Join us with Jacob from NAR’s Commercial division! He recently attended a #CRETech summit, and is here to fill us in on what he learned while there. He covers some takeaways from the summit, including embracing technology in the commercial real estate space. Join us Fridays at 3PM Eastern for Office Hours on our Facebook page, where you can ask questions as you watch and we’ll comment back to answer!
In late July, the National Association of REALTORS® hosted blockchain experts, software developers, and industry partners with the intent of combining efforts to launch effective blockchain applications in real estate. In addition to distributed ledger experts, the meeting was also attended by technology executives from large MLS’s and REALTOR® Associations, real estate attorneys, home inspectors, and representatives from local governments.
NAR’s Research and Development Lab, CRT Labs, has been leading the organization’s innovations in this space and organized the full day meeting. The day was kicked off by a presentation from a leading figure in the open-source software movement, Brian Behlendorf, who is also the project lead for the Hyperledger Project.
The group spent the day discussing the merits, value, governance, and access control of a multitude of different potential blockchain applications. The purpose of these applications ranged from improving access to public licensure information to enhancing the way REALTOR® associations exchange member information. Perhaps the most impactful application discussed was the development of a blockchain-based system that generates and tracks unique identifiers for properties in a similar way that VIN numbers identify automobiles.
The potential for impact of these applications was so great that the group has decided to move forward and dedicate development resources to multiple applications. Following the event, Behlendorf, on behalf the Hyperledger Project expressed interest in making the Property Unique Identifier application a featured case study for their organization.
Brian Behlendorf, HyperLedger Project
|Behlendorf shared the exact moment of when he realized the potential for blockchain technology. His “Ah-Ha” moment came after hearing of a land title project in Honduras that was being started to protect land ownership through decentralization of records. In recent history, the digitization of systems has led to the centralization of systems. He explained how permissioned ledgers can begin to re-decentralizing how these systems work.
Behlendorf then went on to describe the opportunity and benefits that will come from the transformation of the traditional “hub and spoke” models to ledgers, and specifically how the roles of intermediaries in those models will shift over time.
John Mirkovic, Cook County Recorders of Deeds
|John Mirkovic currently serves as Deputy Recorder (Communications/IT) for the Cook County Recorder of Deeds. In that role, he serves as office spokesman and is responsible for internal and external communications, legislative advocacy, the CCRD Property Fraud Unit, and has implemented numerous technology advancements at CCRD.
Mirkovic shared his experience launching a pilot program to use blockchain to track and transfer real-estate property titles and other public records, becoming the first land recorder’s office in the country to do so.
Andrew Page, Business Analyist, Connamara Systems
|Andrew Page presented on Design Patterns for Public Registries. Prior to this meeting,Page created an open source title registry application that could be integrated with local, state, or federal governments to track ownership of assets. He spoke about the advantages and disadvantages of different application architectures for the title registry.|
David Conroy, CRT Labs, NAR
|Dave Conroy demonstrated an application that would allow for more efficient sharing of engagement levels of REALTORS® among the three levels (National, State, and Local) of REALTOR® associations on a private and permissioned ledger.|
About CRT Labs
CRT Labs is a research group operated by the National Association of REALTORS’® Center for REALTOR® Technology. The primary goal for CRT is to track emerging technologies that will affect real estate, educate its members, advocate for the proper use of technology, and innovate when there is a gap between what is needed and what is available.
In 2015, CRT established the R&D lab to investigate smart home/internet of things devices, renewable energy, urban agriculture and building materials, as well as any other emerging technologies as they become evident. CRT is working with NGOs, vendors, national laboratories, universities and government agencies to help promote NAR as an agent for technology research and innovation.
This week on the CRT Labs blog, Jacob Knabb from NAR’s Commercial division writes about some much-needed advancements in commercial real estate technology.
Four industry leaders met recently in Chicago to discuss the state of commercial real estate technology, exploring what disruption might mean for the future of commercial real estate.
Emily Line, Vice President of Commercial Services, Realtors Property Resource® (RPR), Constance Freedman, Founder and Managing Partner, Moderne Ventures and the Moderne Accelerator, and Karin Kraai, Senior Managing Director, Newmark Grubb Knight Frank, joined moderator Ginger Downs, Chief Executive Officer, Chicago Association of REALTORS®, for an informative discussion of commercial real estate technology to a packed room of Chicago-area real estate practitioners.
Ready or Not Here Comes Commercial Real Estate Technology
The first major takeaway is complexity inhibits technology adoption, as does fear of change.
Line pointed to a 2016 Forbes survey, which found only 11% of respondents consider themselves on the leading edge of technology. Yet the same executives also believe that technology is “revolutionizing the industry.” A similar survey by KPMG revealed that over 94 percent of commercial real estate executives identified complexity as their greatest challenge, Line noted, with 84% identifying ‘information management’ as one key solution. “Despite the fact that 84% recognize the solution, 89% are still not willing to step out of what’s comfortable,” Line said.
It is impossible to ignore the fact that new technology companies are entering the industry at a rapid pace, creating cost-efficient products designed to simply workflow. Most of these companies offer supportive data in a more digestible fashion. One great way for REALTORS® to establish yourself in the tech sector is to sign up to test new products “At Moderne, most of the companies we fund asked to create pilot programs where users can try a new company’s product for free in exchange for user feedback,” said Freedman. “Get involved and you may build a real relationship with a company.”
Commercial Real Estate Technology Isn’t Exactly Disruptive
The second key takeaway is that commercial real estate hasn’t had a true disruption yet. “We’ve had embellishers and enhancers [in commercial real estate technology] but not a disruptor,” said Kraai. Commercial real estate still hinges on human expertise at its core and as a result “brokers don’t want to be disrupted,” Kraai argued. Freedman agreed, noting the importance of human relationships. “Deals can take five or more years to complete [and] clients want an advisor or a consultant,” Freedman argued.
“Disruption is separate from the individual,” echoed Downs. “And the products need to make the broker more efficient.”
Technologies created for other markets will penetrate commercial real estate, enhancing how the industry functions. There movement towards smart buildings in smart cities is undeniably changing the way brokers and investors think about properties. “Buildings are becoming greener and offer far more smart tech options for tenants,” said Kraai. “Here in Chicago’s riverfront we are seeing a definite desire on the part of tenants and firms to have a smaller footprint.”
Intentionally Cultivating a Growing Workforce
The final takeaway is three-fold: Diversity creates better companies, the key to building diversity is through mentorship, and this matters to the incoming millennial workforce. Line argued the “Work, Live, Play” movement is unavoidable.
“Shifting lifestyle preferences are prompting major changes in the real estate landscape, forcing developers, investors, and REALTORS® to dive deeper into research and think about the full picture for a community,” Line referenced a study commissioned by NAR and conducted by Swanepoel T3 Group called the Commercial Real Estate ALERT. According to the report, Millennials will make up 75 percent of the workforce by 2030. “One of the most pressing challenges for commercial real estate is to plan for where this important segment of society will live, work, and play,” Line reasoned.
This incoming workforce brings a different set of expectations about diversity. Freedman noted a particular lack of diversity when it comes to the investor space. “The managing partners in firms across equity is roughly 7%,” she said. “In real estate, it’s closer to 3%.” Freedman bemoaned the fact that hardly any women have their own fund despite the fact that almost all want to.”
That said, Downs noted a marked shift in company culture to attract younger employees and improve the happiness of current ones. “Millennials will soon be the largest demographic in the work force, so it’s important to consider what they are looking for in a work place and find spaces to make those dreams a reality,” said Downs. “Because so many of us live tech-heavy, fast-paced lives, we need our work places to be innovative and efficient.” The entire panel strongly believed that practitioners should commit to the old-school method of mentorship to support millennials, particularly women and minorities, entering the commercial real estate and technology space. A diversified industry creates much stronger returns. As Kraai succinctly put it: “All of the Top-20 Tech firms have women in at least 20% of their key positions. It makes better thinking and increases profitability.”
Jacob S. Knabb is Commercial Communications & Member Services Associate for the National Association of REALTORS®. He works frequently with CRT Labs, keeping us informed of the latest and greatest in commercial real estate technology trends.
Check out the Touchstone Indoor Environmental Quality sensor, with its new SLS-printed enclosure, in this week’s Facebook Live Office Hours. To find out more about this project, head on over to Akram’s recent post outlining the current Touchstone project. And to participate in Office Hours, like our Facebook page at facebook.com/crtlabs.
This is the first post in a series about rooftop solar technology. I was inspired to write this after talking to some members from Hawaii and reading the Tesla SolarCity pricing announcement. The series will cover roofing jargon, costs, underlying technology, legislative policy, regulatory issues and design, so let’s get started.
The growing interest in solar generation in 2016 has been borne out by recent numbers. In May, the UK announced that solar generation has surpassed nuclear and coal generation. Focusing on the US, you can compare state-by-state solar activity using information published by National Renewable Energy Laboratory (NREL) through their Open PV Project. NREL’s SunShot report is an excellent periodical that presents a global perspective. It shows that the US installed the second highest number of solar units in 2016 behind China. This moved the US up to fourth in total installed capacity. Only China, Japan and Germany has more installed solar energy systems. With one more year like 2016, the US will surpass Japan and Germany for installed capacity. Most experts underestimated the performance of US solar in 2016 because of the potential expiration of the Investment Tax Credits (ITC). A future post will be dedicated to legislative and regulatory issues behind solar energy.
Before we can talk more about solar on the rooftop, we should review the rooftop itself. The most common solar setup involves attaching panels to the roof, getting them to point as directly towards the sun as possible, and storing the generated electricity. Some of the more common roofing materials, arranged roughly in cheapest to most expensive order, are:
- Foam, Spray Polyurethane Foam (SPF)
- Basic Asphalt (25 year)
- Architectural Asphalt Shingle (30 year)
- Fiberglass Shingle
- Corrugated Metal Sheet
- Premium Asphalt Shingle (50 year)
- Built Up Roof (BUR) or Tar and Gravel
- Metal Shingle
- Stone Coated Metal Shingle
- Wood Shingle
- Shake Shingle
- Metal Seam
- Copper or Zinc
Not every roof can use these materials. For instance, on flat roofs, you might go with SPF or BUR, but these materials would not be ideal for sloped roofs. You would typically find BUR and SPF on commercial and urban multi-units. All of the others you find on sloped roofs. I have never seen a tar covered sloped roof.
Each method has distinctive installation procedures, and costs vary significantly by geographic location. Chimneys, dormers and other features of the roof design that require fitting of the material to the roof complicate installation and drive up costs. Higher grade shingles cost more (although the difference in cost might not be as high as you think), and even the underlayment varies based on what kinds of shingles are used.
The jargon used by most contractors is unfamiliar to consumers. Consumers think of everything in terms of cost per square foot ($/SQFT). Contractors use the term “squares” for their calculations where one “square” is ten feet by ten feet or 100 SQFT. This simplifies ordering because the materials are organized on pallets, accounts for waste (unused material) and for any mistakes. I had my own roof upgraded nine years ago and I still have a stack of shingles in the shed.
The chart above presents the relative cost differences between different roofing materials. Please use this chart knowing that I have accounted for a typical installation that included removing and disposing of the current roof, all material, labor and incidental costs. There are also regional variations that are difficult to capture, which is another reason these are relative costs. These costs are expressed as “squares”, the common unit that will be used in this series.
The red line on the chart signifies what could be called ultra-high end roofing. This line will become important in later posts, especially when talking about the Tesla SolarCity roofs. Here are a couple of interesting things to notice when looking at total installed cost. From left to right:
- Although the Fiberglass Shingle material cost is less expensive than 30 Year Asphalt, the final installed costs are very close.
- Shake Shingle and Wood Shingles are nearly identical in material cost, but Shake Shingles take more time to install because they are irregularly shaped.
- Copper and Zinc material costs vary all of the time, so they were very difficult to normalize
It is important to consider the entire roof when looking at the economics of solar, especially when considering new approaches such as the Tesla SolarCity roof. You don’t attach anything to a Tesla roof, because the roof is the solar collector. When we get to the economics part of this series, we will evaluate the cost of the roof so that we are comparing apples to apples.
The next post will address the technologies behind solar energy collection. The science has improved greatly over the last couple of years. I found the subject matter interesting, but I am an engineer.