Technology and The Five Pillars of Asset Management After years of applied learning, speaking with tens of thousands of industry members and making this my passion, I’ve developed a framework that splits Asset Management into five identifiable pillars that can help future technologists navigate the asset management landscape.

Logan Soya, CEO and Founder Aquicore originally published Memoori

Real estate asset management hasn’t changed much since the advent of “owner managers” in the mid-19th century. At the end of the day, asset managers still partition buildings to rent space, and tenants still want the certain qualities for their spaces – comfort, convenience and affordability – even if what constitutes those qualities has changed with the times.

Though this industry has a reputation for being slow to change, market pressures and new technology are advancing asset management at an impressive pace.

For these technologies to succeed, it’s imperative for companies to understand the industry and its people on a fundamental level. The Internet of Things, machine learning and data science can streamline traditional processes, unlock new insights and save building teams both time and money. But they’re only effective when applied within the context of how the business of real estate operates, and how assets are run today.

BUILDING YOUR TECHNOLOGY FOR PEOPLE, NOT ASSETS

As a young technology entrepreneur (and geek) aspiring to save the planet and make an impact on the environment around me, I was mesmerized by the complexity within each physical building I walked into. Inside a typical office building, like the engine of an automobile, there are hundreds different pieces of equipment that are intertwined and must operate together in order to keep tenants happy and the space running well. Cooling towers, compressors, chillers, VAV boxes, controls systems – the list goes on.

When you first walk into these assets, you can often find equipment that is 10, 30 or sometimes even 50 (yes 50!) years old. Each piece of technology intrigued me, and I saw a wealth of opportunity to apply software and modern technology practices that could make things better. However, to create real impact, I needed to pause my geek-ish tendencies.

I learned early on that you must prioritize what’s important for your customer, not what’s important for the asset. Countless features originally built into the Aquicore platform were later eliminated as we worked to validate our assumptions and learn more about the ways customers use our system.

I’ve seen many young entrepreneurs obsess over improving the physical asset, but are lost as to who they are building this feature or product for and how that improvement ultimately creates impact (either financially or behaviorally) for the stakeholders of the asset.

So who are the people most directly influenced by technological advances for building management? While real estate is a dynamic industry with many different roles, or “personas” as we call them, three primary roles handle the regular operations of commercial real estate buildings and are the most impacted:

If you want to make a difference in the built-environment with new technology and you think you have a cool technology, chances are that the technology should be built for one of these three roles. (or perhaps a combination of them).

CUTTING THROUGH THE NOISE

With roles and personas established, the next question a successful entrepreneur must ask is what do these individuals care about? What are their roles and function? What would really benefit them?

After years of applied learning, speaking with tens of thousands of industry members and making this my passion, I’ve developed a framework that splits Asset Management into five identifiable pillars that can help future technologists navigate the asset management landscape.

FIRST PILLAR - FINANCIAL PERFORMANCE

Closely tracking the revenues, operating expenses and capital expenses for a portfolio of buildings is the primary directive of an asset manager. Asset managers are given a financial proforma for the property, and their mandate is to meet or beat those performance goals, take corrective actions as needed and grow the value of their assets and oversee major projects and milestones of attainment.

Functional applications, like automated accounts payable / receivable and streamlined leasing management, are already making asset and property managers’ day-to-day lives easier by automating simple, repetitive tasks. More deeply integrated proptech can provide invaluable business intelligence, both externally, in conducting market research and reducing market opacity; and internally, in identifying the leaders and laggards in a portfolio. As these tools become more advanced, they are likely to become indispensable to executives in commercial real estate.

SECOND PILLAR - PEOPLE PERFORMANCE

The truth about asset management, is that while their financial output is what they are graded on, they really depend on well performing staff to commercial buildings running every day, making this the second, and often overlooked, pillar of asset management. New tools that save building teams time, stream new insight and information to reduce hours spent on collecting information, and surface new insights about the performance of an asset when staff need it most.

How CRE Tech can affect this pillar: Specialized digital tools can go a long way towards both empowering building teams with better real-time context about the status of their properties, and streamline reporting and oversight. IoT and machine learning technologies enable real-time monitoring to eliminate the frustrations of human error that comes with accurately generating invoices for tenants based on utility usage, enable staff to be responsive and reactive before tenant comfort is compromised, and streamline upward reporting of property conditions. Advances in machine learning and data science can help engineers and operators identify optimal sequences for their building equipment and handle the many variables.

These measures keep property expenses down, but perhaps more importantly, fosters a data-driven workforce and shift to a culture that is now empowered by real-time information. Communication tools help facilitate better team collaboration, improve internal reporting and decrease response times to tenant requests.

THIRD PILLAR - UTILITY PERFORMANCE

Commercial buildings account for about 16 percent of U.S. carbon emissions and roughly the same portion of electricity consumption. According to U.S. Department of Energy estimates, almost 30 percent of that energy is consumed unnecessarily; in other words, it’s wasted.

That’s a problem for everyone. In addition to its contribution to climate change, wasted energy represents tens of thousands of dollars a year in avoidable losses for asset managers and their tenants. Minimizing energy waste is therefore a core focus of asset management; virtually no building constructed after the invention of the chimney has been designed without taking energy use into account. Other utilities, like water, gas and steam, make up less of the average building’s expenses, but nonetheless follow similar patterns.

How CRE Tech can affect this pillar: Today, utility performance optimization is a sophisticated process, one that incorporates granular data monitoring, strategic investments, operations planning around tariff schedules and ongoing tenant outreach efforts. So it’s not surprising that this is an area that is especially ripe for disruption: There is a ready and waiting market for smart building technology that simplifies these processes.

IoT sensors can pull data from utility meters into the cloud in real time, and at a significant discount to traditional technologies. That data can then be used to plan operations, measure the impact of a new investment, alert tenants to consumption patterns and more easily conduct sustainability reporting. With the addition of a few other data points and a little machine learning, it’s even possible for proptech platforms to make direct recommendations, like when a building should be started up or how consumption should be shifted to avoid peak load charges.

FOURTH PILLAR - EQUIPMENT PERFORMANCE

There are two reasons why equipment performance is central to smart asset management. First, commercial building equipment represents a large investment, so asset managers have a strong incentive to plan their investments carefully and keep equipment in good shape. Second, when things go wrong with a piece of equipment, they have a tendency to go very wrong in ways that cost a lot of money and create angry tenants.

Equipment safety has improved over time, but a faulty water tower that goes unnoticed can still cause widespread damage totaling many thousands of dollars. Consequently, the most successful asset managers are often those that are willing to dig into the weeds of equipment management procedures and get things right.

How CRE Tech can affect this pillar: Adding IoT sensors to building equipment can take measurement and verification – the process by which building teams validate their savings projections for a new investment – from an art to a science. These sensors can also detect variations in energy consumption and outputs, alerting engineers when something looks out of the ordinary and keeping small problems from becoming much bigger. Someday soon, IoT monitoring will help us anticipate when equipment will need preventative maintenance or repair.

[an error occurred while processing this directive]These sensors can also help building teams to optimize equipment run schedules so that less energy is wasted, and the energy that does get used is concentrated in low-demand hours whenever possible. We sometimes call this “prescriptive monitoring.” As these tools improve and become more trusted, they will eventually make the leap to controlling run times directly – “prescriptive controls.”

FIFTH PILLAR - ENVIRONMENTAL PERFORMANCE

Finally, there has been considerable innovation around creating indoor environments that are healthy, comfortable and conducive to productivity in the last few years. The “building wellness” movement has been propelled forward by the boom in smart building technology and by new benchmarks like the WELL Standard and Fitwel. Enter environmental performance, the fifth pillar of asset management.

I can’t tell you how exciting it is to be in the smart buildings industry right now. If innovators keep a clear eye on improving the most basic needs of asset managers and building teams, smart building technology has the potential to revolutionize the industry, to the benefit of investors, tenants and everyone working in the field. To make that dream a reality, though, entrepreneurs and their companies will have to keep their focus on empowering the working professionals behind asset operations before everything else.

About the Author

Logan Soya founded Aquicore in 2011 to bring his expertise in data collection and analysis into the commercial building industry. Aquicore now works with leading commercial real estate companies and corporate organizations such as JBG Smith, Facebook, Salesforce, Under Amour and many.

Aquicore is quickly becoming a global standard for real estate operators to deploy meters and sensors and collect real-time information about their building to help reduce operating expenses, streamline bill-back revenue and collection, and improve utility reporting. Our unique platform offering unlocks hidden value-creation opportunities and productivity efficiencies for all stakeholders across the real-estate industry.