO in
2019 and set out a series of longer-term
goals, including buying 5,000 homes a
month. That’s a colossal increase from
the 500 they purchased in Q4 of 2018.
They also have the most website traffic
so they benefit from understanding not
only where people are buying, but where
they are looking as well, which can be a
great leading indicator.
Second, Opendoor. To date, $1.3
billion in venture capital has been raised
and over $1B of it in 2018 alone. The
CEO, Erik Wu has said that in the
not-so-far future, the transaction of a
home sale will cost nothing. This is a
bold statement, but at the moment,
Opendoor has a ton of capital and has
taken off with 60 percent iBuyer market
share in Phoenix.
Third, Redfin. Market cap $1.77
billion and the second largest online
real estate platform next to Zillow.
They recently partnered with RE/MAX,
providing a unique opportunity to
increase its reach to agents and potential
buyers and sellers. It is highly likely they
will be a large competitor to Zillow in
this space.
Fourth, Offerpad. Raised nearly $900
million from venture capital and $100
million in debt. They are operating in
86 cities across the U.S. and had a larger
price appreciation on their purchased
homes than Opendoor and Zillow in
2018, fluctuating between 7 percent and
9 percent.
Fifth, Knock. Full transparency, they
are a Foundry Group portfolio company
so they are connected to my company in
a way. Raising over $430 million since
2016, they are positioned to be a rapidly
growing startup in the iBuyer space.
Sean and Jamie, the founding team,
bring vast industry experience (formerly
at Trulia) and are using data science and
technology throughout the entire home
selling process.
NOW YOU KNOW THE PLAYERS, SO
WHO WILL WIN AND HOW?
Number One: Customer
Acquisition Cost (CAC)
It’s all about the seller leads in the
iBuyer model. Zillow and Redfin have
the advantage here looking at the sheer
amount of website traffic that each
receives. According to Alexa:
Zillow.com is ranked the 35 most
visited website in the United States with
around 37 million monthly unique
visitors.
Redfin.com is ranked the 155 most
visited website in the United States with
around 15 million monthly unique
visitors.
The ability to split-test instant offers
on this amount of website traffic creates
a distinct advantage for Zillow and
Redfin. Whether they are able to harness
their traffic to make better marketing
decisions is yet to be seen.
As for Opendoor, Offerpad, and
Knock. They will continue to use tradi-
tional methods of advertising, marketing
and direct mail to make offers to poten-
tial sellers. This is a solution but it will
be harder to acquire leads with larger
competitors joining the space.
Number Two: Capital
Zillow wants to buy up to 5,000
homes a month. At a median price of
$300,000, that would cost $1.5B a
month. Yikes. You need a lot of capital
to do that. Being a public company like
Zillow or $1 billion in raised capital like
Opendoor is another big advantage in
the iBuyer space. Now, with that being
said, if another 2008 happens, everyone
is screwed. I don’t have a ton of data on
this but you can imagine how sitting on
thousands of homes with only 50 percent
of their original value could bankrupt a
lot of companies, no matter how much
cash they have on hand.
Number Three: Data
Data collection, maintenance, and
quality are critical to iBuyer success. They
need to rely on historical public record
data such as transactions and assessments
to make informed data-driven decisions
when evaluating and making an offer on
a property. Yet access to this data can be
incredibly difficult and requires a ton of
resources.
From looking at the current land-
scape, Zillow has the most software engi-
neers and data scientists attacking this
problem and investing millions every
year. And appropriately so, as the stakes
are high. Accurate data fuels accurate
valuation models and these models are
integral for iBuyers to find and invest
in properties at scale. This is a high-risk,
capital intensive business model that has
not been tested in a down market. But,
backed by the best data, Zillow will be
most able to maintain their advantage
and weather the storm. < >
JOSHUA FRASER (@joshppc) is the
founder and CEO of Estated.
25
 BY PHIL RUSSO

Attacked by the disruptive tribes of the internet, retail real es-

tate has been for years metaphorically circling the wagons, try-
ing to determine the feasibility of a continued physical presence.
At the same time, brick-and-mortar retail tenants and landlords
are trying to protect their very business existence, clinging to
already dwindling profit margins.
While digital technology is partially to blame for the changing
consumer habits that spelled the downfall of the centuries-old
retail economy, it might also be the cavalry riding to the rescue
of businesses hunkered down in their brick and mortar fortress-
es turned prisons. The innovative use of technology in retail real
estate is what’s increasingly viewed as the best defense against its
demise, with the massive use of data the high-powered repeating
rifle that’s being brought to this wild west showdown.
Recently, VTS held its annual Accelerate conference, the cen-
terpiece of which was the announcement of its $90 million raise,
bringing it to “unicorn” status, still a relative rarity in PropTech.
Almost lost in the excitement of that announcement was VTS
CEO & Co-Founder Nick Romito also announcing that the firm
had been quietly building a retail and industrial platform to aug-
ment its office offerings.
In an interview with Propmodo, Romito noted that VTS has
one billion square feet of retail space on its platform already,

Real Estate Data

Riding to Retail’s Rescue
26
27
RIDING TO RETAIL’S RESCUE
with that sector being much more
data-intensive a business than of-
fice. “They track different things than
traditional office owners—sales per
square foot, monthly sales per cus-
tomer—all things as an office owner
you don’t pay attention to,” said Ro-
mito. “There’s a set of tools or features
specific to those things retailers want
and we are building those. The impor-
tance of the customer relationship has
always existed for retail, whereas in of-
fice people didn’t actually realize they
had the same customers in other plac-
es because the east coast team didn’t
talk to the west coast team.”
Gary Stevens, Senior Vice President
of Leasing at Waterstone Property
Group, a VTS retail client, said VTS
gives his company, “an organization-
al tool to manage and reveal gaps in
the timing of our lease cycle, putting
a shot clock on different phases of a
deal.”
Along with such transactional effi-
ciency, Waterstone’s needs are simple,
said Stevens: “I need sales per square
foot, that’s all. We’re trying to find
where the wallets are.” To do so, Wa-
terstone uses a variety of data sources,
including geofencing from PlacerAI,
a PropTech company that tracks con-
sumer foot traffic through cell phone
use in stores.
In building a platform that inte-
grates and makes plain complex data
from retail tenants, landlords and as-
set managers, VTS faces many chal-
lenges, said Romito. The largest asset
managers often have large retail port-
folios, giving them special headaches
in dealing with all the data relating to
tenants and multiple locations. “They
want a global operating system that
goes across every asset class,” said Ro-
mito. Landlords can store and com-
pare tenant data on a monthly basis
on VTS. “What they are constantly
trying to optimize is, do we have the
right tenant mix across an asset,” said
Romito.
Steve Richardson, Vice President
of Information Technology at New
England Development, describes his
company’s “long and sordid history of
trying to track the sausage making of
lease negotiations going back to Mi-
crosoft Access and other things. We’d
never had anything that worked very
well.” Along with the challenges for
NE Development in efficiently moni-
toring its own accounting systems for
lease administration, it has a number
of joint ventures with other compa-
nies, which necessitated logging into
different systems, a major headache.
However, the VTS platform allowed
NE Development to consolidate those
external assets into a single dashboard
and for it and other users to easily
switch from one system to another.
“We normally like to be the keeper
of our own keys, so to speak, to con-
trol all our data, but moving into this
hosted, cloud-based platform of VTS,
because of the accessibility problems
it’s solving for us, the consolidated
dashboard across multiple partners,
it’s turned into a very positive venture
for us,” said Richardson.
Building such a platform entails
having reliable data from the land-
lord and tenant side of retail, much
of it in legacy systems that vary from
Excel spreadsheets to other analog
documents to proprietary electronic
databases, all frequently containing
highly inaccurate information. One
PropTech firm addressing this issue
is Leverton, an AI/deep learning data
extraction platform.
“Data quality is a problem across the
landlord and tenant side,” said Abhi-
nav Somani, CEO of Leverton. “Land-
lords are sort of lagging. Who’s put-
ting resources behind that problem? I
think the tenants are a little ahead.”
Having huge clients like Amazon,
Barnes & Noble, Sports Direct and
Walmart, Leverton’s Somani realized
that, “the concept of the tradition-
al shopping mall or shopping center,
is morphing into a very experiential
landscape and folks have to kind of
figure out how they’re going to man-
age through those data issues that help
them figure out what they want to do
in those locations.”
As Leverton works to clean the data,
Romito gives the following example
of the complexity of building a VTS
platform that encompasses virtual and
brick-and-mortar retail spread out
across geographies and companies:
“With digitally native brands or oth-
er companies like that, they are touch-
ing every asset class. You might have
Zappos, the shoe company, as your
office tenant, but guess what: Zappos
is owned by Amazon, who’s got four
industrial properties with you, and
Whole Foods has two retail centers.
It’s all owned by Amazon. So now the
tenant base has changed so much that
the same tenant is touching every asset
class. So by definition, every asset class
should be on the same technology.
That’s kind of our thesis for building
this thing.”
As Leverton continues trying to
develop the better mousetrap for ex-
tracting accurate retail data, “The real
competition is not other technology
vendors,” said Somani. “We actually
encourage more technology vendors
to join the race because it increases in-
novation. The real competition is this
traditional ‘if it ain’t broke don’t fix it’
mentality that we’ve had in property
ownership for a long time. The real
challenge is converting clients from
doing it the old way, sitting on static
data, not really using data the right way
and convincing them that the need for
structured data, the need for contract
analytics is very high. If you as a [land-
lord] aren’t going to do it, your tenants
are. And the next time you come to the
negotiation table, they’re going to be a
lot smarter than you. That’s a position
you don’t want to put yourself in.”
PropTech companies are racing to
solve these data issues, while retail
real estate landlords and tenants vie
for who will use data to get the upper
hand in lease negotiations and asset
management. As Waterstone’s Stevens
puts it: “Change has never been hap-
pening this fast before and will never
be this slow again. That’s what drives
our business.” < >
PHIL RUSSO (@pfrusso) is a 16-year
veteran of commercial real estate
communications
One app. Equiem offers the complete
platform to engage, delight,

Everything your and improve the working lives

of your tenants. Together we’ll
tenants need. transform your building into a
vibrant, connected community.

getequiem.com
 THE MOBILITY
REVOLUTION
How it will change the future of real estate
BY JEFF WHEELAND
The other day I was walking in my town
and saw an older man riding his bicycle
down the sidewalk. As he approached
a turn, a shared Lime bike was next to
the path, not obstructing his way in
the slightest. The man slowed his bike,
launched a karate kick, sent the scooter
flying into the bushes, and continued
on his way. A few minutes later, two
teenagers zoomed past me on a Bird
Scooter, parked it on the sidewalk outside
their high school, and ran into class
minutes before the morning bell rang.
The juxtaposition of these two
unconnected acts perfectly summarizes
people’s feelings towards the growing
mobility revolution. While some
see shared scooters and bikes as a
menace that clogs roads and terrorizes
sidewalking civilians, others see this
transportation service as a godsend
for increasing efficiency and reducing
material ownership. Regardless of your
own personal feelings, the mobility
revolution is here, it is growing, and it
will fundamentally change everything
from how you travel to where you live.
In his illuminating article, “Our
Frictionless Future,” Elie Finegold, an
Entrepreneur in Residence at MetaProp
and former SVP of Global Innovation
and Business Intelligence for CBRE,
wrote about how radical mobility and
transportation-as-a-service (TaaS) will
change not only real estate, but the world
as we know it in the very near future.
At our recent Metatrends roundtable
held in New York City, we convened a
panel to discuss the mobility revolution
and its impact on real estate and what we
should expect in the future. The panel
brought together two industry experts,
Elie Finegold and Tony Hudgins, VP
of Partnerships at TransitScreen, and
was moderated by Propmodo’s own
Franco Faraudo.
31
 MOBILITY REVOLUTION
Wait, so what exactly is the
Mobility Revolution?
First and foremost, you don’t need
to ditch your car at the local junk yard
to prep for the mobility revolution. It
is already here. If you’ve ever ridden in
a Lyft or Uber, used a shared bike or
scooter, or had food delivered to your
house with DoorDash, you’ve unwit-
tingly become a revolutionary. But the
speed at which TaaS is moving forward
is staggering, and these services are just
the tip of the iceberg, especially as auto-
mated cars begin hitting the roads in full
force in the near future.
Despite its momentum, the mobility
revolution will not be complete until
these new forms of TaaS mesh with
existing forms of transportation – buses,
trains, subways, and good old-fashioned
walking – and are incorporated into one
seamless process that is efficiently use-
able by everyone. At the outset of the
panel, Hudgins touched on the role that
TransitScreen is playing in the mobility
revolution. His company is an aggrega-
tor of transportation information that
compiles over 3,000 sources of transit
data on what he calls the “shared trans-
portation economy.” Hudgins explained
that while these new forms of transpor-
tation are exciting and innovative, there
are still several friction points for users
to seamlessly utilize these forms of trans-
port. Many people will use several modes
of transportation to get from Point A to
Point B. For example, a person could
hop on a scooter to get to the bus stop,
take the bus to the train station, ride
the train to their stop downtown, then
walk the final few blocks of their jour-
ney. But planning this trip out requires
several different apps, websites of transit
schedules, and maps to understand the
routes. It’s a time-consuming endeavor.
To address this, companies like Tran-
sitScreen are working to aggregate transit
information into one platform to make
the process much more efficient.
Why is aggregating transit
information important?
By aggregating this transit informa-
tion in one (or a few) places, certainty
can be built among the user base,
increasing adoption rates. If you’ve ever
32
used a shared bike service, there is noth-
ing more frustrating than walking out of
work following your app to a location
where a bike is supposedly waiting, only
to find it is gone, or has two bent tires.
When this happens, you have to open
another company’s app to find another
shared bike, which may or may not be
anywhere near. It is this lack of certainty
that pushes users to buy their own bikes
or simply drive to work every day. As
Finegold notes, upon building a reliable
and efficient network of transit informa-
tion, usage rates will increase, and their
entire multimodal network will improve.
“Utilization actually drives availability.
There’s a virtual circle and once you
get past the tipping point within a cer-
tain radius, you’ll have a dense range of
services and options that will get you
effective transportation.”
In other words, when a user can
quickly find several nearby alterna-
tive transit options, the entire system
improves. In my previous example—but
instead with a single app or platform—
when the shared bike wasn’t available, I
could open my transit app on my phone
and see that a bus was arriving in two
minutes a block away, find a nearby
electric scooter, or reserve a Lyft to pick
me up. By reliably and seamlessly being
able to find available transit alternatives,
the mobility revolution will continue to
build momentum. As stated by Hudgins,
“mobility is the freedom of knowing
that you do not have to be tethered to
one particular option.” With reliability
comes change. People will realize that
the various types of TaaS are fast and
efficient, and that they no longer have
to own a car anymore. But it is crucial
that people understand how to use the
TaaS and can easily access it, something
that has not yet occurred. However,
when this critical mass of understanding
arrives, it will have seismic impacts on
the way cities are built, impacting real
estate to its core.
How will TaaS impact real
estate in the future?
Everyone knows the three most
important words in real estate: loca-
tion, location, location. But with the
arrival of the mobility revolution, this
fundamental principle in real estate will
change. In some cases like New York
City, which has had a form of TaaS for
decades (think: taxis, taxis, and more
taxis), location will continue to mean
living in a densely populated area. But
in many other cities, the changes will be
much more profound. No longer will
people be fighting to live close to their
jobs. With effective transportation net-
works and increases in tech trends like
remote working, people will be able to
live much further from city centers. This
will have a deep impact on the way real
estate developers and owners approach
buying assets.
Hudgins agrees with Finegold that
real estate location will fundamentally
change with the mobility revolution.
He argues that real estate owners can get
more intelligent about what real estate
they own and what they want to own by
understanding their occupants’ transit
actions. With this information, owners
can find a property that may not have
been considered a “good location” in the
past, but now offers excellent access to
transit services and will be attractive to
tenants. For developers, seeing that ten-
ants in the area tend to use TaaS much
more than cars means that building a
giant parking lot in a building will be less
important than creating access for ride-
share cars to have curb space to quickly
pull in and pick up their customers.
Additionally, the mobility revolu-
tion will bring about a change in the
composition of cities themselves, but
not immediately. Finegold argues that
“density will become an amenity for the
next generation,” as people will want to
be closer to services. But as autonomous
vehicles improve and services—like
gourmet food delivery, for example—are
brought directly to people, populations
will spread out and density will be less
important. But, ultimately, people will
still be social creatures. “You’ll see in
the near future, amenity and lifestyle
centers and clusters,” Finegold states.
“Cities will still have headquarters areas
for work and lifestyles, but you’ll begin
to see more villages that offer these ser-
vices outside of major city centers. With
services coming to us, we’ll need to find
places to interact socially, which is where
these centers will come into play. People
will choose to live close to these.”
Hudgins sees the future of real estate
and TaaS as inextricably aligned. In
order for developers and owners to take
advantage of the mobility revolution, it
will be crucial to share information with
their occupiers to understand how they
use transportation and access a particu-
lar property. By gaining this knowledge,
owners and developers will be able to
accurately size their property and make
the correct real estate purchasing deci-
sions in the future.
Whether you are like the man who
kicks shared scooters into the bushes or
similar to the schoolkids who use these
services to get you the last mile of your
journey to avoid detention, the mobil-
ity revolution is here. Be ready to join
it, or be left in a shared bike’s proverbial
dust. < >
RESEARCH
Understanding Flexible
Workspace in the Era of WeWork
BY LOGAN NAGEL
The 1990s saw the rise of a cornuco-
pia of new ideas and products. From
the internet to the Nintendo 64, the
decade saw a host of innovations
change the way we live our lives. But
one of those things that exploded in
the 90s wasn’t so innovative after all,
despite its incredible influence on how
the modern (particularly urban) citi-
zen lives his or her life: the coffee shop.
Case in point, Starbucks had 425 stores
in 1994, and over 10,000 by 2005. Talk
about growth goals.
In addition to the benefits of lots
of caffeine, coffee shops offer plenty
of other perks. Their explosive spread
ensured that one was never far from
your office, transit stop, or university.
They often serve a role as local com-
munity centers, with performances and
meetings held amongst their benches
and tables. There are enough of them
for any person to find one with a unique
style and atmosphere that matches their
personality. And they’ve stood the test
of time as a spot to be productive,
whether for studying or working.
While coffee shops grew to become
get-stuff-done meccas to rival libraries,
the real estate world spawned another
type of space, this one purpose-built
to offer a workplace for entrepreneurs,
freelancers, and agile corporations.
As we all know, working in a flexible
workspace, like a co-working office, has
become part of the modern-day millen-
nial dream. Head into the office and
grab a complimentary coffee, grab any
open workspace, be it a table, desk, or
beanbag chair, and get to work, perhaps
on a freelance design project or on your
“stealth mode” side hustle. If you get
thirst, or bored, feel free to grab an IPA
from the tap or challenge you someone
to an impromptu game of ping pong.
That’s the romantic vision for these
spaces, at least. Everyone knows of a
34
co-working space or has a friend who
often works out of them. They seem
to have popped up within the last
decade and have certainly taken the
world by storm. In truth, co-working
spaces are not all that new, in concept at
least. Flexible workspaces stretch back
decades to the 1980s with office pro-
vider Regus, who may have offered the
concept but certainly lacked the attrac-
tive trimmings and specific service
model we now know as co-working.
Since those early days flexible work-
spaces have come a long way, devel-
oping into the classic version we now
recognize. But despite the prevalence of
the idea of working out of a WeWork
that seems to have permeated into
today’s office ethos, the industry as a
whole is still very young. What flexible
space is and where it fits in our overall
office landscape has largely been unde-
fined and are subject to a range of exter-
nal forces, as WeWork’s recent funding
troubles demonstrate.
For one thing, the relationship
between truly remote workers who
choose to stay at home with their com-
puters and those who require dedicated
co-working spaces is as yet unclear. As
remote-enabling technologies like giga-
bit internet connections and virtual
reality continue to improve, the long-
term future of flexible workspaces is less
than certain. Perhaps this is because the
firms think that their brand position as
“the office of the future” will continue
to help them grow, or perhaps they’re
hoping to ignore a relatively existential
challenge while they’re in the middle of
their funding rounds.
With WeWork as the clear industry
standout and a range of other smaller
operators leveraging unique partner-
ships or operating models to stand out,
industry observers have foreseen con-
solidation in the sector’s future. With
that in mind, an even bigger and more
exigent question is the full scope and
characteristics of the market, which
continues to require clear categoriza-
tion and a comprehensive definition.
To answer these questions, we tasked
our research team to take a deep dive
into the flexible workspace mar-
ket, as well as develop a narrative for
the industry’s growth over the years.
Through our research, we uncovered
a mountain of useful data. The price
spread for flexible workspace monthly
access in the most expensive (Washing-
ton, DC) vs cheapest (Houston) major
US city is over $600. This is a partic-
ularly intriguing data point in light of
the expansion plans of some operators,
like Industrious, into less dense mar-
kets. And it underscores the compar-
ative dearth of flexible workspaces in
truly rural or far-flung suburban areas.
We also uncovered discrepancies in dif-
ferent measurement methodologies for
which cities rank as the most expensive
flexible workspaces markets out there,
and a host of other conclusions as well.
Our full research report includes a
comprehensive discussion on flexible
workspace market sizing methodolo-
gies as well as a thorough meta-anal-
ysis of the existing body of research.
We profile the history of the indus-
try and offer some estimates as far as
total market size and trends towards
the future. Flexible workspaces have
seen extraordinary growth, in many
cases competing with the coffee shops
that came before them. We hope our
analysis will help shed some light on
who might be the industry’s Starbucks,
why they are, and how to map out the
industry to identify other standouts in
the future. < >
To learn more, visit www.propmodo.
com/research
 How Real Estate Is
Adjusting to Our
Changing Moral Compass
BY AAKASH RAVI

In a sign of the changing times and

an increased focus on tenant needs,
large landlords are striving to attract
and retain tenants by offering an
array of perks inside their new and
existing builds—such as cocktail bars
and wine lockers.
 OUR MORAL COMPASS
At the same time, we seem to have
reached a tipping point in ESG (environ-
mental, social, and governance criteria)
focused investing in the capital markets:
the S&P has recently announced that it
will launch a “socially-minded” index, an
ESG version of its S&P 500 Index.
This begs the question: in a world with
a changing moral compass, will what it
means to be “tenant-focused” change?
How can ESG impact the value and
prestige of a property or a company, as it
pertains to tenant and capital attraction?
To get answers to these questions, I
spoke to a few thought leaders to under-
stand their strategies regarding ESG for
2019 and beyond, and also reflect on
how those of us that serve the property
community can help to create a better
future by working with the real estate
industry to advance ESG imperatives.
Arie Barendecht is the co-founder and
CEO of WiredScore, a company whose
mission it is to empower landlords to
understand, improve, and promote their
buildings’ digital infrastructure; Wired-
Score also just raised their Series A round
at the end of 2018:
“There’s a lot of talk about connec-
tivity as a human right. The digital
divide means that not having access to
high-quality, reliable connectivity in
buildings impacts both the individual as
well as businesses. Without connectivity
we can’t leverage technology, access nec-
essary services, and tap into the power
of big data, which puts people at a dis-
advantage and adds unnecessary frustra-
tion and stress to their lives,” Arie told
me when I asked him why digital infra-
structure is so important for the ESG,
specifically the “social” component,
imperatives of landlords.
Indeed, in an age where we have all the
information known to mankind in the
palm of our hand as well as increasingly
powerful AI and machine learning tools
that are being released to the everyday
consumer via digital interfaces and the
internet, a difference in the connectivity
ability of two individuals could lead to a
huge difference in their respective qual-
ity of lives.
As Arie noted, governments are
keenly aware of this digital divide, and
WiredScore has partnered with large
38
city governments, including New York,
London, Boston, Dallas, and Chicago,
to ensure that connectivity mandates
become a key part of any new residential
or commercial developments, even at the
construction stage.
Although most of the onus on ESG
within the real estate industry is land-
lord-driven, there is an increase in the
number of initiatives where both the
landlord and tenant are engaged in
reaching environmental and sustainabil-
ity goals by way of collaboration.
Shifting away from the world of start-
ups, I spoke to prominent sustainabil-
ity leaders of large property developers
and owners. A recurring theme was that
landlords are increasingly working with
tenants to jointly achieve sustainabil-
ity goals instead of going at it alone.
Standard triple-net leases disincentivize
landlords to work on sustainability and
energy efficiency initiatives due to reduc-
tions in utility bills unevenly benefitting
the tenants,” explained one Director of
Sustainability at a large American prop-
erty owner and developer that I talked
to. “Nowadays, we are more often see-
ing green leases that help landlords to
recover some of the costs of sustainabil-
ity and energy efficiency investments by
introducing cost-sharing initiatives with
tenants.”
It seems that fundamentally, how-
ever, the focus on ESG in the real estate
industry is being driven by end-users
and consumers. Shawn Nelson, who is
the founder and CEO of furniture man-
ufacturer Lovesac, has modeled his entire
company on the principles of ESG.
Labeled “Designed For Life,” Shawn
was inspired to design modular furni-
ture that never needs to be discarded,
based on feedback from his users: “We
observed how our customers were using
and enjoying our Sactionals product,
and the theme that made it so unique
was that it solved all these problems
that people had in real life, and more
specifically how people’s furniture needs
needed to be adapted based on their life
events: getting married, welcoming new
members to the family, and so on.” Love-
sac’s products, therefore, both delight
end-users, while also aiming to limit the
amount of furniture that ends up in our
landfills. With Lovesac’s stock at an all-
time high at the time of writing, it seems
that investors also appreciate its unique
position.
Castellum, one of the largest property
developers in Sweden and Denmark,
is working with my company, Spaceti,
a smart building and smart workplace
solution provider, to promote a well-be-
ing focused environment. We realized
early on that they were committed to
health and well-being in their properties.
They were also interested in working
with sensors and data analytics in order
to learn more about how people use the
premises. They have proactively advised
customers about their usage which
helped to manage properties with more
efficient heating and ventilation.
Indeed, by measuring and improving
indoor air quality, building owners and
tenants can help their occupants and
end-users avoid so-called sick build-
ing syndrome. The challenge though,
another Sustainability Director told me,
is in measuring the benefits: “Unless we
can measure the hard benefits of well-be-
ing, which is somewhat of an intangible,
it is hard for us to engage with tenants
in promoting this aspect in their indoor
environments”. The case studies and
proof for indoor well-being promotion
are increasing, however, most nota-
bly with a recent Harvard study on the
impact of green buildings on cognitive
function empirically showing that cog-
nitive function can improve between
61-101% in green building conditions.
Will well-being initiatives also be
included in the leases of the future, just
as sustainability is included in the green
leases of today? Who knows.
What we can be sure of is that there
is an increasing focus on environmen-
tal, social, and governance objectives by
landlords, tenants, startups, and even
governments.
So forget cocktail bars and nap rooms:
if you really want to future-proof your
building and attract and retain the ten-
ants and capital of tomorrow, ESG
focused initiatives are your long-term
answer. < >
AAKASH RAVI is an entrepreneur and
software engineer.
Valuations and cash flows. Budgets and forecasts. Inflation and market rates, lease
terms and cap rates.

When your business is commercial real estate, your work life is consumed with
numbers and complexity.

Nothing handles those kinds of challenges better than ARGUS, the industry’s most
comprehensive suite of CRE software solutions. With more than 5000 active clients
and over $1 trillion in assets supported, ARGUS is the definitive choice of CRE
professionals who demand data transparency, understandable financial models,
and numbers that make sense.

Clarity for decision-making. It’s what ARGUS delivers.

To see your CRE world more clearly, contact Altus Group today at 888-692-7487
or ARGUS@altusgroup.com.

ARGUS.altusgroup.com
 Flexible
Office Design
Adapts to
Fast Moving
Companies and
Employees
BY JEFF WHEELAND

40
FLEXIBLE OFFICE DESIGN
Imagine you are a commercial real
estate owner. You just leased out
20,000 square feet of space to the hot-
test new tech company in town that
just closed their Series B funding. They
make significant “upgrades” to your
building by knocking out every wall
for an open office concept, installing
a multi-story slide, ping pong tables
and hot tubs in every corner, and three
giant refrigerators for their commer-
cial-grade cold brew coffee and beer
station. The changes are overwhelming,
but they signed a twenty-year lease and
It is still important to ensure a “hospitality-
forward experience so that someone isn’t making
their tuna sandwich out front.”
and easily altered for new tenants and
growing (or shrinking) companies, yet
still designed to attract top talent. As
noted by Ship, with easily changeable
office components, like modular walls
and workstations, owners can react to
tenant flexibility by quickly and cheaply
making adjustments to their buildings
to maintain high rates of occupancy.
Arnoldi agreed, stating that it is
important for building owners and
landlords to standardize and simplify
the installation process, allowing for
quick, easy, and less expensive changes
when necessary. By standardizing the
core components of office design, it’s
easy to be flexible to create a personal-
ity for an office space that is desirable
for each new tenant. Both Ship and
Arnoldi agree that although an office
layout may be similar to another build-
ing, companies can to distinguish their
personalities through artwork. Own-
ers can focus on an identity for their
space that increases productivity with
creative lighting, partitions, and show
walls. But it’s also important for own-
ers and landlords to remember that like
the bones of an office, the personality
should also be flexible and simple to
change.
One of the most exciting new
trends in flexible office personalities
are paying you handsomely.
But then, despite the best prog-
nostications, the market for their vir-
tual reality headsets for cats dries up
overnight and within three years they
shutter their business and declare bank-
ruptcy. Now you have a fancy office
space that no tenants in their right
minds can afford or utilize. Oh, how
you wish you had been flexible.
At our Propmodo Metatrends 2019
event in Los Angeles, we continued our
ongoing discussion about flexible office
design and its value to commercial
is interactive video walls. Everyone
knows art is highly subjective, so if one
employee hates the expensive painting
that adorns the entrance to her office,
it can subtly affect her attitude towards
work. As opposed to costly art instal-
lations that are often quickly ignored
(or worse, despised) by employees,
installing a projection display with
art that changes monthly or quarterly
creates an “element of discovery,” said
Arnoldi, “promoting dialogue between
occupants” and adding excitement each
time employees walk into the office.
With projection displays, designers can
experiment with infinite artwork pos-
sibilities that employees will be excited
to see each morning they enter a space.
Ship agreed that art is a key compo-
nent to attracting tenants, but other
new trends in physical components can
help save owners and landlords money
and time. For example, modular light-
ing, modular walls, and changeable
HVAC systems that can be altered
without requiring permits can keep
tenants in office spaces as their compa-
nies grow and change, rather than force
them to seek out cheaper locations that
can accommodate their needs.
Another common trend that Damon
sees from their tenants is the need for
privacy and dedicated space for sensitive
42
real estate owners and landlords.
To examine this topic, we brought
together three experts, Ryland Arnoldi,
co-founder of Wrapped LA, Brad Ship,
the Director of Strategic Alliances for
Varidesk, and Derek Damon, the West
Coast Regional VP with Convene.
In this era of unrelenting techno-
logical innovation and variable work
schedules, real estate needs to adapt
to companies and employees who are
anything but traditional. With this in
mind, office spaces will have simple
and flexible layouts that can be quickly
conversations that shouldn’t be public.
Flexible office spaces, while trending
toward open concept, still require areas
for employees to meet with outside
clients in private areas that maintain a
level of professionalism and discretion.
But, when arranging these private areas
for outside clients, it is still important
to ensure a “hospitality-forward experi-
ence so that someone isn’t making their
tuna sandwich out front.”
As many real estate professionals will
attest, shorter lease terms are becoming
the norm. In the office of the future,
flexibility is the key to profitability in
commercial real estate as it can help
increase a space’s efficiency and reduce
costly downtime. Unless you land that
unicorn startup that would prefer leas-
ing a building long-term rather than
owning it outright, owners and land-
lords must embrace flexible design
principles to ensure they can main-
tain long-lasting tenants by quickly
and cheaply making the changes that
every company needs in time. As Ship
succinctly summarized, “you have no
idea what tomorrow will bring.” Flex-
ibility will allow owners and landlords
to adapt to change, rather than be left
playing on a multi-story slide to get
to the ping pong table in their empty
office building. < >
We believe the future
of real estate will be
defined by those who
build around trendlines,
not headlines.

RESEARCH

The smartest people

in commercial
real estate turn to
Propmodo Research
for data, insights,
and the right
information to make
strategic business A new deep- Access to
and purchasing dive report our library of
decisions. every month valuable reports

www.propmodo.com/research
43
 A Commercial Real Estate Executive’s
Guide to Artif icial Intelligence
BY GUY ZIPORI
The commercial real estate orbit is
swarming lately with terms like “AI,”
“big data,” “machine learning” and “pre-
dictive analytics,” as yet another cluster
of tech buzzwords takes center stage.
Along with the newfound interest, big
investment dollars are flowing into tech-
nology companies at every niche of the
industry.
With all this hype looming, sensible
CRE executives can’t just stay indiffer-
ent to the promises of AI tech. Many
will tell you they are planning to incor-
porate AI into their processes or that it’s
“in the roadmap.” But what does this
mean? What are the objectives of AI
implementation in real estate, to what
particular field can it be applied, and
which KPIs will measure its success?
Beyond focusing on applications,
executives should also be concerned
44
with the AI-authenticity of tech prod-
ucts being offered them by vendors. In
fact, a recent study revealed that almost
half of all companies classified as ‘AI
startups’ actually have very little to do
with artificial intelligence. How can
we know that offerings claiming to be
AI are in fact using next-level artificial
intelligence technology to bring real
innovation and value to the table for
investors and clients, and not just rid-
ing the publicity wave to hype their own
product?
Now would be a good time to clearly
identify what AI is - and isn’t - and why
it matters for CRE executives.
Differentiating AI from A-Try
The current CRE techscape can be
confusing, as there are a good deal of
tech-based services that may seem to be
AI, but are actually not. For instance,
many companies now offer dashboard
services which aggregate lots of data
from various providers, such as trans-
actional data, rent data, etc. These
companies often market themselves as
AI. Though they may provide helpful
investor advice and value, these aggre-
gation products are rarely AI-based. As
another example, investment procedural
solutions are rising in popularity. These
services streamline the various steps
involved along the legal investment pro-
cess. Here again, the promise of AI may
or may not be entirely accurate.
It is often possible to determine the
authenticity of a core AI offering by
looking at its output. Where real AI is
at work, you can expect the product
to support output decision-making
THE BUZZWORD
DICTIONARY
Artificial Intelligence (AI)
AI has been around for
decades, and refers to technol-
ogy programmed by humans
that uses data and algorithms to
automate a certain capacity of
work that otherwise could only
be done by humans, such as
play chess or detect anomalies
in an MRI exam.
Machine Learning (ML)
Algorithmic machine learning is
a subset of AI. In ML, humans
don’t write all the code lines;
rather, they teach the machine
to train itself by running data
through the model, resulting in
its ability to learn new things
and change its own rules as
it goes along. Some of the
machine learning algorithms in
popular use today are mod-
eled after the human brain, in
what’s known as artificial neural
networks. Technologies built on
such topologies are what we
consider to be AI/ML.
Deep Learning (DL)
A subset of machine learning,
deep learning is considered the
“holy grail” of AI’s progressive
evolution. Simply put, the great
step forward of DL is its ability
to automatically learn from all
kinds of raw data types without
human training — that is, auton-
omously teaching itself.
In its various forms, AI today
allows for much higher process-
ing and automation than ever
before and is currently the best
available way to harness big
data. It will eventually carry out
high-level predictive analytics
with high accuracy making
sense of enormous amounts
of relevant data and even
improving our ability to predict
the future.
insights, not just aggregated market
information or recommendations. Ask
about the actionability of the product’s
final output as an important barometer
of authentic AI and to gauge what parts
of the product offering are utilizing AI.
Another way to detect a CRE tech
company’s degree of intention—and
capability—is by looking into the orga-
nization’s team. Is it comprised of real
estate veterans and an IT guy? Or expert
data scientists and engineers with solid
backgrounds in deep tech? If the latter,
what’s the ratio between engineers and
AI/data scientists (ideally about 1:1)?
The answers to these questions will be
very telling about the seriousness of the
company’s AI hype.
Obtaining Impactful AI
Applications for CRE Execs
So how should a real estate executive
find the right AI-based solution to take
his or her investment potential to the
next level? Here are some crucial points
to keep in mind:
AI is not a goal in and of itself. Define
your objectives and KPIs and determine
that AI is the best technology for achiev-
ing them.
When it comes to CRE, there is a
huge difference between AI applica-
tions being used peripherally, such as
SaaS portfolio managers or cloud ana-
lytics platforms, and platforms using
AI for core business objectives. It’s the
difference between an IoT house with
automated lights and remote heating
capabilities, and AI-powered auton-
omously driving vehicles. Different
organizations have different AI needs
- but it’s crucial to identify which solu-
tions align with which organizational
necessities.
There’s no such thing as one-size-fits-
all when it comes to deep data solutions
for your business. A fully bespoke AI
integration must take into account
the strategies and corresponding data
groups of your particular business
model. Potential partners should display
a deep understanding of your business
goals and methods.
Core AI system building requires
highly specific specialties. This will
usually necessitate partnerships with
technology professionals deeply knowl-
edgeable of AI’s building blocks and
capabilities, particularly as they relate to
real estate investment. This is not likely
to be an in-house effort.
Define the areas most crucial to your
bottom line strategies and see who can
make the biggest impact there. The
additions should be implemented seam-
lessly into your normal operations, yet
still bring quantifiable improvement to
your business goals.
Consider how AI can be directed
to create alpha for your organization.
Effective AI-based CRE insight should
fuse the expertise of your company’s real
estate professionals with machine learn-
ing models to identify value creation
opportunities.
When efficiency or automation is the
objective, incorporating AI shouldn’t
just improve things incrementally - it
needs to give you a serious exponential
jump. As such, your KPIs for relevant
values should be through the roof. Don’t
be misled into thinking AI implemen-
tation should be measured in any other
way but its effect on your bottom line.
Over the last few years, we’ve seen
AI disrupt a number of traditional
industries and the commercial real
estate market should be no different.
By understanding vast amounts of data
that affect the entire real estate invest-
ment lifecycle, AI technology has the
potential to unlock billions of dollars
in hidden value. Now’s the time for
real estate leaders to develop in-depth
knowledge of the new tools available,
and how to apply them to their busi-
ness objectives. By sourcing authentic,
best-in-class AI technology, real estate
professionals will develop a far deeper
understanding of the real estate market
than ever possible.
GUY ZIPORI (@Zipori) started
programming at the age of 14 and
founded his first technology company
at the age of 16.
45
 Microsoft Wants Its Azure
Platform to Become
“the” IoT Cloud

CLOUD
CITIES BY FRANCO FARAUDO

1983
feels like a long time ago.
Michael Jackson first per-
formed his iconic “moon-
walk,” Apple released its boxy Lisa computer,
and Return of the Jedi broke box office records.
But even way back then, there was what we
today call “cloud storage.” The first major com-
mercial online service provider, CompuServe,
offered its consumer users a small amount of
disk space that could be used to store any files
they chose to upload.

47
47
CLOUD CITIES
While the buzz word that is “the cloud” has snow-
balled in the last five years or so the concept is nothing
new. Our emails, for example, have been stored on the
cloud since the early days of the technology. Today, of
course, our data landscape is exponentially more compli-
cated than back in the CompuServe era, and it requires
much more from cloud storage than just a place to
upload data.
One of the reasons for this is the global network of
connected devices that we have dubbed the ‘Internet of
Things’. Again, connected devices are nothing new, but
the sheer number of them and the amount of data that
they collect is uncharted territory. In 2015 there were
15.41 billion connected devices, today there are around
27 billion. While that seems like a lot already we are still
in the early days according to experts. 127 new devices
get connected every second and the number of these sen-
sors, alarms, cameras, detectors, cars, medical devices,
toasters, and just about anything else you can think of
will reach 75 billion by 2025.
A large number of these devices are installed in our
buildings, houses and cities, created by thousands of
different companies and speaking hundreds of different
languages. Plus, many collect and analyse such dense
information that they need to do some of their process-
ing on site in order to eliminate latency that would ren-
der many of their functions too slow to be useful.
So, there is an obvious need for one company to step
up and become the unified infrastructure on which built
world IoT can connect and integrate. Microsoft thinks
they can be that company. Last year they reorganized in
a way that, shockingly, didn’t include a division for their
flagship Windows product. Instead it included an entire
business unit dedicated to “Experiences & Devices and
Cloud + AI.”
If their reorganization alone didn’t prove their desire
to be on the forefront of what is expected to be a $457
Billion IoT industry by 2020, then the $5 billion that
they have earmarked for IoT research should solidify
their intentions.
In order to create a universal platform that IoT devel-
opers can build on and the end users can use as a single
dashboard for their growing stack of devices, Microsoft
has created what they are called Azure IoT. Azure is
Microsoft’s cloud computing service created for build-
ing, testing, deploying, and managing applications and
services through Microsoft-managed data centers. Their
IoT extension of the program includes an “Azure dig-
ital twin” component that will organize all of a build-
ing’s information within an easily understandable digital
replica of a property.
In order to understand how Microsoft was working to
help PropTech technologies with their Azure platform
we reached out to a few companies working with them.
The first was Willow, an integrated building information
software firm. Their CEO, Josh Ridley, met Microsoft’s
Bert Van Hoof at the Realcomm conference last year
where they were invited to come to Seattle and given the
opportunity to join the Azure Digital Twin pilot pro-
gram. They partnered to bring a building in Rottweil,
Germany onto their platforms.
Of the partnership Ridley told me that “the advantage
to us in using Microsoft’s secure cloud environment to
develop our digital twin solution is the ease of product
development and the security of their cloud, meaning
building owners have confidence that the building and
occupant data will be kept safe. The partnership with
Microsoft lead the way in creating valued partnerships
with independent software vendors, resulting in a con-
solidated platform for our mutual customers.”
Much like Apple’s App Store, Azure requires develop-
ers to adhere to certain specifications about how their
programs will interact with others. Unlike Apple, Mic-
rosoft offers a lot of help for developers that want to
create software and connect hardware to their platform.
This helps all of the applications on Azure “play nice” as
well as significantly boosts the security of every one of
their partners. At Realcomm this year, Microsoft hosts
an entire pavilion with over twenty five of their part-
ners, much of which is dedicated to cybersecurity and
interoperability.
Another company that runs on an Azure backbone is
Cohesion. When I asked their CEO Thru Shivakumar
why they chose Microsoft he said, “We chose to part-
ner with Microsoft because they provide better support
for hybrid solutions, such as our intelligent building
software platform, which unites information from both
on-premise infrastructure and cloud-based sources.”
Hybrid cloud solutions is also not something new.
Again, email software has been doing this for years.
But it has become even more important now that IoT
sensors are collecting terabytes of data that needs to be
analyzed and fed back into the overall schema in second
and/or milliseconds.
Microsoft’s plans for Azure IoT is still in its infancy.
As they grow the platform they expect it to become one
of the easiest ways for IoT developers and users to easily
connect into an entire ecosystem of software and hard-
ware. They also have plans to create a data marketplace,
where building owners and managers could sell their
usage data or buy other data sources like nearby traf-
fic usage or advanced weather mod==eling that could
be easily plugged into their analytical systems. Like any
marketplace or ecosystem, this will take a while to reach
a critical mass. But when it does it might make for a net-
work of IoT providers that is too robust to pass up. < >
48
 PROMOTED BY ALTUS GROUP

Finding the Right Deal

is Only the Beginning

50
BY FRANCO FARAUDO

E
veryone has a story about money they wasted on
technology. When buying new gadgets (just like with new
software), it is often hard to know what their real value
will be, which features will be used, or how difficult it will be to
learn or to make a habit of using them. Some of this stems from
the fact that many people see technology as a cure-all pill, to be
swallowed without thinking, blindly trusted as a sure fire way to
fix all of our problems. When it comes to software, particularly
enterprise software, the best technology integrators realize that
the tech is just one piece of the puzzle. It needs to fit into a larger
landscape that includes team dynamics, corporate culture, and
workflow processes.

51
PROMOTED BY ALTUS GROUP

This is a problem which the companies that create

technology think about a lot. Pushing out a product,
or a version of a product, that isn’t able to get trac-
tion is the slow road to failure. Good design can make
the difference between applications that get installed
and ones that actually get used. One of the first steps
in the design process is understanding overall design

acquisition teams work is fundamental

constraints and nothing can be more constraining
than (sometimes irrational) human behavior. So it
makes sense that some of the most rigorous research
into how work gets done comes from the enterprise
software providers that build products to help.
Altus Group is one such company creating technol-
ogy for real estate investment firms. Their enterprise
software, ARGUS, is one of the most trusted in the
world for understanding the valuing of income gener-

Understanding how real estate

ating properties. Since the valuation process is one of

to creating dealflow software.

the most important tasks for any real estate investor
they have spent a lot of time learning how acquisition
teams evaluate and decide on which properties to buy
and projects to fund. Over the course of a few months,
they spent hundreds of hours on calls and in meetings
with some of the world’s top acquisition teams. This
process gave them some interesting insights into how
teams work and which ones have been able to make
the transition to a more sophisticated, digital work-
flow. It also informed on how they designed their new
ARGUS Acquire acquisition software. “It was import-
ant for us to look objectively at how the industry was
incorporating technology into their daily tasks rather
than point them out as Luddites or dinosaurs,” said
Tom Hazeldine, one of the project leaders for the
ARGUS Acquire design team.
They learned early on that deal management was
only a part of what acquisition teams do. Tracking a
deal through the pipeline is the easy part. The real
work comes from the rigorous modeling that is the
culmination of a long due diligence process. In order
to understand the impact of changes in the assump-
tions, most acquisition teams will create ten to fifteen
different models and compare their outputs. These
usually get curated into three options: a “base” case
and the best and worst scenarios.
So to help analysts keep track of all of their mod-
els, the Altus Group team designed their ARGUS
Acquire application to bring KPIs like present value,
IRR, NOI, and cap rate into one place no matter
whether they originated—from their platform or an
Excel spreadsheet. This way, a quick glance can help
see the different outcomes of each forecast model.
They also discovered that some of the most common
addendums to an investment package were cash flow
and rent roll forecasts, so they created a tool that can
generate those reports automatically within ARGUS
Acquire.
It is important not to understate the role Microsoft’s
iconic Excel program is to investment firms. Some
analysts are incredibly sophisticated and blindingly
fast at creating models in Excel. With that knowledge,
the Acquire designers knew that rather than trying
to force everything into a separate application, they
needed to allow easy integration between Excel files
on analysts’ computers and the Acquire platform.
Many of the teams that conduct this process have
a similar workflow: analysts would do the work of
creating, testing and curating the models and then
would present them to an investment committee. The
researchers learned that these committee meetings
are the most pivotal moments in the entire process.
The committees are usually comprised of senior-level
managers or partners at the firm. These executives are
always incredibly busy so they need to be able to have
a high-level overview of all of the different investment
options (and all of their models) in order to make their
decisions in a timely manner. If they are not satisfied
with the evidence they might elect to pass on a proj-
ect. Tom and his team found out that this part of the
process created the most anxiety for analysts. “Teams
will usually put between three to ten hours into each
one of these deals so they don’t want them to get
passed for lack of analysis,” Hazeldine said. For this
reason they created ARGUS Acquire with the ability to
quickly change assumptions in models and learn the
implications on a property’s value in real-time. “Over
half of the analysts we surveyed said that the ability
to recalculate models during the committee meeting
would definitely help them make their case.”
To get a sense of how teams used this ability to
adjust models to their advantage I talked to some-
one doing just that. Jamie Minckler is an analyst at
Matan Companies, a real estate agency out of Bal-
lenger Creek, Maryland. They are a full service shop
- they manage, broker, and invest, so they are a good
example of how numerous regional commercial real
estate companies work. “We don’t have an ‘acquisi-
tion team,’” Minckler explained. “The leasing team,
the analysts, the managers, the principals, all of us
are looking for projects. Depending on the climate we
might be doing a ton of deals, or none.”
Opening the pipeline up to their entire team gives
them more eyes on market, each with their own exper-
tise. Importantly, the matchmaker’s involvement didn’t
end after the introduction. Minckler said, “whoever
brings the deal in becomes its champion, its cheer-
leader, if you will.” This means that they need a way
to explain what they saw in the deal in the first place.
“What is helpful is that anyone from our team, even if
they don’t understand the discounted cash flows as
well as our investment managers, can get into Acquire
and talk the team through it, and figure out what will
happen if the projected rents or cap rates change.”
During the process of building ARGUS Acquire,
Altus Group found that while there were a lot of sim-
ilarities in how commercial real estate acquisition
teams work, there was also quite a bit of variation in
how they think about each deal. Many organizations
use their own internal knowledge such as compa-
rable leases in their own portfolio to construct their
assumptions. Others find creative ways to understand
where the local market is headed. The art of analysis
will always be the secret sauce for an investment team
but creating ways to bring structure to the process
and increase visibility of the work being done for the
entire team helps investment companies do more of
what they do best.
Altus Group looks at what they are doing as more
than just creating real estate software. Successful
real estate investment teams have the ability to cre-
ate massive amounts of value for their shareholders
and for the cities in which they invest. They want to
be able to empower these teams to make their most
informed decisions in the most efficient way possi-
ble. To do this they conducted extensive research and
implemented the lessons they learned to make their
new ARGUS Acquire software the most comprehen-
sive in the industry. They plan on continuing to use the
feedback they receive to create a tool that responds
to actual pain points and integrates seamlessly into
the property industry’s workflow, rather than trying to
change the way successful teams have been doing
their business for decades.
To learn more, visit argus.altusgroup.com/
argus-acquire
53
RESEARCH
RELEARNING LEASING
A changing market demands new perspectives
BY TRAVIS BARRINGTON
To understand the modern economy,
you have to examine how businesses
are able to operate within it. How they
compete, grow and fail can give a sense
of larger trends. Unlike economists
and politicians, who employ a set of
assumptions to ground their view of
the economy, businesses are tied to real
forces from their customers, investors
and regulators. Since most businesses
need a physical location and real estate
can often be one of the biggest costs
for many companies, the way compa-
nies use office space is representative of
the modern business climate.
And things very well might be chang-
ing. Offices have started to become a
more fluid piece of many companies’
P&Ls and a more integrated part of all
of our lives. This is, after all, the nar-
rative that WeWork has been selling.
The way we work is changing, people
are working more like contractors, and
businesses want their real estate to grow
and contract at the pace that they do.
Say what you want about WeWork’s
valuation or unit economics, they have
done a hell of a job at crafting that tale.
But co-working companies like
WeWork represent only a tiny sample
size of the overall total of office space.
They might make a lot of noise but they
are not necessarily a great representa-
tion of how businesses are approaching
their office real estate needs.
Plus, let’s face it, real estate is emo-
tional and not always rational. At one
time or another, we’ve all heard about
a company that relocated their head-
quarters simply because the new CEO
wanted to be closer to home. Or per-
haps you know of a tenant with a space
requirement that included being in a
more prestigious building, on a higher
floor or having a better view than any
of their competitors in the market.
Indeed, the leasing process isn’t easy
54
for a business. Procurement of office
space can be costly in terms of time
and resources, as well as a potential
disruption to operations. Also, leasing
decisions can easily become conten-
tious within an organization, due to
the many stakeholders and competing
interests involved.
For most office tenants, real estate is
not their core business activity. Leases
are only signed every three or more
years, and the lease term often outlasts
the tenure of the decision makers. As a
result, most rely on third-party special-
ists, brokers, and consultants for advice
and to work through the details of the
lease. Even in larger organizations with
an internal corporate real estate func-
tion, it can be difficult to capture the
thoughtful attention of senior man-
agement unless driven by the business,
such as in expansion or consolidation.
However, the tide is shifting. In
recent years real estate has become rec-
ognized as a strategic tool for attracting
and retaining the best employees,
increasing productivity, shaping brand
perception, and instilling culture and
values. As a result, the C-suite has
begun to take notice and place greater
emphasis on workplace and the cor-
porate real estate function. They are
willing to spend more for the right
space, whether that means the ameni-
ties that they need to run their business
or the flexibility to grow and shrink
teams without wasteful unused space.
In order to try and understand how
office spaces are adapting to this shift in
business strategy and corporate culture,
we put our researchers to work investi-
gating how lease terms have changed in
the “era of WeWork.” We broke down
the effects of factors like demographic
changes, macroeconomics, the “agile”
transformation and, of course, tech-
nology to try and understand what has
happened in the office leasing market
and what its future might look like.
Our team combed through dozens of
reports and was able to use some great
data from our partners at CompStak to
try and answer the question: “How is
the office real estate industry adapting
to the modern economy?”
Our results were intriguing. We
found that lease terms are actually
changing. The lengths of the agree-
ments are shortening and even the
largest corporations are adopting
co-working as part of their corpo-
rate occupier strategy. This is driven
by numerous forces including an
economic uncertainty after such a
sustained period of growth and new
accounting procedures that change
the way leases are categorized. It also
follows a growing trend of businesses
outsourcing any non-core part of their
operations.
There are a lot of larger implications
from these findings. Since companies
are prioritizing flexibility and full-ser-
vice spaces, many real estate firms are
either become much more involved in
the day-to-day management of build-
ings or are finding ways to partner with
others and take on more of an asset
management role. This study and its
findings were the first of many for our
platform. We think that understand-
ing what is happening in the real estate
world is critical for understanding the
economy as a whole. We want to do
our part to find the signal in the noise
and help keep the industry informed of
important changes. There will still be
surprises, of course, but we hope our
research can help some of our readers
stay ahead of the curve, be it meander-
ing or sharp. < >
To learn more, visit www.propmodo.
com/research
 The future will be
defined by leaders
who understand
the larger context
in which the real
estate industry
operates.

NEWSLETTERS

Propmodo delivers Global Newsletters International Editions

insights and news PROPMODO DAILY FRANÇAIS
to over 200k email WEEKLY ROUNDUP JAPANESE
subscribers each Special Series CHINESE
week through daily METATRENDS ESPAÑOL
and sector-specific
Sector Newsletters INDIA
newsletters.
REAL ESTATE
SMART CITIES
BUILDINGS
WORKPLACE

www.propmodo.com
The Next Big Tech
Company Might Be
More Human Than Tech
BY FRANCO FARAUDO

N
orwegian Nobel prize laureate Christian Lous Lange once said,
“technology is a useful servant, but a dangerous master.” He was
speaking about the industrial revolution, which shaped the world he lived
in, but his words hold true for the digital revolution that we are experiencing now.
Technology’s never-ending quest for efficiency can empower us to do things
never before possible but it can also be a demanding overlord, dehumanizing and
objectifying the people that grease the gears on which it runs.
We have seen this play out in a number of ways. Employees in the supply
warehouses that make Amazon such a master at logistics have complained of
embarrassing and often cruel working conditions. Facebook, the connective
tissue of modern day extended families and casual acquaintances, was revealed
to have secretly sold the data of its users to other tech companies and is now
being sued for its role in facilitating the spread of false information before the U.S.
presidential election.

57
 MORE HUMAN THAN TECH
At first glance it might seem like indentured servitude to the tech-
nology of the modern world is inevitable. Machines have become
better than humans at most tasks so we all have to work harder
to compete. Technology companies are created to extract max-
imum value so they will eventually find ways to get that value
from the people using it. But it turns out that this is not the case.
A new breed of tech companies are starting to design technol-
ogy to empower the people that use it rather than replace, sell or
enslave them.
One of these companies might just be the biggest tech com-
pany you have never heard of. The company is Hello Alfred, a
New York-based PropTech company powering the home of the
future through technology and hospitality. They want to create
a human operating system for residential buildings by providing
residents of buildings with trusted, personal help in the form of
“Alfred Home Managers.” These home managers are a power-
ful part of the building’s offering and might be a glimpse at the
future of urban dwelling.
Before you think that this is a niche company that only helps
you schedule cleaning services remember that, while algorithms
are getting better at predicting what people want, humans are
still far superior. “We like to think of our Alfred’s as detectives,”
said Marcela Sapone, co-founder and CEO of Hello Alfred. “Our
world is about the relationship that our Alfreds have with the
resident, built on a foundation of trust, ” she told me. “They are
not just help that is in the background, these trained specialists
are going to act as a proxy on your behalf.”
Think about it, when was the last time that Google, Amazon
or Pandora introduced you to your new favorite product, book
or song? Personal preference is about so much more than past
order history. What we need and want is tied up more in our
aspirations than our browser history. “Once we are in your home
we can learn a lot about what you care about,” Marcela said. “Do
you like houseplants but struggle to keep them alive? Not only
will your Alfred start watering for you they might go out and buy
a few more plants for your home. Do you like to entertain? Then
your Alfred might find ways to make it easier for you to have your
next dinner party.” I would bet that a human would never waste
your time by showing you an ad for an item you just purchased.
An algorithm on the other hand...
Each Alfred is given a budget to buy things for their residents
to try and can offer expertise or recommendations in particular
areas From there they can facilitate the order and even set it up
in your home. “We have Alfreds that buy furniture and electron-
ics, anything really,” Sapone told me. HelloAlfred partners with
vetted and values-oriented local service partners and even work
with other brands to get samples of products and invites to special
events to their residents.This is akin to what Amazon and Google
want to do with their voice assistance but on a much more per-
sonal level.
In-home services is a quickly growing sector of the economy
largely due to the increasingly popular desire to spend money on
experiences rather than “things.” As Marcela puts it, “We are life
rich and time poor. People have always been pretty bad at doing a
cost-benefit analysis of what is the value of all of our time but that
is changing, I think that as a culture we are becoming more aware
58
that attention is the most important currency that we have.”
While all of us have chores that we would be much happier to
outsource, some of the barriers to this type of in-home service was
a cultural aversion to asking for help. This is a rather American
ideal, dedicated in-home help is much more prevalent in other
countries, as we see other people doing our dirty work for us as
an objectification of others.
But this seems to be changing and this is where Marcela sees
her company becoming one of the most important parts of many
people’s lives. “Originally we saw that people were ashamed to
admit that they had an Alfred but now they are going into leas-
ing offices and asking for it,” Marcela said. “These are good jobs
that require craft, there is a lot of pride in a job that creates this
level of hospitality.” She said that one of her main sources of new
employees is new moms coming back into the workforce since
they enjoy doing things for others and understand what it takes
to make a household run. There is a certain grace and compas-
sion that comes with helping others in their daily lives. One of
the most celebrated movies of the year was Roma, which did a
beautiful job showing the closeness between families and their
domestic employees.
The analogy behind the company’s name is telling. Hello Alfred
is named after Batman’s (or more precisely Bruce Wayne’s) per-
sonal assistant but in reality he is so much more than that. Alfred
acts as a confidant, sidekick, co-pilot, and even father-figure for
his vigilante employer. In her mind, Marcela thinks that having
Alfred is Batman’s superpower, “not only is having help not a bad
thing it is one of the main ways that you can be successful. Every
successful person has people that help them on a daily basis.”
From very early on Marcela and her co-founder Jessica Beck
understood the importance of putting their employees first. “We
were the first women to win TechCrunch Disrupt and at the time
it was the era of ‘uberization of everything,’” she said. “We got a
lot of negative press because people thought that we were just a
way for people to click a button and get your house cleaned. They
didn’t understand that with our Alfreds, we were creating a posi-
tion of very high importance in the lives of residents.”
Hello Alfred’s commitment to their service providers goes much
further than just talk. Since the beginning, they made the often
unpopular decision to make every Alfred a W-2 employee with
benefits rather than a 1099 contractor like many tech compa-
nies prefer. They also created a bill of rights that they expect their
coders to follow and consider themselves a “human technology
company.” “Everyone that comes on is required to be an Alfred
for a week. Our most important customer is Alfred so you have to
understand their job. We were finding engineers who didn’t want
to do that. We have said no to a lot of great engineering talent
because they are not interested in the full human picture.”
In the modern world, tech visionaries tend to be idolized for
what they can create. But it is important to understand that they
too need to be mindful of the consequences of their actions, or
the actions of their creations. Rather than ignoring the digital
revolution that is permeating every aspect of our lives the next
generation of creators are designing technology so it can be our
servant, or our assistants’ servant, rather than our master. < >
 Your Vision

Our Technology
Set your sights on improved margins and project control.
We can help.

Anytime, Anywhere, Any Device

ibsre.com
(973) 575-4950

Construction Accounting Property Management