‘my7cents: Daniel Kraft about adding value to the physical space’

Sep 25, 2019 8:53:22 AM INTERVIEWS

With a background in management consulting, Daniel Kraft is responsible for Stronghold Proptech – the digital accelerator of Stronghold Invest (which is the leading property advisory, asset Management, fund management and proptech company in Northern Europe), focusing on leveraging the Groups digital assets and industry leading portfolio of companies, to create and deliver the real estate services of tomorrow. He currently sits on the board of Stronghold´s digital ventures such as Datscha, Tessin and Workaround. Find out what Daniel has to say about the digitization of the real estate sector, in our interview series “my7cents”.

What do you think is completely underestimated when the digitization of the real estate sector is being discussed?

Similarly to what happened during the Industrial Revolution, we underestimate the level of impact technology will have on the real estate industry while overestimating the time it will take. Traditionally, real estate has been about the physical space – about concrete, four walls, heat, electricity and the location. Adding the layer of technology, we’ll get a granular understanding about what’s going on inside and around a building – and that will change the industry in a variety of ways. For example, with more data available we’ll be able to more accurately measure and improve the value of an asset.

Which digital solutions are you missing in the real estate sector?

Currently there’s a lot of innovation happening in the software, app, IoT space. What has yet to come is the basic infrastructure to do proper digitization. At the moment, we might have three different fiber cables in the building, the property owner has installed a few sensors in the building, the tenants have bought a few sensors for their flats as well. What’s missing is the backbone, the IT foundation for it to be scalable in the future. A standardized and secure way to connect sensors, extract and utilize data.

What are the most interesting digital services that you’ve seen in the real estate sector during the last 6 months?

Sidewalk Labs, the urban innovation organization of Alphabet Inc. is certainly one of them. Its goal is to improve urban infrastructure by providing technological solutions, and tackle challenges such as cost of living, efficient transportation and energy usage. They’re currently designing a district in Toronto where it’s all about delivering services to the physical environment, reimagining a city from a people-first perspective while integrating data throughout all service layers. This is where we’ll see part of the potential of urban digitization first hand.

Looking at Big Data / AI, the UK based startup Gyana which was founded by the University of Oxford in 2015, gives insights of how people move around a building. Using large data sets from telecom providers, they’re tracking how many people are entering a local store, how many people are passing by, what these people like. This not only helps stores to measure foot traffic and local marketing activities, but also to really understand what a triple A location is.

If you were a real estate owner: what would you do as a first step in regards to digitization?

Hands down, I’d start with the boring stuff. Setting up a solid digital infrastructure in and around the building that allows me to deploy sensors, plugin digital services and scale them. After that’s done, I’d consider which added services will bring value to my tenants and provide additional revenue in the form of second and third rents. For the retail space that could be understanding the foot traffic, or knowing one’s individual energy and water consumption in real-time for the residential sector.

Will the digitization lead to new ways to use commercial buildings? How?

The biggest change has already started. Co-Working or Space-as-a-Service models are changing how office spaces are being used. Internet, coffee, reception, a shared common space – everything is included and not only allows for the space to be used more efficiently but is also geared to increase workforce productivity. For the ladder, property managers have to step up and implement technology that allows to gather data in order to understand how people are using the space, what helps them to work more productively, and how to increase the revenue per square meter. Or companies can rent spaces at i.e. WeWork and let them figure out how to design the most efficient and productive work space.

The digitization has put shopping centers under pressure. Can they also be saved by it?

Physical stores play an important role in the customer journey and technology can help to merge the online and offline decision-making process, creating an end-to-end user experience. Consumers are already trying to get the best of both worlds by doing the research online, then going into a physical store to see and touch the product, then buying it at the cheapest price online. That’s not customer centric and therefore not sustainable.

The e-commerce giants Amazon and Alibaba realized the potential of combining brick-and-mortar with data-driven technology and digital services. Amazon bought Whole Foods for just under $14 billion. Alibaba owns a wide range of offline initiatives including over two dozen tech-enabled grocery stores and cashier-less cafes. Their FashionAI creates a personalized experience for customers by suggesting similar items that the customer is already trying on in-store. At the beginning of the year, Alibaba launched its “smile to pay” facial recognition technology at KFC. What sounds a bit like 10 year old blockbuster Minority Report, is now closer to reality than science fiction.

In which company – Allthings and your own excluded 😉 – would you like to be a fly on a wall for one week?

Being at the strategy meetings of WeWork’s boardroom would certainly be exciting. Having created a world renowned brand, they’re already getting their ROI of buying a building from the appreciation in value that comes from tying their brand to that building. Just like IKEA. With the amount of money WeWork has, they’ll test many different ideas to put their mission of “creating a world where people make a life, not just a living” forward. Not all are going to succeed but I’d be curious to eavesdrop how they strategically approach that goal.

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