Vincent E. Pacheco Blog: The Smart Cities Movement Is Reshaping Commercial Real Estate

In 2014, 54% of the world’s population lived in cities. A UN report predicted that 66% of people in the world will live in cities by 2050. As cities grow at a rapid pace, they face an increasing number of problems.

For instance, cities like New York City, Los Angeles, and Austin deal with large amounts of traffic-fueled congestion. Other urban areas experience high levels of pollution and waste that grows in line with an ever-increasing population. The speedy population growth in places like San Francisco has lead to housing shortages. Insufficient housing has caused rent and house prices to skyrocket while leaving many people displaces or homeless.

On the whole, growth in urban populations is a positive development. But, the problems created by this growth must be addressed. Startups are solving some of these problems and transforming cities in the process.

Founders are ushering in a new standard for smart cities, using real-time sensors, advanced logistical software, and innovative citizen engagement tools. As cities continue to adopt smart technologies, the industries at the heart of city life will fundamentally change as well.

Commercial real estate (CRE) is one industry that will transform as a result of the rise of smart cities. CRE developers and managers should see increased efficiency and decreased costs as entrepreneurs introduce new smart cities technologies. Here are a few ways that CRE has already evolved with the rise of smart city technology.

Startups making commercial real estate safer, cleaner, and more pleasant

A variety of smart cities startups have created solutions that increase public safety in urban areas. One example is the startup SkySafe, which has made a product that can take control of rogue drones and safely land them, making the skies, and the cities beneath them, a lot safer.

Increased public safety throughout cities indirectly impacts CRE because safer neighborhoods command higher real estate prices. This means that as technology continues to enhance security in cities, CRE owners will see increased revenues and profits without any direct investment.

Waste management startups have also already begun to transform the business of CRE. Ecube Labs creates data-driven waste management solutions. The Clean CUBE, which is one product offered by Ecube Labs, is a smart solar-powered trash compactor bin that compresses garbage so it can hold up to 8X more waste than standard trash bins.

Owners and managers of commercial real estate properties such as event spaces, airports, and malls have implemented products like the Clean CUBE as a way to decrease costs. Even though waste management isn’t a sexy industry, applying a smart cities paradigm to it has helped increase operating efficiency for both municipalities and CRE.

Other smart cities products specifically designed for CRE have had a transformative impact on the industry. For instance, Lane has created a product that makes it easy for any CRE building to make a mobile app for its tenants. Some buildings that use Lane have been able to grow event and program participation from 2% to 20% of tenants. Other Lane customers have increased awareness of building programs from 5% to 40% of tenants. As CRE property managers have increased tenant engagement with Lane, they have seen decreased turnover.

As you can see, products like SkySafe, Ecube Labs, and Lane that bring smart cities tech to CRE have either directly or indirectly helped the industry in a number of ways. As you can see in this conversation between Strategic Property Partners CEO Jeff Vinik and Dreamit CEO Avi Savar (Disclosure: The author of this post works for Dreamit), the beneficial effects of smart cities tech on CRE should continue to compound over the next several years.

Future Benefits of Smart Cities on Commercial Real Estate

Thanks to smart cities tech, commercial real estate has already experienced an abundance of benefits. However, the smart cities industry is still young. This means that as smart cities tech grows exponentially over the next 10 to 20 years, the revenues and profits gained by CRE companies should also increase substantially.

Some of the benefits that smart cities tech could provide to CRE in the future are:

Decreased damage and repair costs. When property damage is detected quickly, the cost to repair it decreases. Eventually, smart sensors will be able to automatically identify damaged infrastructure in CRE properties and alert the building manager.
Decreased utility expenses. Smart appliances and environment regulation systems are already able to decrease some utility costs. For example, the Nest Thermostat learns about what you like and when you like it in terms of room temperatures. That said, there is still plenty of room for innovation when it comes to decreasing the electricity, oil, gas, and water expenses involved with owning or running a CRE property.

How Commercial Real Estate Companies Can Participate in The Smart Cities Boom

If you’ve read this far, you should have a better understanding of how smart cities tech will help commercial real estate companies be more efficient and profitable. This means that if you work for a CRE firm or manage CRE properties, you’re probably ready to jump on the smart cities train to profits. But, how should you hop on that train? Well, a few of the ways your CRE firm can join the smart cities trend include:

Placing smart technologies throughout its buildings. You can reap the benefits of smart cities tech by implementing it in your CRE buildings. While these implementations may require some up-front investment, they’ll likely lead to increased revenue and/or decreased costs.
Investing in smart cities startups. There are a number of smart cities startups looking to raise funding from strategic partners. If you want to own pieces of companies that could define the future of cities, look for them on places like AngelList, Gust, and FundersClub. Also, consider joining the Dreamit investor network (Disclosure: The author of this post works for Dreamit) so you have an opportunity to invest in the best smart cities companies. As an investor in a smart cities startup, you may be able to gain early access to their technology. You’ll also potentially receive enormous financial returns if the company succeeds.
Encouraging your local city or municipal government to adopt smart cities tech. If local governments receive pressure from businesses to implement smart cities solutions, they will probably do so more quickly. Get together with your friends who own local businesses and form a coalition of companies that ask your government to invest in smart cities initiatives.

Wrapping things up

In this article you’ve learned about how smart cities tech has already had profound effects on the commercial real estate industry. You’ve also gained a better understanding of the ways in which smart cities tech might impact CRE in the future. Finally, you’ve heard a few steps your CRE firm can take to participate in the smart cities revolution.

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