Features | From Pivot Magazine

Your office is about to get cooler. Here’s why

To keep up with splashy start-ups and co-working spaces, corporate landlords are using ‘proptech’ to give Canada’s old workplaces a modern makeover

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Just like financial technology (i.e., fintech) has disrupted the financial sector, proptech, a nascent but rapidly growing industry, is starting to change the way people think about and interact with real estate

Ever since it was founded in 2003, Dream Unlimited has run its business like every other big, boring real estate operation: it buys commercial buildings across Canada, leases out the space, collects rent and that’s about it. It’s certainly a profitable strategy: the Toronto-based real estate investment trust (REIT) made about $120 million in net rental income in the first nine months of 2018, and the global real estate market is worth trillions upon trillions of dollars.

Collecting rent will always be central to any real estate business, but companies like Dream are starting to realize that may not always be enough. In our tech-fuelled future, the traditional way of doing things isn’t going to cut it. “Real estate has been operating the same, without any big innovations for a very long time,” says Pauline Alimchandani, a CPA and Dream’s chief financial officer. “Things are beginning to change.”

In many ways, they already have. Start-ups are ditching rows of cubicles in favour of open-concept offices tricked out with tech. WeWork, the frontrunner in a vast cadre of rapidly expanding co-working spaces, lets tenants book conference rooms and find workspaces on their smartphones. If companies like Dream don’t adapt, their tenants will rent from the REITs that do. “You see how companies like Uber or WeWork can change the landscape so quickly,” says Alimchandani. “We realized that for us to compete with a company like WeWork and to stay relevant to our tenants, we need to offer increasingly better experiences.” 

So, last year, Dream did something most businesses fail to do until it’s too late: it started funding its disrupters. In partnership with Toronto-based Relay Ventures, Dream created Alate Partners, which provides capital to “proptech” companies—that is, innovative technology firms focused on the property sector.

“Proptech was not on the radar when we started,” says Gyekye. “The real estate industry moves slowly.” 

Just like financial technology (i.e., fintech) has disrupted the financial sector, proptech, a nascent but rapidly growing industry, is starting to change the way people think about and interact with real estate, whether that means urban skyscrapers or suburban single-family homes. Enterprising entrepreneurs are building tools to help renters find space faster, collecting data to help companies know where to rent, and trying to cut out real estate agents altogether.

Through Alate, Dream has invested in commercial real estate start-ups like Arrive (formerly ParkWhiz), which helps companies with vehicle fleets find, book and pay for parking, and Lane, a platform that lets workers access building amenities. Through the Lane app, tenants can, for instance, sign up for wellness programs, submit maintenance requests and hear about office events, while their employers and landlords can send out maintenance alerts, monitor parking and create employee handbooks, among other things. Not only will Dream have a stake in these and other proptech companies; it can also offer their services to Dream tenants. 

Though proptech is still young, it’s only a matter of time before it transforms the real estate sector. According to PitchBook, a Seattle-based financial research company, $3 billion in venture capital was poured into North American real estate start-ups in 2018, double the amount that was invested in 2014. PwC found that the North American proptech market was worth US$7.3 billion in 2017, up from US$4.6 billion in 2016, and that number is only going to grow. Dream, for one, plans to be on the crest of the wave. “To be a landlord of choice, we need to have a more personal connection with tenants,” says Alimchandani. “It’s changing from just collecting rent cheques.”

Kofi Gyekye (Photograph by Evaan Kheraj)

Kofi Gyekye, Lane’s 30-year-old founder, is one of the entrepreneurs hoping to make a mark in the proptech business. Since founding his first business at age 22, he’s been in enough corporate buildings around Toronto to know that, by and large, they’re soul-sucking spaces. “The workplace experience is pretty abysmal,” he says.  

But when Gyekye started working on Lane, the term proptech didn’t exist. He had experience building enterprise software, and he saw an opportunity to enhance the tenant experience. So he founded Lane, which is available in a number of buildings that house offices of the Big Four firms. The platform may soon let employees book meeting rooms, obtain guest passes from security, buy gym passes, receive discounts on cafeteria food, locate vacant parking spaces, while companies will be able to see how many people use various rooms, where they spend their working hours and whether they renew their gym passes. That information will help them better tailor the workplace experience to their staff’s needs, says Gyekye. “It streamlines everything.”

“Real estate companies are looking to adopt more tech,” says Cooper. “Things are changing.”

Today, proptech is still a relatively unknown field. “It was not on the radar when we started,” he says. “We’ve seen a few players in the space since, but real estate moves exceedingly slowly as an industry.”

A new accelerator is trying to change that. Lane was one of 10 companies chosen to participate in Colliers International’s first proptech accelerator, which it launched last year with Colorado-based Techstars. Its goal is to turn fledgling proptech start-ups into viable operations. Like Alate, it focuses exclusively on commercial real estate and takes an equity stake in the companies it works with (it wouldn’t say how much).

Colliers is betting that the proptech industry will explode on numerous fronts, transforming building design, data analytics, Internet of Things technology and more. David Bowden, CEO of Colliers International Canada, sees a future where electrical, heating and ventilating systems are entirely automated—“that’s a market in the billions of dollars,” he says—where data can tell companies how its employees are using its spaces, and where retailers know in advance if a store will be successful or not.

Courtney Cooper (Image provided)

One of the companies in the Colliers accelerator, New York’s A Retail Space, uses geo-tracking smartphone software to give retailers precise data on how many people pass specific buildings, and the demographic group to which those passersby belong. That can help companies decide where to set up shop. “Knowing that information makes an investment significantly less risky,” says Bowden.

Other companies in the accelerator include MapYourProperty, a Toronto-based business that helps land developers, urban planners and others conduct feasibility studies, identify zoning issues and conduct environmental assessments. Sweden’s Raybased, meanwhile, creates wireless networks that allow commercial real estate operators to monitor and control electrical, heating, ventilation and lighting. Colliers has also invested in companies that can predict real estate market trends and help university staff and students more easily find housing.

While Gyekye thinks that proptech “is entirely disrupting” the real estate market for the better, Bowden thinks it's complementing it.

All sorts of companies are entering every facet of the proptech space, but Gyekye thinks improving the office experience is going to be one of the industry’s central focuses, especially considering about 47 per cent of Canadian workers are unhappy with their jobs, according to Hays Canada. Part of the reason for that dissatisfaction is because of our offices. Numerous studies have found that open offices stifle collaboration, decrease productivity and increase absenteeism. These spaces aren’t going away, so companies have to find ways to make them better.

The technology to do so exists. Proptech companies are hoping to give those tools a foothold in offices by making them user-friendly. They’re hoping to do for real estate what Uber did for cabs, what Wealthsimple did for investing and what SkipTheDishes did for delivery.

Unlike in those industries, however, it’s the large companies that are driving the change in the real estate world. Banks may be investing millions in digital transformation now, but that’s only because fintech up-and-comers have eaten into their market share. While Gyekye thinks that proptech “is entirely disrupting” the real estate market for the better, Bowden thinks it’s complementing it. “I would say it’s less about disrupting the market and more about assisting it,” he says.

Pauline Alimchandani (Image provided)

Bowden thinks proptech will allow landlords to be more efficient. For instance, if data reveal that the only small meeting room in an open-concept office is constantly being booked, he can add more rooms like it to future properties. The more he can use proptech to help tenants, he says, the better it is for his business.

While Bowden doesn’t think proptech start-ups will make stalwarts like Colliers obsolete, he says creating an accelerator will give his company a clearer view of the future. “It gives us an efficient way of assessing the technology that’s coming forward,” he says. “If we’re assessing 1,000 property technology concepts on an annual basis, we’ll have a great understanding of what the future might look like.” And if some sector-altering technology does come along? If it’s part of the accelerator, Colliers will have a stake in it.  

“We need to have a personal relationship with tenants,” says Alimchandani. “It’s not just collecting cheques.”

In some ways, whether proptech is going to disrupt or compliment companies is besides the point. The staid real estate sector is about to change in dramatic ways, and companies need to decide where they fit in, says Courtney Cooper, Alate’s director of corporate development. “A lot of real estate companies are trying to be innovative and figure out how they want to operate and serve their customers going forward,” she says.

Cooper thinks great results can come from collaboration between industry incumbents and tech companies. The start-ups have the big ideas, the venture capitalists have the funds and the real estate companies can put the technology to use. “Everyone’s trying to figure out how to offer the best value to tenants,” she says. “Real estate companies are looking to adopt more tech, and they’re signalling to tech entrepreneurs that things are changing.”

Of course, some in the industry are apprehensive about the coming change, but Alimchandani for one is excited by the possibilities. Dream may be a real estate operator and developer now, but she thinks it could soon start playing a significant role in how people live and work. She says Dream’s tenants want communities where everything from retail and transit to workplaces and green spaces are integrated through technology. The company has already invested in a platform that will allow tenants to order groceries to their offices or have dry cleaning delivered to the trunk of their car while they work. “It’s easy to see how a platform like this could have multiple uses within an integrated community,” she says.

However proptech plays out, the real estate industry is guaranteed to change significantly over the next decade. “In 10 years, we’ll have a different way of interacting with people in our communities,” says Alimchandani. “Traditional thinking about real estate is becoming obsolete.”