WHAT ARE COMMERCIAL REAL ESTATE LEADERS REALLY THINKING?
Discussions on some of the prominent topics in the commercial real estate industry such as connectivity, wireless carrier relations, property technology (proptech), 5G, and Citizens Broadband Radio Service (CBRS) were captured in one spot during the “View from the Top” panel at the Connected Real Estate Summit event in February.
Sponsored by ANS Advanced Network Services and introduced by Paul Fettuccia of ANS, Wells Fargo Securities Managing Director and Senior Equity Analyst Jennifer Fritzsche moderated the panel that featured some of the foremost voices in the CRE and connectivity industries. The panel included Tavistock Development Company SVP Business Development & Sales Ken DiScipio, Tishman Speyer Sustainability and Utilities Senior Director, Jonathan (JP) Flaherty, Rudin Management COO and CTO John Gilbert, and BOMA LA Chairman Marc Gittleman.
“(Connectivity) clearly is changing. The ecosystem is rapidly developing,” Fritzsche said before asking the panel for their thoughts on the topic of connectivity as a whole.
“LOCATION, BANDWIDTH, LOCATION”
There was a time a property’s location solely dictated its chances of being leased. Today, if a CRE owner cannot offer tenants wireless connectivity, they’ll have difficulty occupying their building.
“(Connectivity) is the number one item that attendants ask for—how much bandwidth can I get,” Gilbert said. “Because if you didn’t have that connectivity, could not access those global market places, couldn’t digitize your product and get it out to the world, you were not going to survive.”
Seamless wireless connectivity is also critical when it comes to communities and “smart” cities. DiScipio, for example, noted how Tavistock needed connectivity for three separate components in Lake Nona, the community it developed—the residents, CRE occupants and visitors. Strong connectivity was required so people could start a phone call in their car, get to their office, or leave their house.
“It’s been very important for us to offer that bandwidth as we built out the project,” DiScipio said. “One of the first moves we made in 2006 was to run fiber, so we’ve got 23,000 miles of fiber at Lake Nona.”
Meanwhile, Flaherty and Tishman Speyer recognized the importance of the carrier-neutral risers. His company implemented that infrastructure in most of its buildings so its tenants could choose multiple carriers and get the speeds that they wanted.
“That was not by any means easy, but we could control that outcome,” Flaherty said. “Because I can control from the point of entry in the building, to the closet on that floor. Then the tenant runs to that little box, and we’re good to go.”
The challenge however comes in places where Tishman Speyer cannot control its destiny, according to Flaherty. This typically happens in the wireless space where the company has to work with carriers. Tishman Speyer has found more ease working with some of its older buildings because cellular signals move through them without issue. The same could not be said for newer buildings, which are often “very efficient glass boxes” that the market craves. They’re great for energy efficiency, but unfortunately block a lot of cell signals.
“The real challenge has been building new buildings that are very efficient and have lots of glass,” Flaherty said. “How do you actually provide wireless connectivity? In a world where I can’t control that outcome, I have to work with the carriers. How can you make those investments and understand how you’re going to be able to play that out over a long period of time?”
Gittleman addressed the connectivity landscape from the financial aspect. His focus is on how investors, building owners, operators and ultimately the tenants who all benefit from it.
“We’ve all heard lots of different models when it used to be the carrier paying for it, but the carriers can’t pay for it anymore because you won’t tolerate your cell phone bill being any higher,” Gittleman said. “So what I focus on is, how do you solve an equation for giving a tenant, because that’s our shared customer, a better value proposition for being in a building where you collect more rent?”
“MAKE SURE YOU HAVE A GREAT RELATIONSHIP WITH ALL OF THE CARRIERS”
“At the end of the day, we’re both feeding the same master,” Gilbert said when the panel was asked about their relationships with carriers. “We’re giving (the tenants) space, they’re giving them connectivity. If we’re not working together, then all we’re going to do is point fingers at each other and does not solve anything. We try to be as friendly as we can and ultimately get them to understand our side of the equation.” DiScipio noted Tavistock’s strong relationship with Verizon, but is working to get a “champion” within each carrier to help with getting into desired areas.
Meanwhile, Flaherty explained the signal blocking issue in his company’s glass offices was not carrier specific, but a problem with radio waves in general. He also agreed with Gilbert’s sentiment that it’s critical to maintain a good working relationship with carriers—especially since carriers are often CRE owners’ customers and rent space from them.
“In general, we’ve found that you have to get in with the carriers regardless—we’ve got three carriers and it does not appear any new ones are coming. If there are three players in the space, you cannot be in the business of alienating any of those guys.”
“Now we’re at a point where unfortunately, most of what I see as a singular direction of the ownership groups is trying to educate carriers on how they need to behave in the building,” Gittleman added. “Carriers have figured out they don’t need the owner’s help getting it to the building. Now owners are starting to understand not only the rights they have, but also the need to deliver services to the tenant. It’s the ownership groups that are pushing the carriers to say, ‘Look if you’re going to come into our building, we need to meet you halfway. Here are the rules you’re going to follow. In turn, you’re going to be one of three or four carriers, and you’re going to get the customers.”
“TECHNOLOGY HAS TO SOLVE PROBLEMS PEOPLE CARE ABOUT”
In 2009, Rudin Management was presented with an opportunity to equip its buildings with a pre-power outage warning system. If a building’s power was about to go out, utility company Con Edison could send a signal to the elevators and let riders off at the nearest floor so that they wouldn’t be stuck inside. Rudin liked the idea of the warning system, unfortunately, the warning would come 30 seconds prior to the outage.
“We walked out of the meeting and I said to my SVP of Operations, ‘How are we going to do that in 30 seconds?’” Gilbert said. “He said, ‘I have no idea.’”
The solution came from Gilbert’s iPhone—Rudin’s buildings needed an operating system. That way, the company could take the external data feed and make it actionable in 30 seconds. Rudin built a single integrated platform where all of its buildings’ data could live.
“Innovation really starts with a question that needs an answer, and that leads to another one—that’s what innovation is all about,” Gilbert said. “Under a single rubric, Bill Rudin made it clear when he said, ‘Gilbert, I have no idea what you guys are doing, but unless it helps me attract or retain customers, I don’t care about it.’”
Tavistock has also recognized the importance of investing in technology. The company is currently investing in companies that are incubating 5G. Meanwhile, it has also invested in View Glass, a “smart” glass manufacturer and put its product in 300,000 feet. These types of innovations have enticed 18,000 people to Lake Nona’s residential area where 29 percent of residents are running businesses out of their homes.
“It’s something we did not think would ever happen,” DiScipio said. “All of a sudden, we have this millennial workforce that’s moved in. All of the things that are happening where we invest in technology are paying back in the long term. It’s important that we stay on top of it and offer (the community) the next level.”
“CBRS—MANNA FROM HEAVEN?”
CBRS is a hot topic in the CRE industry because it will give building owners an opportunity to have private LTE in-building networks. Before CBRS, CRE owners had to rely on carriers for LTE quality networks, and pay a premium for the data, or use Wi-Fi, which was more cost effective but less reliable. The panelists acknowledged CBRS’ emergence and are preparing for it in one way or another.
Gilbert views CBRS as an “enormous problem solver” and said Rudin is currently engaged in two lobby renovations where it is pre-engineering the lobbies to be CBRS-enabled.
“As we begin to build out, we like to say buildings have always had a heart, (engine room, boiler room, HVAC system) now they have a brain (NANTUM), and the final frontier is a central nervous system,” he said. “The central nervous system is ultimately that wired and wireless network that’s going to be grabbing data as granular as we possibly can to bring back to the brain to make that building smarter, faster.”
“Will it get noisy? Probably, but we’ve to figure out how to segment those networks, because now I’ve got clean spectrum, I can do my IoT stuff, provide my security piece because I can push wireless video. CBRS solves a lot of problems we’ve been bumping up against. I look at it as manna from Heaven.”
Others reacted to Gilbert’s comments on CBRS. Shane Rubin of CTS said, “CBRS, Private LTE and 5G are some of the new frontiers in wireless communications. Listening to CRE leaders like John Gilbert and Jonathan Flaherty speak on the importance of new wireless technologies gives me hope that the rapid expansion of smart buildings is quickly approaching, and CTS is excited to be part of that evolution.”
Explaining how CBRS works also needs to be figured out, according to Flaherty. He noted that industry insiders understand the concept, but there are others who don’t understand it or are even discussing it. What they are talking about, however, is 5G.
“The good news on 5G is that as far as we can tell, all we really need to do is just keep laying boatloads of fiber because at the end of the day, that fiber will solve all of those problems except for the antenna, the other end of the wire and the head equipment of the other,” Flaherty said.
Tavistock is conducting a study to see how CBRS might benefit the company, but is committed to 5G. The company is collecting “tremendous amounts of data,” has eight self-driving vehicles on hand and is working with 72 percent of Lake Nona residents who have provided their exercise habits, medical records and wearable device data.
“If you drop your phone, it’s going to diagnose whether you just dropped it, you’re having a medical problem or have an emergency and need the police,” DiScipio said.
Meanwhile, Gittleman looked at the CBRS and 5G emergence from the real estate standpoint. He recalled putting a clause in every lease that said the landlord could manage any radio spectrum in the tenant space. At the time it was just Wi-Fi, but he received a lot of pushback.
“People would say, ‘You want to tell us what frequencies and channels we can use?’” Gittleman said. “No, what we’re saying is we have enough foresight for you as the tenant to make your life as easy as possible.”
The analogy Gittleman used was a neighbor turning their music player up as loud as possible, causing others to do the same, and in the end, no one was enjoying their listening experience. Taking that potential conflict to the data space, the question is how to optimize for the building to work.
“There was a lot of foresight in that, because now when we’re talking about tenants and how they’re talking about bringing in their own private LTE, the whole regular space gets even more congested,” Gittleman said. “The one thing I continuously focus on is how do you manage that across a multi-tenant project where the tenants aren’t talking to each other, but their radios are interfering with each other.”
