We as in we are commercial real estate and to most of us all, that means buildings. Buildings that we don’t occupy as a residence. Yes, I know there are companies out there starting to blur even that definition. But for now, let’s just keep to the basic definition of.
Buildings: It could be one simple individual building in a secondary market occupied by five different companies. It could be a portfolio of buildings across the globe occupied by A-rated tenants of all types. We are all in those types of building in some form or the other every day.
Data: The oil, the fuel, the market driver, the market maker, the data gold that flat out makes $$$$ for millions of people now and, possibly in the future… it will make them trillions.
Scale: Has many different definitions depending on the context from which it’s used and in this instance scale by my definition is used to obtain a dominant position within the commercial real estate industry.
Combine all three together and you get what?
World domination of #CRE and #TECH?
Sounds too easy does it not? How hard can it be to put all of those pieces together and do just that, dominate the world of #CRE and #TECH as we know it today?
Well, let me explain why it has not to this point and may not be done EVER!
Buildings: How many are there just in the US for instance. According to Reonomy, “There are more than 50 million commercial properties in the U.S. (by Reonomy’s definition of “commercial,” which includes all properties other than single-family homes).”
“By volume, vacant and agricultural land make up roughly 37 million of the country’s parcels. 4 million U.S. parcels are multi-family properties, and just over 1 million are industrial.”
Data: Let’s slice out the 4 million multi-family parcels just for starters. 4 million, think about that number. If you were to say collect just HVAC data on all 4 million what would that take? Where would you start? What is a defined standard of data and by whom is that standard defined and accepted by? How much time effort and money would it take to get ALL 4 million parcels of HVAC data into a database? How often would that data be updated and be made useable and who would pay for that data? Again we are talking about just the HVAC data. Not occupancy, payments, debt, etc.etc.
Scale: Is the HVAC data from 4 million multi-family parcels enough to create a dominant position in the marketplace? It must be, 4 million buildings are one hell of a pool of information to pull from. Is there a viable business from just this sample, uh yes there is but again is it enough to dominate all #CRE? The answer to that is a BIG…NO!
A tale of just one city.
Buildings: In the city of New York including all of its boroughs there are said to be more than four hundred thousand buildings. Walk up and down any street in just one of those boroughs and the uses for an individual structure are endless. For example the street I live on in Manhattan has (and this is off the top of my head) a gym, a barber, two dry cleaners, a Thai takeout, a Turkish restaurant, a nail salon, a school, a drugstore, a bar/burger joint and of course walk-ups and multi-story apartment buildings. Again just one block. Multiply that by thousands of blocks and it’s not hard to grasp the enormity of it all.
Data: Imagine just that one block, how many different HVAC systems could there be? What condition are they in? How efficient are they? How about this, how many HVAC systems are there in just one building alone? How would you begin to collect data from all of those systems on just that one street? Maybe you could go to every individual owner of every building and have them pay you to monitor each and every one of their systems. Let’s you and I be real for a minute, even if you could find every individual owner, how long would it take to get everyone to say yes and pay? My guess, NEVER!
Scale: A story I use all the time. I get pitched all kinds of “solutions” and when they bring up how they will scale I ask them this. Do you have every individual building and every room with every tenant and all mechanical data in every building from 59th street up to 125th street and between Central Park and the East River? They look at me dumbfounded and say “well that’s not…” And I say of course it’s not but that’s what I mean by scale. (If you do have all that data please email me and let’s talk, I have a fat checkbook awaiting your every move.) All I was asking for was just the data from one small part of Manhattan. Not all of it, not even the other boroughs.
As we sit here today there are many companies out there collecting what they say is data gold. It’s gold because they say so, it’s gold because they think they have obtained a certain level of scale, it’s gold because they have convinced you it’s worth paying for. It’s gold because you have given them permission to create what you define and some sort of data standard.
Every one of those companies is vying for one thing. Global domination. They all think they will get there, some think they are there now. It is a market that if not now will at some point soon be worth Trillions and it is certainly worth the time effort and money it will take to get there.
It will indeed benefit us all.
A few things you want to keep in mind.
Who owns all the Buildings?
Who is the true owner of that Data?
And who will set the standard for decades to come and when will they Scale?
+1 Place your bets!