As the Proptech Wave Breaks Over Commercial Real Estate, Microshare is Riding High
By Michael Moran
Commercial real estate has lagged other sectors in its adoption of new technologies aimed at bringing new features to clients, new efficiencies to facilities management and putting flesh on the bones of the smart building revolution. Self-flushing toilets and motion-activated lighting was about the extent of most firms’ commitment until recently – both technologies widely deployed since the early 1990s.
Microshare has been at the forefront of this story. After years of politely leading prospective clients through pitch meetings on the power of our software to transform their operations, we have recently closed large contracts with some of the world’s leading corporations to enable features like predictive maintenance and cleaning, occupancy monitoring, environmental controls and other innovative approaches to Facilities Management (FM).
These breakthroughs have been a long time coming. Since Microshare’s founding in 2013, the Philadelphia-based startup has been in education mode, deploying pilot programs across North America and Europe to demonstrate how a new generation of cheaper, longer-lasting IoT sensors can significantly boost their Net Operating Income (NOI) by bringing cost efficiencies, new client services and market differentiation to commercial properties.
One of the firm’s first pilot projects, dating to 2014, involved occupancy monitoring and other intelligence for a major Philadelphia-based REIT that owners office towers and residential building across the company. The firm – an early mover in proptech – has expanded its engagement and now counts as an anchor client.
Figure 1: Proptech Global Financing History
The Light Bulb Illuminates
The ecosystem for commercial real estate technology has been transformed in recent years by the development of new platforms that have attracted an increasing amount of venture capital – some $5.2 billion by the middle of 2018, up from just $1.3 billion four years prior (See Fig. 1 below). Other sources suggest that the pace has only quickened of late. CREtech, a commercial real estate research firm, says VCs poured $12.9 billion into proptech in the first half of 2019 alone. That’s up 491% since 2013, according to the firm.
Figure 2 below notes the that a 2019 survey of the commercial real estate industry by Credit Suisse found proptech making headway in core use cases like facilities management (FM). While some proptech use cases like those in notoriously luddite construction management space, for instance, continue to face headwinds, the industry and proptech suppliers are closely aligned in FM.
Figure 2: Alignment of proptech and commercial property industry on facilities management
The hundreds of hours we spent explaining to prospective clients (including REITs, property owners and facilities managers) that the advanced capabilities of our platform and the cost savings and data security advantages flowing from it are now paying off.
“In many cases, light bulbs went on at these meetings, but we ran into the early mover problem,” says Microshare CEO Ron Rock. “The value proposition was clearly recognized, but line item budgets simply did not include proptech. So, we won internal champions across the world, and our job was to continue feeding them with the data they needed to make the case internally.”
The case, it seems, has now been made. This year, following an $5 million injection of capital led by Motley Fool’s venture fund , Microshare has booked business with some of the world’s largest facilities management companies and infrastructure companies..
The Consultants Catch Up
The growing realization within commercial property, in particular, that firms like Microshare can provide game-changing intelligence has made its way into the consulting industry, too, where major commercial real estate practices that focused on buy-sell-hold issues like valuation, vacancy rates and other traditional metrics, have now embraced proptech – reacting to demands from the industry. Virtually every major consulting firm currently has vacancies listed for digital specialists within their property practices.
Boston Consulting Group, in a March 2019 report on Building the Housing of the Future, notes that in order to compete, property owners “must use digital tools along the entire value chain. For example, they can incorporate virtual reality into end-consumer marketing programs or use smart sensors in maintenance and facility management systems to increase efficiency.”
PwC’s Emerging Trends in Real Estate 2019 concurs:
A number of factors are combining to create this transitional pivot point. The first is the size of the U.S. real estate market, which is an enticingly large target: As of the end of 2017, the U.S. Bureau of Economic Analysis says that the real estate industry represents 13 percent of U.S. GDP. The second is that the target market is diverse, with most real estate companies operating within only a few segments of the overall industry. With this level of fragmentation, there is certainly no clear leader in the real estate technology business. This appears to play right into technology’s knack for fomenting consolidation. Third, opportunities for success appear to be unlimited. Real estate technology has the opportunity to touch virtually every aspect from fintech to proptech, from supply chain logistics to end user convenience, from manufactured building components to workplace productivity, from data analytics to tailored amenities, and more.
Microshare’s approach to smart grids, buildings and other infrastructure goes well beyond app-based conveniences and simple IoT sensors. Unlike many IoT data providers, Microshare’s DNA is in governance, KYC and compliance, and its senior team has decades of experience building complex Business Process Management (BPM) and compliance systems for some of the world’s largest corporations.
The Microshare platform provides state-of-the-art data security and auditability, key concerns as the massive commercial real estate industry dips its toe into the ocean of data its facilities will generate. This not only results in cost savings and prevents breakdowns of physical plant that can lead to lost revenue and legal exposure, also prepares its clients for further transformation as data sharing, smart contacts and Artificial Intelligence (AI) increasingly penetrate the daily operations of their properties.
The use cases the company is involved with run from convenience to the existential. Imagine, for instance, you own high-rise residential properties across a range of dynamic markets – Austin, Denver, Munich and Vancouver. Microshare’s management of strategically placed sensors and gateways can:
- Prevent overflowing trash cans in bathrooms and common areas;
- Monitor usage in expensively maintained conference rooms, workout spaces and other amenities;
- Track a high-rise apartment’s luggage carts – a common problem as tenants often use them and leave them stranded on random floors;
- Allow tenants to download and app that shows if there are chairs or barbeque grills available on the pool deck, if a visitor parking space is available for mom.
These and many more bits if Micro-intelligence provide major increases in tenant satisfaction, preventing poor online ratings and complaints, and help luxury properties – currently overbuilt in many MSAs and forced to offer free first months or forego security deposits to secure tenants – new ways to differentiate themselves. What’s more, proper management and sharing of this data through the Microshare platform can create new revenue streams, too, a service providers eager to get in front of a pool deck full of millennials bid for the privilege.
But facilities data can not only save money; it can save lives. Sensors are now monitoring everything from the safety of elevators, whether parking lot gates are functioning, whether water is leaking into the sub-basement, whether fire doors are locked as well as carbon dioxide levels in living spaces and pressure levels on industrial boilers.
Crucial data like this may require more than onsite monitoring. Here, Microshare’s unique history of data governance, security and sharing comes into play. Proprietary data on critical systems can be shared with everyone from fire departments to maintenance contractors – all done so securely and with the ability to micro-contract for immediate response if needed.
Taken together, the potential cost savings are enormous, avoiding deferred maintenance, life-threatening hazards, or catastrophic flooding or fires that produce lawsuits, nonperforming assets and ruin to a firm’s reputation.
McKinsey & Co., another firm racing to add digital savvy to its commercial property practice, sketched out its vision of the smart office building of the not-so-distant future.
Embedded within the facility is an array of intelligence to closely connect the infrastructure and occupants. Nearly 30,000 sensors cover the floor space, collecting granular, area-by-area data on occupancy, temperature, humidity, light levels, and even coffee-machine and towel-dispenser use. The data are aggregated in real time, with analytics parsing the information into actionable intelligence to improve the occupant experience. Office and conference-room temperature adjusts to match occupancy levels and user preferences, for instance, and overhead lights brighten and dim according to the amount of sunlight present. Employees engage with this intelligent infrastructure through a smartphone interface, providing location awareness and wayfinding, real-time occupancy of meeting rooms and collaboration areas, workspace vacancies and assignments, and dynamic control over lighting and environmental settings.
McKinsey’s fiercest competitors agree. “Only a few companies have yet brought the concept of the truly smart building to life,” notes Boston Consulting Group in its 2019 survey of smart buildings. “But it’s predicted that intelligent buildings will be commonplace by 2020.”
At Microshare, we know that to be true because we’re making it happen right now.
Media contact | Michael Moran | mmoran@microshare.io | +1 201-264-5751