The Interoperability Challenge in PropTech: Bridging the Gap Between Tenant and Building Apps
As the PropTech industry continues to evolve, the challenges it faces go beyond just funding issues. The broader macroeconomic environment is impacting some of the largest segments of the real estate market. For example, the residential sales market is struggling with historically low inventory and the highest interest rates in 30 years, while the office market is being reshaped by hybrid work models that have led tenants to reduce their space requirements. Additionally, the tech sector, which had driven much of the leasing demand over the past decade, is now facing a downturn as technology valuations decline.
Despite these headwinds, PropTech’s long-term prospects remain promising. There’s still considerable work to be done to modernize the real estate sector, and we remain optimistic about the potential for innovation. However, one pressing issue that could slow progress is a lack of interoperability between different PropTech solutions—particularly between tenant engagement applications and building-specific applications.
The Rise of Tenant Engagement Apps
Tenant engagement apps have gained significant attention and funding in recent years. These platforms are designed to enhance the tenant experience in office buildings, helping property managers offer services that attract new tenants and increase the likelihood of renewals. These apps provide tenants with convenient access to building features such as elevators, doors, and amenities. They can also facilitate services like ordering food, booking meeting rooms, and tracking air quality, all while helping building owners track ESG compliance and occupancy data.
While these apps are relatively new, they have become increasingly competitive, with several well-funded companies rapidly gaining market share. The typical target clients for tenant engagement apps have been building owners and property managers. However, some companies are now shifting their focus to corporate tenants, offering customized solutions that allow businesses to consolidate access and management across multiple office locations. This is a game-changer, as many businesses would prefer to use a single app across all their offices instead of relying on separate apps for each building.
The Interoperability Gap: A Growing Issue
Despite the clear advantages, the lack of interoperability between tenant-specific and building-specific apps is creating significant challenges. To illustrate this, consider a law firm with 500 employees spread across six offices in different cities. The firm decides to implement a dedicated tenant-specific app to streamline access, improve communication, and gather valuable data across its locations. This app would integrate with the firm’s existing software systems, allowing employees to access company-wide resources, book meeting rooms, and submit IT support tickets, all while providing the firm with valuable insights into leasing, renewal strategies, and ESG compliance.
However, the six offices are located in buildings where each landlord has deployed a different building-specific tenant engagement app. This creates a problem: The law firm’s app cannot give employees access to the base building features (such as elevators, security, and amenities) unless they use the specific building’s app. If an employee switches to the building’s app to access these services, the data generated by that interaction is not integrated with the law firm’s app, meaning the firm misses out on valuable insights.
The Growing Complexity of Hybrid Work
This problem will only intensify with the rise of hybrid work. Many employees are no longer tied to a single office location and may work from home, co-working spaces, or various other locations throughout the week. For example, a typical hybrid worker might follow this schedule:
- Monday: Work from the Midtown office
- Tuesday: Work from home
- Wednesday: Work from a co-working space
- Thursday: Work from the Midtown office
- Friday: Work from home
In this scenario, the employee will need to use multiple apps just to access different workspaces—such as the law firm’s app, the building app for the Midtown office, the building app for the co-working space, and even a separate scheduling app for booking desks in the flex space. Since none of these systems would be connected, the employee’s experience becomes fragmented, and valuable data remains siloed. In the worst case, the employee may simply opt out of using any apps at all, choosing to carry physical access cards instead.
The Importance of Seamless Integration
The lack of interoperability between tenant apps and building apps presents a major hurdle to improving tenant satisfaction and operational efficiency. If these apps are designed to enhance the user experience but end up creating friction or confusion due to their lack of integration, users will quickly abandon them. Without widespread adoption, the data collected by these apps will be incomplete, rendering them less useful for property managers and corporate tenants alike.
The success of these platforms hinges on their ability to integrate smoothly with the broader PropTech ecosystem. This requires developing industry standards for interoperability, enabling different applications—whether they focus on building management, tenant engagement, or corporate-specific needs—to work together seamlessly. Only then can the PropTech industry unlock its full potential, providing tenants with a more cohesive experience while giving property managers and corporate tenants the insights they need to make informed decisions.
Conclusion
The PropTech industry faces significant opportunities and challenges in the coming years. While the rise of tenant engagement apps has the potential to transform the way we interact with real estate, the lack of interoperability between these apps and other systems threatens to slow down progress. As the sector continues to evolve, it’s essential that all players work together to establish common standards and ensure seamless integration across platforms. Doing so will unlock new efficiencies, enhance user experiences, and provide valuable data that can drive smarter decision-making for everyone involved.
For the record, we are a fan of both the Building specific Apps and Tenant specific Apps, and we are confident that they both can add tremendous value to all parties. However, until the issues of interoperability are resolved, there is most likely going to be a lot of frustration and confusion between landlords and tenants.
The scenario described above is just one example of compatibility issues that are created when many different technology solutions are launched without an agreed-upon industry standard. Unfortunately, I foresee these issues only increasing until these interoperability issues are solved for, and/or until mass consolidation leads to 1 or 2 companies that own the market (similar to IOS and Android in the mobile operating system industry).
The CRE industry is heading in the direction of fully connected smart cities where the lines between live, work, and play will continue to blur. The issues of interoperability will become more pronounced and impactful during this transition.