Connectivity, Mobility Key CRE Technology Trends, Says Emerging Sectors Panel

PHILADELPHIA, PA—Connectivity and mobility are among the key technological trends affecting the commercial real estate market over the past decade, according to participants in the “Emerging Sectors Affecting Commercial Development” panel at ALM’s GlobeSt.com Philadelphia Conference last week at the Crystal Tea Room. The panel was moderated by Jeffrey Tertel, executive managing director, Newmark Knight Frank.

Panelists told about 300 commercial real estate market participants at the conference that technologies like the “Internet of Things” are making building management and operation considerably more efficient.

“What we’re seeing from the unit user perspective is that the workplace dynamic is completely changing because of that access to connectivity,” says Valerija Beares, first vice president, advisory & transaction services, CBRE. “Before, you would have very traditional offices, then you went through that open office concept, that that really did not do well. Now what you’re seeing is the flexible office concept, so you’re able to work out in the open, pick up, immediately move to a conference room, and there’s no disruption in the technology, which wasn’t the case a couple of years ago.”

On a more limited level, Brandywine Realty Trust has been experimenting with the so-called “liquid space” concept, which provides “a quick way where people can find a small amount of office space that they need in a hurry, and can make the process of actually identifying it and actually documenting a lease or license agreement for that space much quicker than in the traditional way,” says Steve Rush, Brandywine’s vice president, leasing.

“It’s much more for kind of smaller spaces that maybe the landlord has some trouble leasing or wants to focus on other things, and it’s been sitting vacant for a long time,” says Rush. “ We’ve funneled basically all of those spaces into liquid space, so that we can potentially get month to month leases. So, it’s not traditional, but you still pick up a way of gaining some revenue on spaces that otherwise would be hard to lease or use a lot of time that would be better spent on other things.”

Brandywine has created an app platform for the liquid space leases that enables potential tenants to look at virtual floor plans of the spaces and agree to terms with a few clicks, Rush says.

Connecting buildings to Internet monitoring yields benefits in terms of reduced tenant complaints and greater efficiency in managing buildings, says Beares.

“Are conference rooms in use? Do the restrooms need to be cleaned, that on-demand cleaning, so that you’re not getting complaint calls,” she says. “Do the light bulbs need to be changed? What’s the ambient temperature? All of those things are going into the Internet of Things, and driving a lot of change from the back end of office space.”

Technology is changing the way retail space is being leased as well, says Larry Steinberg, chief operating officer, retail group, Rittenhouse Realty Advisors. He pointed to a three-month lease Dietz & Watson signed for a pop-up store on South Street.

“Retailers now are affected by their Internet sales, but they’re also doing brick and mortar sales, and they want to understand what the combination of those two selling methods will yield for them in the way of sales and performance,” Steinberg says. “It’s a very difficult row to hoe for them. You have a big shift in the kind of retail that’s happening, and the stores that are opening—fashion and soft goods sales—have contracted significantly, but they’re being filled up and backfilled by other kinds of retail.”

The changing attitude toward work among younger workers is also having an impact on how developers think about their property portfolios, moderator Tertel pointed out.

“Dad, work is a thing I do, it’s not a place I go,” he said, quoting the millennial son of a colleague responding to criticism from his father, whose concept of work was to arrive in the downtown office where he was employed very early in the morning.

“The mobility of the workforce is causing the end user to re-evaluate exactly how much space they lock into a long term traditional lease, versus how much they just use in a flexible hotel sort of structure,” says Brandywine’s Rush. “One of the ways we’ve really adapted to that is leasing out space to a third party coworking facility.”

Enhanced amenities like fitness centers, pools, and large open areas where employees can congregate are also part of efforts to make office environments more friendly and attractive, he says.