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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   December 2017

Prepare for the Internet of Things

The next tech revolution affecting the mortgage industry is already unfolding

Every industry must race to stay ahead of the latest technological innovations, and the mortgage business is no exception. As each new technology gains traction in the marketplace, leaders who want to stay competitive must determine how it will impact their business and then prepare to make the change faster than their competition. This applies to mortgage brokers operating in the commercial real estate market.

The Internet is arguably the most significant business revolution since air travel. Then came mobile technology, followed by the app economy.

Now the internet of Things (IoT) is on the cusp of changing everything. As the change takes place, mortgage professionals — focused on multifamily, retail, lodging, industrial and office assets — will have the opportunity to play a critical role in the real estate ecosystem, serving as the central intermediaries connecting developers and owners to the capital they need in order to integrate this evolving technology with commercial properties.

Connected objects

The IoT is a term that describes connecting physical objects, such as kitchen appliances and climate-control systems, to the internet. The goal is to create a “smart” network — and ultimately “smart” spaces.

These spaces can be as self-contained as a single kitchen or involve an entire home. At scale, the IoT can lead to an entire civil infrastructure operated through a smart grid that delivers utility services and a smart freeway that controls the movement of autonomous vehicles.

Put simply, the IoT supports an automated world that anticipates our needs and enhances daily life. According to business-research company Gartner Inc., some 8.4 billion objects will connect to the IoT by the end of 2017.

Bottom-line impact

Without question, convenience and operational efficiency are the most obvious impacts that the IoT will address. Organizations that maintain IoT-enabled properties can realize significant return on investment by simultaneously reducing their operating costs and offering more attractive, safer spaces.

Imagine an apartment building that can use real-time data analytics to detect overuse of a specific floor’s heating or air-conditioning system and schedule maintenance before the system breaks in the middle of the night. Picture a residential community where the manager can optimize LED lighting based on the amount of sunlight reaching specific spots at different times of the day. Think about a retail store that can automatically schedule restocking when a product runs low. This is the promise of the IoT.

Then, there is safety. Inspections can be dramatically streamlined when climate control, plumbing, smoke detectors and lighting systems all perform their own regular diagnostics — and self-monitoring appliances can red-flag problems, such as the refrigerator defect that sparked the tragic London apartment fire this past June.

These are some examples of potential applications, as well as cost reductions, that will encourage more investors to seek out IoT-enabled properties and more developers to see the IoT as a necessity rather than a curiosity.

Changing spaces

If applied correctly, the IoT also can remedy challenges many properties face in terms of security, procurement and construction safety. Autonomous machines can operate in hazardous or dangerous areas of a worksite; supplies can be re-ordered automatically, saving time and money; sensors can detect potential sound or seismic dangers; a worker can be notified when he or she ascends to a certain height without a properly secured harness; and expensive tools that are stolen can be easily tracked once plugged into the IoT.

Smart spaces change more than the way electronic devices work. They change the way we interact with space itself. A parking facility linked to the IoT can automatically notify a towing company when an unauthorized vehicle is illegally parked. It also can track average parking times to determine when a given area is likely to see cars move or indicate where there might be an available space nearby. In addition, as self-driving cars become more common, the IoT will be able to route and maneuver them into smaller parking spots, thereby reducing the need for costly lot expansions.

Indeed, the construction phase is the best time to integrate the IoT into a property. A facility built to leverage this new technology from the ground up will be able to offer the benefits of the IoT immediately without requiring tenants to implement it themselves. Therefore, construction loans and loan underwriting will likely become increasingly inclusive of investments related to the IoT.

•  •  •

 The IoT is only the latest major innovation the mortgage industry needs to capitalize on, and it won’t be the last. Traditionally, property owners who adapt to new ideas quickly will develop infrastructures and best practices that make them more agile as new ideas continue to materialize.

The IoT integrates human behavior with the spaces we occupy and the items we use. By embracing the IoT’s potential today, mortgage professionals can position themselves as the critical facilitators for owners or developers looking at the IoT as a power tool to unlock maximum value from their investments in the future.


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