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July 2020 Newsletter

Letter from the Editor

Hello to all! We hope you are doing well, staying healthy, and able to enjoy summer to some degree. Like we do every two months, here's a wrap up of all things smart buildings. We remain hard at work on a range of interesting projects. And, as you'll see below - still writing articles and sharing valuable information to the industry.

This newsletter again is longer than normal. There is much going on, and a lot of uncertainty. This expanded issue attempts to capture all the relevant smart buidling news. 

In early July, Joseph Aamidor published an article in Propmodo about a smart building stimulus. The article explores the opportunity to fund smart building technology as a core part of the economic recovery. Please read it and let us know what you think. There have been a number of other articles about a green stimulus, including this in Fast Company, which we think dovetails with our ideas about a smart building stimulus. Joe also wrote a piece in LinkedIn about the impact Covid-19 will have on vendors and their sales/marketing approaches. And, Joe also was quoted in this article in Building Operating Management Magazine on selecting smart building technology. 

Additionally, we joined our friends at Credit Suisse on a conference call to discuss the impact HVAC has on Coronavirus mitigation. The audience was made up of institutional investors who focus on the multi-industrial space. This is the second collaboration with Credit Suisse over the past ~6 months. We look forward to the next opportunity to collaborate with the team.



In other news, there continues to be a lot of uncertainly in the broader market, but also in real estate. On one hand, people are getting used to this new normal, and just working and living their lives. But, there are a lot of big questions still to answer, such as:

  • What does demand for offices look like in the next year or two? (We're confident the future is bright in the long term.) Jonathan Woloshin of UBS said it well: "We believe it is too early to write the epitaph for the entire office sector as there are a number of counterbalancing forces at work.” Moreover, a number of proptech investors still are quite high on the space and do see a return to normal.
  • How much space is required by the typical business? How flexible does leasing and use of offices become? Gensler's survey on returning to work is fascinating, though a number of other real estate tech experts have noted that the numbers expecting to return to the office appear high. Lisa Picard of EQ Office also shares some great points.
  • Does technology adoption accelerate to operate buildings more efficiently, or do the general economic trends, like more vacancy and lower lease rates, drive building owners to avoid any new spending? (This one is most interesting and relevant to us - but is dependent on the first two bullets.) McKinsey notes that "pioneers in the [real estate] industry have been exploring ways to diversify sources of revenue, pursuing new digitally-enabled business models and focusing on tenant experience. The pandemic has made clear that those that haven’t yet made such investments in underlying capabilities and infrastructure will need to catch up quickly."

We're watching all of this and are happy to have a conversation. Please reach out if you want to chat.

A few other insights and observations:

  • Cost savings is going to be critical moving forward, but the first costs to deploy many smart building solutions may act as a stronger deterrent than in the past. However, we believe these technologies will be more important, especially with less consistent schedules across operating hours - if workers have more flexible hours, then the equipment can be optimized to be flexible, too. Software will be a critical part of this. See below for a slide we included in our Credit Suisse talk. (And, this great post from Mission Data includes some similar points - especially at the end regarding measurement and verification.) 
  • Health/wellness will move from "nice to have" to a "must have". We keep reading about the massive investments being made in HVAC and indoor air quality, and how this can be highly disruptive to disease transmission. This includes research articles on the transmission of Covid-19 within specific buildings, to summaries of various research reports, to even doctors who tweet about the importance of HVAC (see question 6 about the arms race to advertise high quality HVAC systems). Additionally, Bractlet published a nice white paper on indoor air quality and Covid-19 transmission. EnVerid published its own paper with a focus on filtration. Moreover, New York State is requiring air filter upgrades for shopping malls as a condition for reopening.
  • In terms of repopulating offices, and other commercial buildings, we are seeing a dichotomy: larger companies view office space as important. Some will even require more space to support social distancing. However, some firms, like Twitter and Facebook, are allowing employees to relocate out of the office. In the case of large companies with very flexible remote work policies, we think those firms still will invest in satellite office space in many prime geographies - employees will not have to work at home all the time. On the other hand, startups seem much more apt to work remotely away from an office. Economics may be at play: it may make more sense to cancel a lease than to reduce headcount, and startups have been under pressure since the pandemic started. So, what is the impact on the technology landscape? There will be large properties that seek out smart buidling solutions, but there also will be a range of new opportunities to provide software that supports the new ways that some firms use their offices (or just use conference rooms as necessary). Eric Roseman, VP of Innovation and Technology Ventures at Lincoln Property Company has been tracking these developments, including this post on LinkedIn.
 
Aamidor Consulting Market Resources. We've been tracking all the key industry partnerships and have summarized them on this readily available site. And, don't forget that we have summarized key M+A activity here.


As always, we look forward to hearing from you about how we might help with your product and market strategy needs. 

In this issue of Smart Building Insight:

  • Relevant fundraising, M&A, and partnerships.
  • News, reports of note, and some of the coronavirus-related developments in real estate. 
We hope that you enjoy this Smart Building Insight newsletter. We look forward to hearing from you.
About Our Practice

Aamidor Consulting provides product management, product marketing and strategy advisory services to software vendors, building owners/operators, and investors. You can work with us in a variety of ways:
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Investment News

  • New funding rounds:
    • SmartAC.com, which has sensors to install and monitor equipment performance, raised $10M in its series A.  The product appears to be marketed at residential and consumer markets. On that note, see this summary of health/wellness features in high rise residences, from Mansion Global.
    • Upkeep, which makes facility management software for manufacturing, healthcare, food production, distribution sites, raised a $36M series B. The world of FM software is vast and we see it continuing to align with energy and management and broader building IOT. This presents a growth opportunity for incumbents but also enables a great deal of value to be delivered to end users. 
    • Envoy, which got its start as a visitor management offering, raised $20M and an additional $10M in debt for small acquisitions. The firm also launched "Protect" which is focused on safely reopening offices. We've been skeptical of Envoy's approach beyond the visitor management offering - it just appears to be a range of "nice to have" offerings - and some of the Protect offering already is handled by CMMS products. The article also validates some other points we've heard and shared in past issues: renewals remain stable but new business has dried up. 
    • Our friends at VergeSense raised $9M from Allegion Ventures - and past investors JLL, MetaProp and others joined the round. In other news, Density, which makes comparable sensors, noted that bookings increased 5X following the March/April shutdown.
  • Taronga Ventures closed its RealTech Ventures Fund focused on proptech. Participating are Dexus, PATRIZIA, and CBRE.
  • It isn't really a technology play, but WeWork rival Industrious looks to an IPO.
  • Acquisitions:
    • Schneider Electric announced that it is acquiring RIB Software, which is focused on the AEC market. This isn't such a bad move, when you see all the digital twin products being launched in the market. 
    • Savant, a high-end smart home vendor, is buying GE Lighting
    • It's tangential to our industry, but Pearce Services, which provides maintenance for telecom infrastructure, is buying World Wind & Solar - a provider of repair and maintenance services for utility-scale renewables and EV charging. Pearce also announced a partnership with PE firm New Mountain Capital at the same time.
  • New partnerships:
  • PropTech angel investor Matt Knight has been busy writing a few good pieces - the first on the industry's move into "PropTech 3.0", and the second on the importance of technologies to save on real estate operating costs. This is not unlike the points made by Gridium, and dovetails with our article on a smart building stimulus (how do we address the first costs?)
Industry Resources

Aamidor Consulting offers a few up-to-date resources to help smart building stakeholders monitor the market:
  • M&A Tracker: A list of relevant transactions. 
  • Partnership Tracker: A summary of all the partnerships and alliances announced.
  • Investment Activity: Firms raising money in this market. COMING SOON!

See our homepage to learn more about our the full breadth of our offerings.
  

Noteworthy Articles, Reports and News

  • Memoori published a report on smart buildings and the impact of Covid-19. We enjoy these reports - it's the first quantification we've seen of the drop in market size for smart buildings and then the subsequent growth in the following years. Anecdotally, it seems like smart building spend is holding steady, though even a 2-3 month pause in procurements, across some potential buyers, likely will lead to declines.
  • Good interview with Sam Zell on Bloomberg about valuations, real estate and Covid-19. Same with this one, with Brookfield's CEO Bruce Flatt.
  • WiredScore, which rates internet connectivity in commercial real estate space, announced that it is developing a smart building standard. The firm notes that it is the "first", however there are other efforts already in motion. A standardized definition and quantitative methodology to assess smart buildings is a good thing: we support it. But, we aren't convinced the Wired Score model (a building pays for an inspection and certification of internet connectivity infrastructure) will translate to the significantly more complex world of smart buildings. 
  • Elevators appear to be a choke-point in office reopening.
  • CoreNet Global held a virtual hackathon focused on Covid-19.  It's a bit hard to navigate to each of the ideas, but they are interesting. Our friend Drew DePriest was the leader of one team with an interesting autonomous workplace idea
  • In Europe, a few grid operators announced winners to a data access competition they ran. Specifically, they were looking for innovative products that used cross-border energy data (two or more EU countries).
  • Sustainability in focus: Larry Fink and BlackRock continue to take a leadership role on climate change, as this interview with McKinsey demonstrates
  • Product launches:
    • Augury, which makes machine health sensors used in buildings (among other places), announced a new offering backed by Hartford Steam Boiler (HSB), which focuses on predicting repairs and offsetting the cost of failures that are not identified by the offering. We see significant alignment between smart building technology and insurance, so more announcements like this are likely.
    • HqO, a tenant amenity app, launched HqOS, which is a marketplace of third-party apps designed to serve as a single stop for property management. Missing from the list is anything HVAC, power or lighting related, though property managers may not really need visibility into those systems. We think that there will be more marketplace approaches like this, as small firms seek new channels to market, which those with more traction look to expand their share of wallet. The motivations are not so different than what we think will drive a wave of consolidation late this year or early next year.
    • Qualcomm's facial and temperature sensing cameras can now be connected to building access control systems
Our Firm in the News
 
If you are interested, here are all the articles we've published.  
 
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