Previously in our series of digital transformation journeys of leading real estate companies, we have featured interviews with Brian Welsh from Round Hill Capital, Malte Wallschläger from HIH and Dimitri Huygen from Xior.
We hope that each of these articles shows how innovative real estate companies are adapting, breaking new ground and creating value in these turbulent times.
In this article, we give highlight to Grigor Hadjiev, Global Head of Innovation & European Sustainability to share his insights on how PIMCO Prime Real Estatebuilds and executes a digital strategy that inspires the industry.
ABOUT PIMCO Prime Real Estate
PIMCO Prime Real Estate is one of the world's largest real estate and asset managers with €92.5 billion assets under management. PIMCO Prime Real Estate invests worldwide through 17 offices located in Germany, France, Belgium, Italy, UK, Spain, Sweden, the U.S., Singapore, China and Japan. With its global team of experts, PIMCO Prime Real Estate stands out as a change-maker in decarbonizing their portfolio and boosting user experience.
1. A TWO-WAY DIGITAL STRATEGY
We know that Hadjiev is leading PIMCO Prime 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 sqm office space are being upgraded under the program to achieve a prime level of smart and sustainable profile.
In light of this, we ask Hadjiev: What is behind your digital strategy?
“Our digital strategy is structured around two main areas: One is to keep track of global trends. The second one is to implement the Building Signature Program that is adding value to the lifecycle of tenants and buildings.”
“The program is structured around 4 pillars. One 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 the work with Spaceflow fits as we include the tenants into the digital roadmap with a tenant app. The third one 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.”
“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 wellbeing 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.
2. WHAT TO DO AND 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?
To answer the first question: 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 conceptualizing, 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.