Interview: Data is driving digitisation
Digitally savvy players in the real estate industry are now using artificial intelligence as the default choice for making their business processes smart. Union Investment, for example, deploys an AI-supported solution provided by Eucon for invoice management. In the following interview, Dr Lars Scheidecker (Union Investment) and Heike Gündling (Eucon) explain the rationale.
Dr Scheidecker, digitisation presents real estate companies with a range of challenges. What’s your strategy for tackling them?
When it comes to digitisation, our focus is primarily on solutions that have the potential to become the industry standard. If the real estate industry can agree on standards, everyone would ultimately benefit from a coordinated approach.
Ms Gündling, as a digital SME your company has already helped the automotive and insurance industries to go digital. You are now working with the real estate sector. What do these industries have in common?
We are currently in the process of becoming an increasingly data-driven economy. In our opinion, it doesn’t make sense for data to be left in individual industry silos. Data collected in the automotive sector may also be useful for insurance companies, for example. Insurance companies are the link for us because they insure both vehicles and buildings.
Data management and digitisation obviously play a key role here. How will intelligent automation of processes simplify real estate management?
The real estate industry is awash with data collection activity and repetitive processes, but unfortunately they have been largely unstructured up to now. Automation by means of artificial intelligence could significantly streamline many processes. Since these digital solutions are usually provided by third parties, it’s critical for real estate companies to operate in a genuinely collaborative manner. That is particularly true when it comes to data transparency, by which I mean ensuring that data can be accessed and exchanged easily. Here again, standardisation is key.
Exactly. And before I embark on large-scale digitisation of my processes, I first of all look for relevant similarities. There needs to be a degree of commonality. Leases, for example, and also invoices, which in our case relate to our real estate funds, are broadly similar around the world and therefore can be read very easily by machines.
How exactly are data and digitisation driving forward processes at Union Investment?
I can name three main areas. Firstly, we are helping to establish industry standards for data rooms, such as through our involvement with the Society of Property Researchers (gif). This work has also influenced the way we manage data rooms ourselves and we have further improved our processes in this area. Secondly, digital energy monitoring is an important issue for us. We are aiming to make our real estate portfolio virtually climate neutral by 2050. To achieve this ambitious goal, we need data that tells us precisely how and where our properties can be improved. The third area is payment and invoice management for our real estate funds. We have worked together with Eucon on this to develop a very effective solution that has the ability to become an industry standard within the real estate sector.
How does the Eucon solution help to create an automated invoicing workflow?
Our actively managed commercial property portfolio contains around 400 properties that need to be managed as professionally as possible in the interests of investors. There are also many passively managed investment funds on the pooling vehicle and Service KVG side, where Union Investment has seen strong growth over the past few years. Eucon ensures that all incoming invoices are correctly assigned to the relevant funds and assets (properties and holding companies) and that the entire invoicing process is completed quickly and efficiently along a fully digital path.
I would particularly like to emphasise the collaborative approach here. Union Investment incorporates its service providers, such as property managers and facility managers, into the invoicing workflow. Our solution analyses each individual invoice and automatically suggests options for further processing and allocation to an account. These processes are then carried out by the relevant staff in the same system. That’s the classic way of using a digital platform, which we are all very familiar with from online shopping, but it’s still not as common in business environments as it could be. We see this as one of the biggest growth opportunities for the real estate industry.
We touched on it before: anyone who wants to use artificial intelligence effectively needs to create platforms and build ecosystems. How does that apply to the real estate industry in Germany and Europe?
If data is the raw material of the 21st century, then transparency and intelligent analysis of this data will become the key principles of successful business models. It’s astonishing that the big tech companies with their huge data sets are only now beginning to discover the real estate industry as a field of activity. Leveraging data allows a better understanding of user requirements, which in turn allows better planning, construction, operation and management. The German and European real estate industry will be in a strong position if platform providers can succeed in establishing themselves here under the leadership of large asset managers like Union Investment, for example.
I share the view that the principles of the platform economy will increasingly be adopted in the commercial real estate industry over the next few years. There are already signs that this is happening. Digital ecosystems will also be very important. One of the questions that arises is who will provide the digital service interface to tenants of commercial properties. From the perspective of portfolio managers and fund managers, the ability to generate additional income is also a factor here. Invoicing management likewise offers attractive opportunities for developing available solutions into a platform.
Do you think your platform could become accepted as the market standard across the industry?
Having worked with Eucon across many areas to develop this solution for real estate processes, we believe it would be sensible for Eucon to make the solution available to the wider real estate industry beyond Union Investment. We are in favour of this approach, not least because Union Investment is rooted in a cooperative and collaborative tradition.
We are already taking steps towards standardisation in the German real estate sector. I believe the recently adopted data management guideline produced by the Society of Property Researchers (gif) is a real milestone here. In light of the competition from America and East Asia mentioned previously, there is an urgent need to press ahead with applying standards.