Members of ULI’s Asia Pacific Tech Council discuss the new council’s areas of focus, the interface between technology startups and the real estate industry, the challenges of incorporating rapidly evolving technologies, the promise of big data, and related trends.

Contributing Their Insights:

Phil Kim, managing director, Asia Pacific, Jerde, Hong Kong; founding member, Asia Pacific Tech Council

Ariel Shtarkman, founder, Orca Capital, Hong Kong; founding member, Asia Pacific Tech Council

James Wong, executive director, Hon Kwok Land Investment Company Ltd., Hong Kong; founding member, Asia Pacific Tech Council

What issues will the new council be exploring?

Ariel Shtarkman: The idea is for the council to serve as a platform for real estate practitioners from around the industry to share ideas on technological innovations in real estate, whether to innovate from within or invest in technology startups, and whether we include additional services in our property offerings. We want to be a springboard for Asian startup technology companies or startups from the United States or Europe that want to come into the Asian market. We want to be the first place they come to pitch their ideas.

Phil Kim: The goal is to get smart about the immersion of technology in our slow-moving industries—property development and construction—in a young, adaptive society where people have adopted mobile phones and technology faster than any other region. Four areas in particular come to mind. The first is efficient transactions, including searching for properties, making an offer, buying, selling, obtaining credit and insurance, and closing escrow. The second is making the building process more efficient. There are a thousand parties involved in the building process, from construction to procurement of materials, each with its own system that isn’t connected systemically. The third is enhancing operations, which includes everything from [smart thermostats like] Nest to intelligent building systems. We’re talking about being able to operate the building as if the building talks to you, rather than being a fixed artifact controlled by buttons and levers. And the fourth is about making buildings and property better able to sustainably adapt over time.

James Wong: We are still exploring the topics we want to focus on. But three drivers compelled us to form the council: 5G, drones, and biometrics. Particularly in Hong Kong and Shenzhen, property developers and property managers are being pitched these technologies all the time. For example, drone manufacturers are talking about using drones to make product deliveries, which is simpler to do here in Hong Kong than in the rest of China because of the population densities. Everybody lives vertically here, so it’s easier for drones to hop from building to building. Some technology companies are asking us, when you create a new building, where will the delivery drop-off box be—in front of the lobby or in a sort of Harry Potter–style “owlery” near the top of the building? Also, in Asia there are fewer concerns about privacy than in the West because we live in very crowded environments, so culturally and socially, privacy is less of a concern. As a result, the adoption of biometrics is faster here—so fast that I have a 75-story building that opened less than 12 months ago, and it’s been through three generations of facial recognition software so far.

What helps or hinders technology startups and real estate companies in understanding and working with each other?

Kim: In Asia, fewer dominant companies control a vast majority of properties. Large property companies have fixed advantages [and] can resist the changes that are coming. Yesterday, I was talking to a startup in Hong Kong that has an app that lets property owners rent hotel rooms or offices more efficiently—by the minute, if required. A large, dominant property owner can use traditional sales and marketing tools rather than give up control over those to a startup like this one.

Shtarkman: I’m a major investor in several property technology startups at the moment, and I’ve come to see a disconnect. There are amazing technologies created by startups to solve a particular challenge for real estate companies, but these startups don’t necessarily know what running the real estate business is about. Until recently, real estate developers and property owners didn’t need any innovation to continue having healthy returns. So a technology may be great, but startups don’t necessarily understand how to market it to the real estate community. And real estate companies have to figure out how to calculate the value of a proposed technology very quickly. How will this particular technology improve my bottom line?

What else might stand in the way of the real estate industry adopting technologies?

Wong: Part of my businesses is also in construction, and the construction industry is especially conservative about adopting new technologies. For example, take building information modeling: if the government didn’t force us to use it, we’d never adopt it.

Shtarkman: Real estate is an old-school industry, and so there is often resistance to innovation. A lot of property management processes can be automated in ways that deliver significant cost savings to the owners. However, the people employed in property management may have been with the company many years, and they might not be very familiar with using technology. If they are resistant to change, a new technology will not be successful. So real estate companies should be reeducating all of their employees about technology.

Kim: There is no dominant platform right now for real estate technologies, and people tend to trust brands they know. With the new startups, each property owner seeks out various technologies and experiments to bundle them correctly. The majority of real estate companies are heavily investigating and researching the innovation-driven startups. But the industry as a whole hasn’t pulled the trigger to make one of them the primary platform.

How can real estate developers keep up with the rapid pace of change in technology?

Shtarkman: It is a challenge, because technology is moving very quickly. A lot of times, the solution that was created six months ago is now on version 3.0. So how do we keep track? And how do we make sure that the technology we have in a building and in our portfolio is up to date, without spending a disproportional amount of time on that?

Wong: The good news is that the technology provider often covers the costs. In the case of our building that is now in its third generation of facial recognition software, our total cost was just the labor of putting it in and taking it out and the time to set it up. You can negotiate with the technology vendor to try the system on a trial basis or get an upgrade for free. The low cost of technology is making this a very interesting time to be an asset owner.

What kinds of technologies do you wish more people in the industry were aware of?

Kim: Building information modeling [BIM] is the industry standard, but it isn’t mandated 100 percent yet. It allows you to design in six dimensions—three spatial dimensions plus time/scheduling, cost, and operations—and digitally embed physical and functional attributes in the design. As you change those attributes, you’re instantly updating the information in the model. What’s exciting is that even after the project has been completed, BIM allows you to monitor every element of a building, tied into a technology platform where maintenance, operations, and energy can be very efficiently managed. We can even provide links to the sources for the materials and provide information about whether they are sustainable or handled in a sustainable way. It will allow us to stitch the entire cycle together much more tightly.

Wong: Everyone is talking about 5G. The 5G transmitter’s range is shorter than 4G, so you need a lot more transmitters, but the tradeoff is you have fantastic downloading speeds. But 5G transmitters are the size of microwave ovens—they’re not something you can easily stick underneath a staircase. And there are two competing bandwidths. The Americans favor the millimeter wave, and the rest of the world is using sub-6. So do I have to put two different kinds of transmitters throughout my building? Or do I adopt one over the other?

Shtarkman: I’m interested in anything to do with real estate as a service—anything that property owners and developers and investors can do to enable their buildings to add value to their tenants and to anyone who comes onto the premises. There is a whole category of services that have a physical component and a digital component, whether it’s streamlined food deliveries or storage or smart data and analysis in helping people make decisions.

How is big data useful for the real estate industry?

Wong: There are interesting things happening with big data, but from a property developer point of view, we aren’t sure how to apply the data. Big data requires large data sets, and what we have in Hong Kong in terms of large data sets is financially related, and perhaps some that are demographic. If I want to use big data to figure out the best layout for a coworking space, however, or find out how often visitors come into a coworking space each day and how long they stay, that data is in private pockets that I can’t access. So big data is promising, but it is not at the stage yet where it is ready to use.

Shtarkman: Everyone talks about big data, but in our industry, we’re still not sure what to make of it. Every owner of a building can collect huge amounts of data, whether about the operations of the buildings and how often particular devices operate, or how people move inside the building. The big question is, what do we do with that data? How do we mine it, and what does it offer to owners to improve the operation of the building and either increase rents or decrease costs? There are companies creating technology solutions for managing the building in a more energy-efficient way, and that is one area that has an opportunity to capture the hearts and minds of real estate stakeholders.

What other trends do you see in the interface of tech and real estate?

Shtarkman: I believe real estate companies will have to become technology companies, just as banks are. Take J.P. Morgan, for example, which offers traditional banking services. The biggest item on their expense list is technology. They innovate from within, they acquire robot financial advisers, and they are becoming a technology company. Most banking operations that used to be done at a bank can now be done online or using a smartphone app. But for the real estate industry, this kind of transition will require a big culture change. It will require establishing in-house technology teams with people who understand both technology and real estate.

Kim: Buildings are designed to last 50 to 100 years. But in practice, they may last 30 years or less, and then are sold and rebuilt. In the future, the cycle will be even faster. There is so much change in users’ desires. Younger professionals aren’t thinking about working in a corporation for 30 or 40 years. The constant change in what they see and in the way they work means that traditional office providers have to offer more adaptable spaces. Instead of thinking about a building as a fixed asset, technologies allow us to change the uses and adapt. We may be creating buildings with prefabricated or cellular structures—well designed, well detailed, with good material choices that are sustainable—that can be stacked in different configurations for evolving uses that we cannot predict today.

Read more on: Urban Land Magazine