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PropTech Asset Management > Blog > Real Estate Asset Management

In this blog we are looking at the management and maintenance of a property starting from asset management, which is focusing on commercial properties.

We are comparing the old way of working within asset management and compare it with the new technologies, which have already entered the market in order to reduce the workload of the asset manager and look at firms, which are providing transparency and improved communication methods during the operational process.

The main aim of real estate asset management firms is to increase and optimise the value of the building and to manage and to maximise the investment returns. Throughout the entire life-cycle of the real estate management they anticipate potential risk by analysing data and forecasts profitability for the owners.

The investors or owners, who can be small family offices, large insurance companies or pension funds hire asset managers to ensure that voids, arrears, compliance issues, repairs and maintenance are at lowest levels. Whereas, rental income is at highest levels. By analysing the market, data and reports they are able to implement the best possible strategy for the performance of the related portfolio. Often the asset manager hires a property manager to conduct daily operational tasks, while he is focusing on financial matters. This also means deploying the capital of the investor in order to generate the expected return. Hence, the asset manager either buys a portfolio of buildings or builds up a portfolio of assets.

Afterwards, we are looking at property managers and their daily work within the commercial real estate sector and for private landlords. We evaluate how technology is improving communication and transparency for administration tasks. We are then looking into technical and digital ways to improve their leasing process from the landlord’s view and the renting process from the tenant’s view.

Finally, we are looking into facility management and all the changes, which are coming through the implementation of sensors in the building, which become a smart building.

Asset management

As diversification plays an important part in risk management, asset managers have to mitigate risk using different real estate asset classes or geographical asset distribution. This could mean they cannot be close to their properties all the time and must rely on the local property manager or facility manager. Therefore, it is crucial that transparency is provided, which means the owner or asset manager knows the status of their buildings, any upcoming and completed repairs, and potential changes of tenants. This was mainly done through property managers in the past, but now can be accomplished through technology. An asset manager can draw data from sensors in the building that give them information about their technical status. Digital reporting systems allow every task accomplished by the property manager to be transparently visible to all stakeholders. Property types can be differentiated into the common ones: office, industrial and logistics, retail, and residential. The following assets are emerging as property types from a niche market: hospitality and smart hotels, self-storage, student housing, and senior housing. As asset managers generally work on funds, which have a certain strategy, this can be divided into:

  • Core
  • Core-plus
  • Value-add
  • Opportunistic

The asset manager’s performance

The asset manager is not simply paid at a fixed rate, but also has the owners and investors looking at his performance. This means, the higher the value of the assets under management, the higher will be the fees the asset manager is able to charge. Hence, the asset manager is incentivized to increase the value of the building and the performance of the portfolio by reducing his own cost and time. This can be different for the property or facility manager, who might not receive a bonus according to the performance of the building, being paid according to the completion of a task at a fixed rate or on an hourly basis.

In a nutshell, asset managers in the past were forwarding the daily operational tasks and heavily relying on the property manager and the facility manager. Consequently, a good asset manager was the one who selected the best property manager and the best facility manager.

Interoperable systems increase efficiency

New technology now makes it possible for the asset manager to be virtually closer to the building and have much more insight using data. An asset manager who needs to forecast rental income, capital expenditure (CAPEX), and operational expenditure (OPEX) previously had to rely on general market statistics from the past to predict the future. With the use of sensors, it is possible to obtain real-time data for the building. This allows an asset manager to determine, for example, the consumption of energy by a specific floor, room, or even tenant. Alternatively, it can measure the longevity of an elevator, which might require replacement in the next two years. This data is then accessible from everywhere in the world at any time, and the asset manager can create a budget based on his forecast.

Furthermore, the asset manager must transparently show the owner or investor all the details of the property and portfolio. Technology enables the use of information from the property manager’s system, which is compatible with the system from the asset manager. Hence, different digital systems are now interoperable.

Efficiency can be created for true scalability, which means the asset manager can use one system and one standardized algorithm and apply it to different buildings to receive the same kind of reporting, if the same tasks and strategies have been standardized and implemented once a call-to-action scenario is activated. This could be applied to any changes, such as a tenant moving out and a new tenant moving in.

It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.

Robert Kiyosaki
Facility Management

Smart Buildings

The facility management sector is one of the fastest growing and changing environments within the real estate world, due to the technology emerging in the Internet of things (IoT). IoT devices and sensors enable cities and buildings to become smart. A smart building not only collects and provides data from its facilities, it has an automated system that enables different facilities to communicate with each other. The greatest improvement is the advancement of the sensor technology. This technology is even present in everyday devices, such as simple smart phones, headsets, carbon monoxide detectors, thermostats, smart watches, and cars. With the ability to transfer data and communicate, it is now possible to utilize the information gathered by the sensor and communicate back to take actions. For example, a simple electric thermostat senses an increase in temperature, which transfers this information to a central system, which activates the air conditioner. Those sensors are often not even bigger than a small microchip, and can be integrated in building components or products separately and simply installed on the wall, in a component, at a desk, or even a chair.

In the past, facility managers were responsible for repairs and maintenance and a large portion of the work was reactive. This means facility managers informed the property manager that a building might require some repair work and waited for confirmation to commission the work. Preventive maintenance was hardly possible due to the waiting time until repair work was approved. Due to such a long waiting time, facilities or components of a building could not be repaired before they completely broke down. This caused higher cost and consequently a lower return for the asset manager.

By using sensors and digital platforms that provide information about the condition of the building and its components, it is possible for the asset manager and the property manager to see data updating the condition. This means that, before the facility manager reports something, the property manager and the asset manager already have this information on the screen. Furthermore, it is not a subjective opinion of the facility manager or the contractor, instead it is an objective capture of the situation and condition of the building. It is therefore possible to react immediately and approve funds for maintenance work before the facility or system breaks down completely. The cost for maintenance can be much lower than an entire replacement.

Repairs and maintenance

While managing an entire portfolio, it is now possible to compare buildings and their expected ongoing cost. Digital platforms using big data are able to predict the operational expenditures and capital expenditure requirements of individual buildings. This was not that easy in the past, as cost that had accrued was generalized into one category, such as repairs and maintenance. With this new technology, it is now possible to determine where, when, and how a defect happened. With this information, it is possible to analyze the cause and install a preventive mechanism to avoid further defects.

For the development of new buildings, Building Information Modelling (BIM) should be used and the information should be passed on to the facility manager. He is able to use the data for the day-to-day operations. This means ongoing assessments of a number of components which are not visible without destructive measurements. For instance, it can be difficult to find the leak of a valve installed in between walls. Furthermore, it can be also very difficult to find the valve itself. With a 3D model of the building, it is possible to direct the contractor to the exact location of the component that caused the defect in order to fix it.

Sensors and Internet of Things (IoT)

Even if the building doesn’t have a three-dimensional model, it is still possible to use sensors to optimize the usage of the facilities of the building. Sensors can be installed in a number of devices, such as windows, lights, walls, desks, chairs, et cetera. The application of IoT capabilities is endless. The sensors give a command to execute, if a condition has been met. The combination of different sensors interacting with each other in a building can already be considered as a property with an integrated building management system (BMS). It is a controlling system, which regulates the HVAC, lighting, and fire and security system of the building independently. This could mean that you are walking into a room and the light goes on because the sensor detects movement in the room.

Some companies are focusing on combining components to provide a solution for a certain problem. Other companies are focusing solely on one individual component of the facility of the building. An example could be a firm optimizing the usage and maintenance of elevators only. Another firm is focusing only on the sensors in a window, which detects temperature, humidity, and light in order to control the HVAC system or blinds. And there are companies focusing just on the HVAC system to optimize energy consumption. There are also firms with the sole focus of the air quality within a building.

Smart buildings

However, sensors do not necessarily automatically add up to a smart building. Buildings become really smart once they get a brain. This means the individual components, facilities, and the corresponding sensors need to talk and communicate with each other and are interoperable. For example, this could mean that if someone walks into a meeting room, the lighting, the projector, and heating or cooling goes on and informs other facilities in the building that this meeting room is now occupied. It could then inform the waiting client at reception that his meeting can start and direct him to the meeting room with indoor navigation through augmented reality, where the employee of the firm is already waiting for him. At the same time, it informs the other employees of the company that this particular meeting room is occupied. The Cube in Berlin is a building which will have those components communicating with each other.

Furthermore, there are companies that are not using sensors at all. Instead they create data to analyze and optimize the building by using given information, such as the energy bill or the given infrastructure, such as the strengths of the wi-fi signal. Firms which are able to utilize the data are the key to the future, as machine learning is able to automate and optimize the utilization.

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