The commercial real estate (CRE) industry – like every industry – is grappling with the consequences of digital transformation.
Dan Sterk, CEO of Managed Services at RealFoundations (RF), explains how outsourcing a managed services team is a cost-effective, flexible, and scalable way to meet the ever-changing demands of the entire real estate ecosystem, from portfolio managers to owners/operators, investors, and tenants.
Digital Journal: What are some of the most prominent examples of managed services within commercial real estate?
Dan Sterk: That’s a great question – the reality is that there is a wide variety of managed services within commercial real estate that improve operational performance, increase data transparency, and contribute to organizational stability. There has been tremendous growth in real estate managed services in the last few years and we’ve seen that the most successful service providers are those made up of industry professionals with highly specialized skills and knowledge of specific asset classes. The ultimate goal of managed services is to streamline critical processes while providing ongoing improvement across portfolios.
Managed services benefit everyone in the real estate ecosystem, from portfolio managers to owners/operators to tenants. They are cost-effective, flexible, and scalable to meet the changing demands of the business. Managed services can really apply to almost any area of a real estate portfolio. Key examples include:
- Property Accounting: streamlines financial operations, reduces accounting labour costs and increases operating flexibility in a challenging labour market. Outsourced accounting enables a company to leverage real estate experts alongside cutting-edge technology for flexible solutions. This frees up the internal teams to concentrate on core business tasks, enhancing performance and revenue generation.
- Lease administration: covers all stages of the property lifecycle, from due diligence to disposition. The support teams ensure efficient and effective lease management, identifying discrepancies, missing documents, and other critical issues to allow users to value and acquire real estate with confidence.
- Application support: offers continuous technical assistance, maintenance, enhancements, and performance monitoring for real estate technology applications. This service ensures the systems operate smoothly and align with the company’s business objectives.
DJ: How do RealFoundations’ managed services help solve unique challenges in the commercial real estate industry?
Sterk: At RealFoundations, we focus solely on real estate and the depth of our expertise spans all asset classes, from developers to owners/operators and investors of all property types—residential and commercial alike. Our dual offerings of Management Consulting and Managed Services provide us with a comprehensive understanding of the real estate operating platform, allowing us to offer unique insights and recommendations that drive tangible improvements in our clients’ operations.
Our outcome-based pricing model reduces management burden on clients and our service provider’s training program provides consistency and scalability of service and reduces errors. Through our unique data integration capabilities, we’re able to simplify getting data into client systems to improve data integrity. What’s more, we utilize automation and AI to increase the amount of data captured and the timeliness of information availability. We also offer access to large teams in different time zones to provide broad support coverage. Fractional access to a team of industry experts who understand how the different business processes and technology fit together is not possible with a limited budget for internal hires with frequent turnover.
Our integrated services are especially valuable for companies that lack the capital or internal structure to recruit, hire, and retain top talent. Instead of overworking one person who takes on the role of 15 people, risking employee burnout and turnover, companies can lean on RealFoundations for a fully-stacked team of experts and resources at hand.
RealFoundations solves these three major challenges:
- Elasticity: RealFoundations directly impacts company culture and a company’s talent pool. Variable support teams can quickly and seamlessly ramp up when they are needed most and cut down during a downturn or slow period, companies won’t have to overwork limited internal teams or conduct layoffs in a downturn.
- Willingness: Hiring managed services teams means hiring those who are excited and willing to work on your specific business needs with a better career path working across multiple clients – without fear of turnover or the need for rehiring and recruiting efforts.
- Cost: Building an internal team of highly qualified experts with niche skill sets required to support the business can be costly. RealFoundations provides a dedicated team of functional experts and maintains a fee structure based on outcomes – not headcount.
DJ: How have tech advancements changed the way RealFoundations interacts with customers?
Sterk: Customer needs combined with technology advancements will continue to shape the way we deliver results and meet the ever-changing needs of our clients, which is why RealFoundations began adopting a work-from-anywhere capability, pre-covid. Over the last few years, our managed services teams have interacted seamlessly with real estate professionals without having to be onsite. As a result, the abrupt change to completely remote work had little impact on us or our commitment to our clients.
What we’ve learned from adapting to a completely digital environment is that a holistic tech stack – where all the systems can be integrated – is the most powerful tool for those in the real estate industry. For example, RealFoundations utilizes the Microsoft stack so that all meetings, recordings, documents, transcripts and more can be found in one place. We even have a dedicated managed services offering for clients called Modern Workplace Services that provides expert advisory of Microsoft Teams, Sharepoint, Engage, and Azure, integrating infrastructure and end-user support into a single management platform. This team helps optimize the elements of security, identity and compliance within the Microsoft Ecosystem for both domestic and global resources, driving efficiency while reducing overhead.
DJ: How has tech transformed commercial real estate and the way owners and operators manage portfolios? ]
Sterk: Like every industry, technology is impacting commercial real estate and residential management operations now more than ever. Consumers are conditioned to receive what they want when they want – which is instantly – requiring property managers to rethink the leasing process and tenant experience and cater to the desire of new generations for quick, convenient and on-demand experiences.
In addition, tech advancements such as RPA, AI and chatbots are feeding into this quick-response appetite, which is shifting the perception and treatment of tenants toward how a business views and treats a consumer:
- Lease abstraction allows documents to be scanned for relevant information and automatically entered into property management systems.
- Modern workplace services/Modern Digital Workplace supports efficient enterprise-wide collaboration.
- AI enables faster access to valuable, proprietary data while providing guide rails for employees to manage enterprise risk.
- Chatbots provide multifamily residents the opportunity to complete the application and leasing processes conveniently from their smartphones.
DJ: What is the importance of data management in today’s business environment? What should business leaders in commercial real estate ask themselves when looking to invest in AI?
Sterk: Data management is very important in today’s business environment due to the rise of AI and systems that rely on the human entry of data, making it critical for CREs to prioritize it. One way to do this is through managed services where there is a dedicated team whose whole mission is to help global investors with data management to manage risk and better manage performance of real estate portfolios. Currently, there’s not much discipline around understanding data, and because of this, we’ve seen just how important data quality/completeness and data protection is before investing in AI. In 2023 it was estimated that 329 million terabytes of data were created each day demonstrating the depth of the data management challenge.
Very few business leaders and decision-makers who are seeking to invest in AI can answer the following questions: What types of data do you collect and store? Where does this data live? Is it secure? Who has access to it? Do you have granular control over this data?
One thing to consider is understanding which systems are collecting what information. An innovative mindset can also help companies to prepare and be more adaptable to technological advancements in the future. We’ve seen that a forward-thinking approach – such as keeping the introduction of AI copilot in mind – yields successful results of tech adoption. Lastly, properly collecting and storing customer data can help streamline future application processes as well as help leverage already collected data to make informed decisions while also minimizing risk. Our time-tested approach to data management is focused on delivering critical information for managing the business while minimizing the effort for our clients and their partners and providing transparency throughout all stages of delivery.
DJ: What role has digital transformation played in the evolution of your industry?
Sterk: Digital transformation has drastically changed the leasing application process and allowed owners and management companies to get closer to their customers—their tenants. While streamlining the leasing application processes and properly gathering tenant information is important, it’s just one side of the coin. Digital transformation has transformed the configuration and infrastructure of the buildings themselves. Buildings with more technology that make each unit more user-friendly drive revenue. This is not just because companies can charge more for modern, tech-enhanced units but also because it optimizes operating expenses (OpEx).
For example, multifamily companies have rolled out technology initiatives on a massive scale to detect maintenance issues early on. If a pipe bursts in one apartment, it can cause severe damage in that unit as well as all the surrounding units if not detected quickly. New technology allows property managers to pinpoint exactly where and when a maintenance issue occurs so they can swiftly fix the problem. Office buildings are also leveraging more technology to collect ESG data to execute environmental initiatives. Most office spaces have automated lights and temperature control to drive down energy consumption and costs. Some spaces have even started to collect data from each outlet within a workspace to determine which is using the most energy.
With accelerated digital transformation and advancements in technology, the real estate sector is now able to better retain customers (a.k.a. tenants), boost ROI and reduce OpEx.
DJ: What questions should a company ask when considering outsourcing to a managed services provider?
Sterk: Once a company decides to outsource, it should begin vetting several different, experienced providers. Asking direct and specific questions will help to identify the best firm with which to partner:
- Are you ready to leverage sourcing? Is your team onboard? Do you know your processes and are they consistent?
- How knowledgeable are each of the firms under consideration about your asset class in the real estate industry?
- Which provider has the deepest expertise in the functional area that will be sourced?
- Who has the strongest record of performance and the most referenceable clients?
- Does one firm stand out for its use of leading practices and technology solutions?
These questions will provide quantifiable insights when making a decision and help to select a provider that best fits your needs.
