SAN FRANCISCO—Diane Vrkic of Waypoint believes that a 1% decrease across all US commercial real estate operating expenses can create more than $105 billion in additional commercial real estate value. The founder/CEO of the expense and analytics platform discussed this concept, along with other ways of improving operational efficiencies, in this exclusive.

GlobeSt.com: Why should we be paying more attention to the effectiveness of commercial real estate asset and property management?

Vrkic: The commercial real estate market has rebounded from the financial crisis to reach peak valuations again and there continues to be high competition for deals. As returns potentially become compressed because of high transaction prices, additional value can be driven into assets by looking beyond traditional revenue streams and capital expenditure improvement projects. By analyzing and enabling the identification of operational efficiencies within assets and across portfolios, significant value can be realized, leading to improved NOI. There are many technology solutions and advancements that are now available to owners and managers to help real estate decision makers better optimize asset performance and realize this untapped value opportunity.

GlobeSt.com: Commercial real estate is in the midst of a metamorphosis. Explain how machine learning and smart technology are a part of this change.

Vrkic: Real estate by its very nature is a bricks and mortar business. Yet the bricks that make up the foundation of real estate investing and real estate management circle around information—information gathering, analysis and reporting. We are entering a new age where data is becoming more easily accessible and relevant. It is becoming relevant because applications are converting data into intelligence that can be used to enable the investing and management processes inherent within our industry. We are seeing improved analytics technologies and Internet of Things/IoT become a much more relevant force in the industry. By embracing the use of smart technology and machine learning, the business of real estate as well as the assets themselves will become more efficient. It is quickly becoming the norm for owners and asset managers to gather data and improve the functionality of everything from the amount of electricity we are using to the traffic patterns around cities—both of which have an enormous impact on the functionality of commercial real estate. A great example of this is the 18 million square feet Hudson Yards megaproject in New York City which incorporates heat mapping to track crowd size and energy usage, mobile apps to collect user health data and a microgrid to show energy savings.

GlobeSt.com: How much money is left on the table in CRE due to inefficient operations?

Vrkic: A tremendous amount. Right now, we estimate the US spends roughly $650 billion on commercial real estate operating expenses. A small 1% decrease in operating expenses equates to $105 billion in additional asset value created (assuming 6.23% cap rate). Obviously, the lower the cap rate, the greater the value created. This shows there is enormous financial upside and an opportunity to unlock significant value by focusing on improving operational efficiency which is a big part of Waypoint's focus. We offer a technology solution that takes a very manual time-consuming process and automates it so teams can now access real-time financial insights needed to maximize returns.

GlobeSt.com: What are your predictions for the overall economy in 2018 and its effects on commercial real estate, specifically how will innovation and technology shape the trajectory?

Vrkic: Taking into account recent projections from the ULI Real Estate Consensus Forecast, it's looking like commercial real estate will see continued moderate growth, alongside a growing GDP. If owners can embrace technology solutions for building operations, such as expense and analytics platforms and sensor data, they will begin to see savings resulting in massive additional asset value. On top of savings, technology advancements—such as cloud computing, analytics and IoT—will influence how properties are constructed, managed, sold and leased.

GlobeSt.com: Can you talk about the CRE startup culture in San Francisco?

Vrkic: San Francisco has gone from a conventional banking and financial hub to today's technology capital. High-class tech tenants are located throughout the city, some of which are a part of the growing CRE startup space. At Waypoint, we're lucky to be in good company here and we thrive on being a part of such an innovative community. A few fellow CRE startups that come to mind include Juniper Square—real estate investment software that streamlines fundraising, investment administration and investor reporting; Deal Path—a deal management and collaboration platform for commercial property investment and development teams; and Carbon Lighthouse—an energy service that engineers software and strategies to secure returns for owners on existing equipment while also cutting carbon emissions.

Instant Insights /

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