A two-way digital strategy

Hadjiev is leading Allianz Real Estate’s Building Signature Program that secures collection, analysis and implementation of operational and financial data to provide meaningful insights to all asset managers.

An implementation example of the program is Castellana 200, a mixed-use office and retail asset in Madrid, Spain. Early in 2022, the building became the first asset in Spain to integrate the Building Signature Program. Currently in Europe, over 700,000 sq m office space is being upgraded under the program to achieve a prime level of smart and sustainable profile.

In light of this, I asked Hadjiev: What is behind your digital strategy?

Hadjiev: Our digital strategy is structured around two main areas: One is to keep track of global trends. The second is to implement the Building Signature Program that is adding value to the lifecycle of tenants and buildings.

The program is structured around four pillars. The first is ESG, which focuses on how to improve the environmental features of the building with technology. The second is the user experience. This is where our work with Spaceflow fits as we include the tenants into the digital roadmap with a tenant app. The third is cybersecurity, using digital tools to make our building operations more cyber resilient, and the last one is collecting data. Keeping track of digital transformation trends helps us make sure that we’re aware of where real estate goes, and working with the program helps us elevate the operations.

Allianz has deployed Spaceflow’s tenant app at The ICON, Vienna

It is important to mention that when we are deploying the smart building program in the assets, we communicate this with the tenants. We make sure that we are adjusting and adapting the smart building program to the tenants’ needs because it is not one-size-fits-all. We are trying to make sure that the building is delivering what tenants want. For example, some tenants want to make sure that they track the well-being of their employees. So we make sure that we provide the technology to enable that. They are also interested in entertaining their communities, so we look into integrating the best community management solutions, for example, a tenant app. We have a global set of solutions, but we give answers locally.

What makes your digital strategy stand out from other asset management companies?

We started implementing digital solutions almost three years ago. This gives us feedback on things that we did and helped us improve what we’re doing today. We’re very risk-averse. To test a solution, we need to get approval from so many specialists. Security, legal, data privacy, compliance… Still, we never stop testing. We do it in a very conservative way, but we still test a lot of things and work on improvements to make results outstanding.

We have built partnerships with more than 40 companies in three years’ time. This is huge! Even companies that are less risk-averse have fewer solution partners. And we see that with so many of them, we’re scaling up. We have the capacity to correctly assess, and take the right partners in the ecosystem, and move forward with them.

What to do – and what not to do – in digital transformation

As an asset manager with so many potential proptech partners, how do you make sure that you choose the correct ones?

We are a global asset manager, and we have people in multiple locations across the globe. By having these people on the ground, we can systematically check local solutions, we can compare them with others across continents and countries, and we can then scale the ones that are meaningful. Obviously, we pay attention to not giving too much to single, small, local players. Though, this is when innovation is happening as you build something new. This is a hybrid decision about the value created and risks taken with the solution company that is very good in one market, yet they don’t have the capacity to scale into another market.

Also, when you work in digital and smart solutions, your scaling capabilities are higher than building something tangible and physical in a building. Digital solutions are much easier to scale.

We know that some proptech companies come and disappear very quickly. How can you make sure that your partners will exist in the future?

We have proptech partners that we have worked with for several years now. We are extremely careful with how we select them. If your partnership becomes stable over time and, most crucially, you observe that this solution is adding value to your tenants, it will probably sustain. These are the most important things that need to be taken into account while deploying a technology solution.

What are the common mistakes that asset managers make in digital transformation?

One common mistake is adding technology to your portfolio just because you see that others are doing it, too. I think there is some sort of FOMO in the market that others are doing this, so I need to do it, too. If you don’t fully understand why you are bringing a new solution to your operations, don’t bring that solution on board.

We identify very specific use cases before we onboard technology solutions, and then we deploy the solutions that address those use cases. Technology is an enhancer of a smart decision taken by the one who needs it, to answer a specific need. One big issue we observe in real estate is technology being used without knowing how to use that. Though, sometimes we also do that, but only in one building with one solution, because we want to test it. When we go into scaling, we make sure that the tests have worked well and that this solution is really answering some problem or need.

Let’s ask the question vice versa. What are the common mistakes that proptechs make in helping real estate in digital transformation?

Sometimes, proptechs develop a product before assessing thoroughly whether there is a need for that product. There are some products that are intellectually very interesting, but there is no use case for them in the industry. If the solution is not applicable, they cannot make money out of that.

Lastly, what is not being discussed enough in innovation in real estate?

The topics that are being discussed right now are the right topics. What needs to be discussed more is the tangible elements of executing innovation. Everyone is very good at conceptualising, when it comes to execution, the entire industry is weak because the topics are very new.

What we don’t discuss enough is the way we execute technology and how we scale up innovation. We need to change the strategy and go deep into the topics that are important now, rather than topics that will be the highlight in 10 years. We just don’t exchange enough experience about the things that are in execution and in the immediate pipeline, such as user experience and sustainability.

• This interview was carried out by Spaceflow
• Melis Karabulut is marketing manager at Spaceflow

The post How Allianz Real Estate makes technology decisions appeared first on Place North West.

The Knowsley unit will be used as a production studio for film, TV and video production both by Zút and other production companies looking to film in the Liverpool area. 

Zút’s lease includes a break clause after five years. The unit also features 80 parking spaces, two ancillary offices, and dual-level access loading doors. 

Mark Hancock, managing director at Zút, said the acquisition of the new studio comes following the company’s “significant growth”. 

“Acquiring this new studio space will be a great asset for us, providing a perfect setting for our larger commissions, as well as other production companies looking to film in the area. 

“Liverpool is more popular than ever as a filming destination and brings with it a lot of investment in local ancillary services, so it will be great to see some of this investment coming to Knowsley, being from the area.” 

Zút’s clients include Liverpool FC, Nike, Betfred, and Amazon. 

JLL advised Eric Wright on the deal.  

Ruth Leighton, leasing director at JLL, said: “Overbrook Lane offers excellent space, bolstered by its strong location and accessibility. We’ve seen robust demand for spaces of this classification, and we are pleased to have acted Eric Wright Group on this successful deal.” 

The Zút deal has been in the pipeline for several months. Eric Wright Group lodged plans with Knowsley Council last autumn requesting to change the use of the unit from general industrial to a film studio. 

The facility will include a green screen area and a photography studio, according to planning documents. 

Carol Stollery, group portfolio manager at Eric Wright Group, added: “Zut is a welcome addition to our growing tenant portfolio. It is extremely exciting and dynamic business and we are delighted that Overbrook Lane is to become a hub for creative activity, which will undoubtedly benefit both Knowsley and the wider region.” 

The post Film production firm takes space in Knowsley  appeared first on Place North West.

Venture capital has long favoured software. In 2021, VCs invested $290bn worldwide into software companies, according to data from Pitchbook. Hardware, meanwhile, attracted just $13bn.

There are, of course, many reasons for that. Hardware startups are more expensive to get off the ground, typically requiring millions of dollars to get a prototype produced before product market fit is validated. Software companies also scale much more easily than hardware companies since they don’t require manufacturing or supply chains. 

Adding to the complexity, hardware companies come with working capital costs from inventory and work-in-process materials, which often have to be funded with expensive venture dollars during the early stages of the business. On top of all that, software models usually have higher margins and lend themselves more easily to recurring revenues, which means that investors can expect a higher multiple at exit.

SFV’s portfolio already includes a number of software companies for exactly these reasons. So why are we advocating for more attention to be paid to hardware?

Funding the missing piece

While venture investors may want everything to be solvable with software, real estate is an industry that is fundamentally physical in nature – and therein lies the tension for investors.  

While there is a great deal left to achieve by deploying IoT sensors, leveraging AI driven insights and digitising workflows, there is a limit to what we can achieve with just software. Software won’t fix poorly insulated walls, nor can it eliminate the embodied carbon of a new structure.

Real estate currently accounts for approximately 40% of global greenhouse gas emissions. Making meaningful and substantial reductions to this figure (in the short window of time we have left) will require dramatic changes to the way buildings are constructed and operated.

Software won’t fix poorly insulated walls, nor can it eliminate the embodied carbon of a new structure.

Ultimately there is no path to achieving the sustainability leap that the real estate industry needs without physical changes to everything from heating & cooling systems to building envelopes to construction materials.

Progress in these areas has been limited to date, in large part because it is fundamentally difficult to decarbonise concrete or retrofit HVAC systems in an economical fashion (the £35bn estimate for decarbonising public buildings in the UK has been described as “the tip of the iceberg”). But this challenge, with its huge scope and daunting obstacles, is the perfect problem for venture capital to take on. 

When identifying the most meaningful opportunities for innovation in decarbonising buildings, let’s not forget about hardware. That’s where the real step change will be.

Case study: Gradient

Sustainable Future Ventures recently announced an investment in Gradient’s $18m Series A.

What does it do? Gradient’s window heat pumps allow users to access the efficient heating and cooling of a heat pump in a beautiful, affordable, and easy-to-install product.  

How does it work? By designing a self-installable heat pump, Gradient has eliminated the most expensive part of installing a heat pump – the labour. This also mitigates skilled labour shortages, disruption to tenants and the need for electrical upgrades.

Why did we invest? There are 25 million multifamily and hotel units in the United States, and there are no good retrofit options available to them. Meanwhile, market signals like this $24m contract awarded to Gradient suggest that the multifamily market is ready to adopt fit-for-purpose heat pumps.

Find out more

Hardware will shape the future

Let’s be clear. Hardware is hard to get right. Long R&D cycles, high capital requirements, large teams and dependence on supply chains require patience and a healthy appetite for risk.  

But because nailing all of this is hard, companies who do pull it off can find themselves in the enviable position of owning a market with less risk of commoditisation. Fewer competitors will have taken the same risks and overcome the same hurdles. 

Under growing regulatory pressure, real estate is calling out for innovations that will make targeting net zero a realistic, financially viable ambition. Hardware that offers a green, yet affordable, alternative to the carbon-intensive building blocks of the physical world will inevitably fill that gap.

Ultimately, we expect the most impactful companies – for investor returns, the built environment and the planet – to be those that successfully combine the differentiation of physical hardware with elements of software scalability. 

Conan Lauterpacht is the founding partner and Reid Carroll is an investor at Sustainable Future Ventures.

The post Hardware investment is vital for decarbonising real estate appeared first on Place North West.

Last year proved that occupancy in office buildings will hardly return to pre-pandemic levels, with the rise of work from home, work from anywhere and freelancing. Accordingly, the future of office buildings remains blurry on a global scale.

In the post-pandemic world, however, this doesn’t mean that we’re living in an ‘office is dead’ reality. The old ways of operating office space are long gone – as customers want to pay for not only the office space, but for the experience and convenience it brings with valuable amenities and digital enablers. This can be observed in the rise of Class A office values in New York, commanding $50 (15%) more per square foot than before the pandemic. The price of Class B buildings, meanwhile, has risen just 6% according to Deloitte.

But with just 47% of offices occupied across the US, valuations have nevertheless fallen. Given that property taxes are the biggest source of revenue for a city like New York, Manhattan saw tax revenue fall 11% last year to $5.24bn. More worryingly, the city’s buildings also risk being stranded for not complying with green standards set to be reached by 2030.

Similar trends are observed in other highly commercial cities such as San Francisco, Portland and Chicago, where the level of post-pandemic recovery in business areas fluctuates between 30-40%.

Repurposing and refurbishing office spaces as residential units is definitely a solution, but achieving that by complying with sustainability standards is more difficult than anticipated. This would require major reconstruction, including many more bathrooms and kitchens, and, therefore, new plumbing, electrical and other vital systems, causing even higher costs. As an example, only 3% of New York City office stock is viable for conversion.

But it is possible. In 2022, among all the European office assets that were transformed to serve a new purpose, 64% became residential units.

Over the next five years, this figure is expected to remain above 50%, with 40% expected to be mixed-used assets and the rest logistics and retail, with Germany and France ahead of the curve compared to the rest of the continent.

What concerns the commercial market most in terms of financial performance is sustained high inflation and workforce management. Accordingly, 55% of US-based commercial real estate leaders expect a further recession in 2023, which will make them focus on strategic acquisitions or maintaining a steady state. Climate change, on the other hand, is viewed as the least important challenge related to financial performance.

Unlike in the US, climate change in the commercial real estate sector is seen as the biggest challenge by European leaders, and repurposing buildings has become a bigger trend than in the US despite the costs. As a European head of asset management in PwC’s Emerging Trends in Real Estate Europe 2023 Report says: “There is no single discussion you will have with any peer in real estate that does not end up referencing ESG and decarbonisation.”

• Melis Karabulut is marketing manager at Spaceflow

The post How hybrid work will reshape office investment appeared first on Place North West.

This shows that a big element of the challenge of retrofit is not just the physical interventions that need to be made but also the pace required. And to deliver at pace, we need people – a lot of them – and that means we are going to need to invest in skills development.

Learn how industry leaders approach sustainable retrofits at PlaceTech’s workshop-style event, ESG: The Retrofit Playbook on 23 February, sponsored by Social and Mills and Reeve.

There is a lot of commentary about a lack of skilled people to deliver on existing building commitments, so delivering retrofit at this scale is going to require a long-term strategic plan for the sector and supporting industries to get their head around.

And it is not just retrofit that will provide challenge and change to the construction industry. The Future Homes Standard, which comes in to force in 2025, will change how homes are built, and coupled with the increased popularity of offsite construction, you can see big changes coming to people working in the sector.

Opportunity to upskill

Low carbon technology requires new knowledge. One of the biggest – if not the biggest – challenges we face as a country in the net zero transition is how we are going to decarbonise our heating. Considered opinion is that we move away from fossil fuel-based heating – gas – towards more electrified methods of heating, including heat pumps. Presently there are more than a million registered gas installers in the UK and potentially up to 5,000 heat pump installers.

You can look at this in two ways. Firstly, this is a big opportunity to retrain an existing workforce, but it’s also a massive opportunity to bring new people into the sector. When you consider that government targets are for 600,000 heat pumps to be installed per annum from 2028, you can see this is a market that will have longevity, so a people and skills plan is needed to deliver it.

Also, the role of the installer in helping consumers in the retrofit journey cannot be overestimated. There is a lot of trust in installers, and the more that understand the new technology and its benefits for the home, the quicker the pace of change can become.

Trustworthy data is key

But it is also not just trade skills that are needed. To deliver retrofit effectively as housing associations, developers or large landlords you need to understand your property portfolio completely. That means you need data you can trust to make the right decisions.

We have an eclectic mix of property types in the UK, and that means interventions are likely to vary in individual properties. You need to have that holistic understanding to avoid costly and unnecessary mistakes.

To deliver retrofit we will need a broad mix of skills. We will need data analysts; we will need software engineers; we will need retrofit coordinators; and we will need communicators, amongst other roles, to explain what is happening, why it is happening and the changes people will have to make.

‘Jobs of tomorrow’

This is effectively a completely new sector. These will be part of the “jobs of tomorrow” and, therefore, it is why the younger generation need to be engaged and made enthusiastic about the opportunities that lie ahead. And it should also be linked to the social value that working in this area can add. Ultimately, this is about making homes better to live in – making them warmer and better ventilated – providing greater comfort and using less energy.

So, the skills question is a vital component of the net zero transition. But let’s not look at it just through a technical lens, but also how we can quickly scale up to deliver a successful and valuable transition.

• John Quinton-Barber is founder and CEO of Social Tech Communications

The post We need new skills to rise to real estate’s retrofit challenge appeared first on Place North West.

The mid-year 2022 UK Commercial Real Estate Lending report confirmed an increase in investment activities up until June 2022. Since then, deal flow has started to slow down dramatically. As interest rates rise, successful real estate funding gets more and more difficult for developers.

In the current market where risk factors are more and more difficult to model, two questions arise. How do developers ensure the financial stability of their projects? And where lie the biggest challenges and opportunities when it comes to secure financial planning for property developers?

Financial stability in a shaken market: challenges and opportunities for property developers

Challenge 1: data & documentation

Making the right decisions during the planning and development process has the potential to cut project costs by 20%. This makes it all the more important to use empirical data throughout the project. The earlier data is harvested and structured, the earlier it can be used as a guiding benchmark. Consistent grouping and proper structure and analysis forms make project information comparable. For example, you can reliably define income milestones based on data from previous projects, which helps with accuracy in liquidity planning.

Challenge 2: real-time liquidity planning

Ideally, you’ll carry out liquidity planning in real-time by directly comparing cash inflow and outflow. That’s where having a transparent overview of all a project’s financial transactions, including payment status, contract volumes, and amounts paid out, can help to secure liquidity. Excel spreadsheets simply can’t provide this type of comprehensive overview in a format that’s easy to digest, and because they are so prone to error, there’s a high risk that they will actually hinder financial planning.

Challenge 3: reporting

Financing a project involves many stakeholders. To build trust with those stakeholders, demonstrate your legitimacy, and prove your eligibility for credit, you must be able to produce customised reporting tailored to their respective needs and priorities. Only when your data is 100% accurate, can you rely on the reports you share with banks and investors, even if one makes an ad-hoc request and you have to generate that report under pressure. The more comprehensive your reports are, the easier it will be to secure financial support from those funders on future projects, too.

Increase the security and transparency of your financing process

This leads us to understand where the opportunities for property developers lie in the coming months:

• Using cross-project benchmarking to maximise profit and minimise risk
• Carrying out liquidity planning in real-time
• Boosting credibility with detailed and tailored reporting

Especially when it comes to acquiring, tracking and grouping your project data, modern, digital tools like Alasco help you build a strong database to stand out in the investment landscape.

The desire to have less complexity over the course of the project and sales process, secured funding and predictable revenue streams is strong. To find a solution to the challenges, we’ve analysed the factors that have the greatest influence on a successful financing process.

In this free checklist, we look at six factors that will increase the security and transparency of your financing process, providing you with a greater understanding of how uncertainties and risks can be reduced to a minimum.

• Sarah Geiger is director of UK at Alasco

The post The changing investment landscape: secure financial planning for developers appeared first on Place North West.

While one side didn’t even know what ESG meant, the other side took ESG as its biggest concern and priority. For progressive landlords, concerns over meeting environmental targets have reached an alarming level, even amid the global economic downturn and other impactful events that could have shifted the focus of all businesses away from sustainability.

Investors care about ESG when making commercial investment decisions – in addition to keeping their good brand name – although its perceived importance and what counts as  environmentally-progressive building differs from region to region.

We know that not all real estate companies have taken as concrete steps towards net zero as some of the industry leaders such as NREP or Newsec in the Nordics with their commitment to reach net zero by 2028 and 2030 respectively, or Charter Hall which is performing above the global average in sustainability performance.

The rest of Europe and North America are yet to catch up with Scandinavian standards. For example, three-quarters of the UK office market falls below the minimum energy efficiency standards that will be in place by 2030, and the rest of Europe shows similar numbers.

According to estimates by Knight Frank, $500bn of office space in New York with high carbon emissions may be stranded or destroyed by 2030, as it won’t comply with green standards and refurbishing it will be too costly.

In the case of demolition, constructing sustainable buildings on the same spots will require top-level investors, designers and project managers, so that these buildings don’t become irrelevant due to future green standards.

In addition to the ‘E’ in ESG, the ‘S’ factor has been gaining traction in the last few years, as businesses see value in becoming more people-focused, as wellbeing and people engagement matter more than ever. Running an environmentally and socially sustainable business will be one of the most important factors for successful organisational transformation in real estate over the next 20 years, according to PwC’s Emerging Trends in Real Estate – Europe 2023 report.

This begins with creating communities, common spaces and social impact through diversity and inclusion-oriented strategies, as well as by supporting the concept of real estate as “social infrastructure”, which affects not only financial returns and tenant retention, but also the social worth and image of companies.

In short, tomorrow’s net-zero compliant and socially responsible buildings will need to be built today. But the question of how – how the financing and velocity of this change will pan out – remains unanswered.

In our estimation, these trends will shape much of the ESG conversation in real estate in 2023.

• Melis Karabulut is partnerships and event specialist at Spaceflow

The post Trends shaping ESG agenda of real estate in 2023 appeared first on Place North West.

Southworks, MiddleCap’s first development in the UK, completed in 2021, bringing 70,000 sq ft of tech-enabled, BREEAM ‘Outstanding’ office space to the market. Now, the developer is looking ahead to its second UK project – Seal House – which aims to push the boundaries of tech even further.

Listen to podcast

Takeaways

• The main goal for Southworks was to collect all the data possible at a reasonable price and level of complexity. MiddleCap installed a “digital backbone” of sensors that collect all the environmental and occupancy data in the building
• Southworks was based on the idea of “API-based architecture”: each system or sensor should be able to send its data to other parts of the building or consume data collected by other systems. In other words, all the tech needs to talk to each other
• Flexibility is key. The design allows sensors to be moved or replaced and there are no physical thermostats or light switches, which means tenants can change the physical space however they want
• Proptech companies need to be able to not just deliver, for example, a tenant engagement app, but also spell out a clear roadmap and build a standardised support system and take cybersecurity seriously
• MiddleCap expects to see consolidation among startups, leading to fewer – but more advanced – solutions in the coming years
• When thinking about smart buildings, start with asking what the ultimate goal is. Is it to understand how your portfolio behaves? Is it to lower operational emissions? Then figure out what data you need. Only once you know all that start to think about what tech can deliver that for you
• Starting to collect data to make better decisions doesn’t need to be complicated. For example, if you have an access control system, you can tap into that data to understand when people are in the building. That can help you start making decisions about things like heating, cooling and lighting.

The post LISTEN | MiddleCap’s Miloš Halečka on delivering innovative smart buildings appeared first on Place North West.

BAE Systems’ acquisition of the Portland Walk properties, which includes the former WHSmith and Body Shop units, will see the stores converted into a multi-use skills facility. 

“The Portland Walk facility will make a significant contribution to the ongoing regeneration of Barrow’s town centre,” said Steve Timms, managing director of BAE Systems’ submarines business. 

“For more than 150 years, our shipyard and the local community have worked side-by-side to support each other and this investment is a demonstration of our ongoing commitment to develop and champion the town.” 

He added: “This [facility] will build upon the extensive vocational training and community investment provided by BAE Systems in the town.” 

BAE’s Barrow skills centre could complement additional town centre developments being progressed by the local council, according to the authority’s leader Cllr Ann Thomson. 

“Barrow’s town centre has lots of potential, but we know it must be regenerated so that it meets the needs of today and the next generation,” said Thomson. 

“As a council, we are already working on a major scheme to create a new destination in the centre of the town that will draw people in to enjoy food, experiences and shopping. 

“BAE Systems’ vision for the former retail properties will help to inject additional and much-needed activity and vibrancy to Portland Walk and the surrounding area which could in turn help to attract and support further businesses and retail. The future for Barrow’s town centre is looking bright indeed and we are excited to see it move forward.” 

Following the collapse of Debenhams in 2021, the future of the retailer’s extensive estate has been under the spotlight. 

While some of the department stores have been retained for retail, plans to covert some into other uses, including offices, are also in the works. 

Liverpool – M&S will take over half of the 200,000 sq ft vacant department store at Liverpool One, while entertainment operator Gravity will occupy the rest. 

Trafford Centre – M&S will relocate from its current 87,000 sq ft store into the 135,000 sq ft ex-Debenhams.

Chester – Martin Property Group bought the Browns of Chester building last year following the acquisition of the 212,000 sq ft Grosvenor Shopping Centre. The company said it would “work closely with local stakeholders” to develop its plans. 

Manchester – AM Alpha is redeveloping the former Debenhams on Market Street into a near-300,000 sq ft office development 

Blackpool – Mike Ashley’s Frasers Group is to transform the ex-Debenhams into a Sports Direct and a Flannels. 

Stockport – The council owns the old Debenhams building and plans to convert it into film studio space. 

The post BAE snaps up Barrow Debenhams for skills centre  appeared first on Place North West.