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Commercial Real Estate and the Two Sided Market


To borrow a term from millennial-speak, the ‘origin-story’ of AirBnB is enough to warm the hearts of aspiring startups all across the globe.


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November 22, 2019 Prabhu Ramachandran
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Commercial Real Estate and the Two Sided Market
How the next generation in innovative operating models is escalating business potential 
To borrow a term from millennial-speak, the ‘origin-story’ of AirBnB is enough to warm the hearts of aspiring startups all across the globe. Much like the classic format of superhero comics, where the term originates, this is a story of the proverbial ‘nerds’ of humble means transforming into a powerhouse that changed the world they inherited. A single air-mattress laid in a living room hardly seems like sensible way to start a bed and breakfast business, let alone the seed for a multi-billion dollar business, and yet this is exactly the path AirBnB has taken to global prominence. What drove this seemingly unlikely expansion is the power of bridging the gap between a customer base and its unmet needs. 
This strategic approach, often termed the two sided market, began to really come into its own with early innovators like the online marketplace eBay, recruitment portal Monster.com and social media platforms such as Facebook. However, with each passing year, the approach has assumed ever greater significance, as both sides of transactional relationships begin to enthusiastically embrace the convenience and value addition. With global connectivity, smartphones and app based services becoming the norm, business models no longer restrict their conception of value chains as being between costs and revenue. The two sided market idea leverages technology to simplify transactions back to their historical origin, as an empowered and dynamic interaction between buyers and sellers.
How this impacts Commercial Real Estate
The commercial real estate space has always been a complex web of interdependent relationships and transactional dynamics. From the multiplicity of third parties, collaborators and vendors, within the operational aspects liked to a portfolio of buildings, to the customer focused services and platforms, the two-sided market is a perfect fit for the industry. Every automation, mechanical asset and service within a building is the product of a specialised industry and market. On the one hand technologies such as building automation to monitor and control HVAC systems, lifts, security, and lighting represent one set of operators and stakeholders, on the other, facilities managers, real estate portals and agents constitute a separate arm of the industry.
Much as the internet and smartphone technologies empowered online services such as AirBnB, digital commercial real estate platforms are now enabling a unified operational model within the industry - one that can be optimised for the benefit of both end-users and the businesses that service them. This is not simply a matter of facilitating commerce, everyday functional processes too stand to become far more transparent, reliable and predictive. The relationship between CRE owners and the vendors they rely upon to help manage and maintain their premises might be a behind-the-scenes aspect of commercial real estate, but it’s also one of the most critical to successful and profitable operations. What’s more, in the event of downtime, the response needs to be immediate. A single service or amenity going down in a building can undermine the entire operation. 
This is where a digital platform that unifies all processes and functions with the aid of IoT collated data and AI and Machine Learning empowered real-time analysis adds a proactive and powerful layer of command and control to building portfolios. A digital ‘brain’ and a nervous system of sensors and data can enable the smooth and optimal performance of assets, which the commercial real estate business was never able to deploy in the past. Digitized properties can align every physical asset and all workflows into a truly outcome oriented system, which delivers unprecedented efficiency, reliability and profitability.
The Promise held by a Digitally Empowered Future
With the advent of the digital age in the commercial real estate business going far beyond business management tools and customer service, into a brave new data-driven world of optimized processes, the future of buildings as smart assets is finally upon us. The modern customer has become accustomed to rapid and reliable response from service providers and businesses that they choose to rely upon, but this is only half the story. While, adapting to a new generation of end-users and their expectations is certainly a win-win that results in greater market share and brand value, what has truly piqued the interest of the commercial real estate industry is the leaner more agile model it can operate within, in pursuit of its own internal priorities. 
Complete and continuous digital records of real time data streams can unshackle untold potential within the commercial real estate industry. What is on the horizon is not simply a better way to track asset performance and responding to anticipatable issues – although this is certainly an unprecedented and powerful advantage. The truly breathtaking promise is one of a completely integrated and systemically optimal ecosystem, which reconciles flexibility with reliability and the highest standards in occupant experience with ease of operations and maximum potential for profit. 
The truth is, what the ever increasing powers of Connectivity, IoT, AI - and even current outliers with the industry like Blockchain - might hold for the future of commercial real estate can only be partially guessed at, by even the most visionary of futurists. Technology has consistently exceeded even the most optimistic of forecasts in the past, and digital technology particularly so. One thing, however, is for certain; portfolio-wide, vendor agnostic and real-time software based digital platforms are already emerging as the non-negotiable competitive advantage for commercial real estate businesses to seize.
(The Author, Prabhu Ramachandran is the founder and CEO of Facilio Inc.