“We are going to be the Microsoft of CRE!”
Scores of PropTech companies have come and gone, believing they had found the magic solution to becoming the operating system of the office. Usually, the founders of these firms come from outside of real estate, and it takes them 2 to 7 years to figure out that real estate does not operate in a remotely similar fashion to IT, finance, HR, corporate ops, or any other corporate function. By that time, other PropTech companies have caught up to their technology and the original company is only just beginning their pivot to fit into the real landscape of how real estate works.
One of the first questions I ask to new PropTech leaders is how long they’ve been in the real estate space. If the answer is a confident less than two years, they still have a lot of learning left to do. If their answer is a deep sigh and a chuckle, they get why I’m asking the question and have been around long enough to get why the question matters.
Real estate’s ecosystem is odd. The money flows in unusual ways, and corporate budgets are structured very differently from any other corporate function. Couple that with the fact that real estate, workplace, and facility teams – the groups that need to cooperate closely to make anything work – are too often separated, and you have a recipe for an industry that doesn’t have a clear path forward, usually. The closest thing there is to a common direction would be the big service providers, and even they try so hard to differentiate themselves from each other that it can be hard to see a clear long-term path.
This brings us back around to whether CRE and PropTech are winner-take-all industries. No. Not a chance. There is too much existing fragmentation in how things are done for a single solution to have a chance of dominating the industry. Even something as “simple” as desk booking is too complicated for a single solution to fit the needs of every company. The operational realities of a workplace encompass so many possible variables and processes that it takes a lot to make any tool work well.
More than any other function, real estate is responsible for dealing with people and their behaviors. Other functions have a greater ability to set restrictions and boundaries on how employees interact with them. IT can digitally define those interactions. HR can set policies for how discussions and problems are dealt with. But in real estate, employees often see the workplace as their domain. And because that domain is physical, most boundaries are set through cultural norms rather than firm strictures. It is incredibly easy for an employee to ignore the desk booking tool and sit down at any desk they like. Sure, they may have to deal with someone unhappy that they took their desk, but they can pretty easily just move down a space or two.
Building a PropTech solution that can universally work within this is the height of hubris. Instead, good solutions introduce new norms that others can adapt and build on. This broadens the opportunities for everyone. Introducing a desk booking tool that reframes the model and gets a selection of new companies on board with the new approach opens doors for even more companies to consider similar approaches. This is a “rising tide lifts all boats” industry right now.
Maybe in 10 or 20 or 50 years this will change, but I doubt it. Real estate is too human-oriented for clean solutions (unless working from company owned or leased sites becomes a thing of the past).