New players enter the PropTech industry all of the time. Whether they are launching a new spin on existing technology, or an innovative new solution, rarely is it a newsworthy event. It takes time to execute a go-to-market strategy, and although there will always be early adopters, mass adoption never happens overnight. However, every once in a while an established company enters the space that has the ability to make a huge splash. And that is exactly what is occurring with Apple in PropTech.
In fairness, Apple has been playing a part in the PropTech industry for years since most companies that service the Real Estate sector offer an IOS App, but Apple is now getting directly involved in the industry and the implications are enormous. Apple announced last year that they are finally opening up Near-Field Communication (NFC) for Access Control in the Commercial Real Estate industry.
When most people think about access control, they think of the proximity cards and fobs that they use to get into their office. These types of plastic credentials are still carried by millions of people in the workforce, but a seismic shift began to take place about 7 years ago with the launch of digital credentials. A digital credential refers to the use of a cell phone (instead of a card or fob) to grant access to a secure location (doors, turnstiles, elevators…). Many companies have rolled out digital credentials over the past few years, and while they each have their own unique twist, most of them operate on the same type of technology: Bluetooth Low Energy (BLE). BLE is a feature that comes standard with every smartphone, regardless if it operates on IOS or Android. Both Apple and Google permit third party developers to build solutions leveraging their built in BLE feature, making it an ideal technology to power digital credentials. When an access control app is opened and within range of a card reader, the door unlocks and access is granted. In addition to added convenience, digital credentials can offer benefits that you cannot get through a proximity card or fob such as location based services. Additionally, credential management becomes infinitely more convenient for occupiers and property managers who historically had to meet with every employee in-person to distribute, collect, and track hundreds (if not thousands) of plastic credentials every time an employee was hired, fired, or misplaced their existing card or fob. Lastly, since there are many different formats of physical credentials, an employee that has access rights to work from different offices across multiple cities often needs to carry a stack of cards with them.
NFC technology is not new, but Apple has always restricted its use to ApplePay. Android has permitted NFC for other applications, but companies have been reluctant to utilize it for purposes such as Access Control because more than half of the US population owns an iPhone, and they would be excluded. Now that Apple is permitting developers to build access control apps that utilize NFC, the game has officially changed.
There are pros and cons to utilizing one technology over the other for access control. The benefit of using BLE is its read-range. BLE read-ranges can be customized to work from distances ranging from a few inches to as far as 15 feet. This flexible read range can activate a wide range of experiences such as hands free access. A person can keep their phone in their pocket and unlock a door without the need to hold their phone up to the reader. This can be very convenient when you are carrying boxes (or cups of coffee), so that you do not need to be a professional juggler to figure out how to take your phone out of your pocket and hold it up to a card reader in order to open a door. Other benefits of a long read-range include opening garage gates from a distance so that you do not need to come to a complete stop and roll down your window while holding your phone out of the car.
NFC’s read range, similar to an access card or Fob, is limited to a few inches. However, unlike BLE which can offer an inconsistent experience that can be affected by surrounding conditions, NFC works consistently every time. But, if the only difference between BLE and NFC were limited to read-ranges and consistency, this wouldn’t be much of a story. What makes Apple’s announcement such big news comes down to one thing: Apple Wallet.
If you have purchased digital tickets to a concert or sporting event, or if you store digital credit cards on your phone, then chances are you have used Apple Wallet. Apple’s NFC technology is fully integrated into their digital wallet. Utilizing a digital credential to access your office is just the start of Apple’s vision. Ultimately, the Apple Wallet will hold all of your keys and passes to access any secure location that you use on a daily basis such as your home, car, and garage. Additionally, the Apple Wallet can hold digital credentials to places that you need on an Ad-Hoc basis such as a hotel room, an Airbnb, or a rental car. If you are visiting a customer’s office or staying at a friend’s house, your visitor pass or digital key can sit nicely into your Apple Wallet as well. Once an authorizer approves your credential, all that you need to do is show up and you are good to go.
Many businesses already offer digital access through their company branded Apps. If you are spending the night at a Hilton hotel, you can download the Hilton App and use their digital key feature to access your room.
But none of these Apps are interoperable, and if you need to download dozens of different Apps (and open up each one every time you need to use it), the lack of convenience outweighs the benefits, and adoption remains low. The physical experience of opening a door with NFC is not differentiated enough from BLE to make any noticeable difference, but the game changer is Apple Wallet, and that is only available when using NFC. I am convinced that within the next few years, the only thing that people will carry with them is their smartphone. No more keys, credit cards, identification, or any other physical items will be needed; your phone will enable every task and activity that a person experiences during their daily life.
New technology rarely delivers benefits without negatively affecting other industry players. This is the exact reason why innovative tech companies love to use the word “disruption”. NFC is no different, and it has the possibility of disrupting a growing segment which has become one of most popular new offerings in the commercial real estate industry over the past few years: Tenant Engagement Apps.
I have written extensively on Tenant Engagement Apps in the past and I remain a huge fan of these platforms. My primary responsibility at my job (I’m a Managing Director at Kastle Systems) is to continuously meet with the leadership teams at the nation’s largest CRE and Multifamily operators, and the topic of Tenant Engagement Apps comes up in almost every meeting that I have. Almost every major commercial portfolio owner has either deployed a tenant app, is in the process of testing multiple apps, or is strongly considering purchasing one for their portfolio. Competition is so fierce that industry heavy weight VTS spent $300M in the past year acquiring two of these companies (Rise Buildings and Lane). Other leading App developers have raised hundreds of millions of dollars from venture capital firms over the past few years as they all race to develop differentiating features as well as to gobble up as much market share as possible.
These Apps offer a wide array of valuable services that drive tenant delight, build loyalty between landlord and tenant, and collect data to optimize operational efficiencies, reduce costs, and attract and retain tenants. The pandemic has turned the commercial real estate industry on its head, and with so many employees working from home, real estate companies have craved solutions that allow them to effectively communicate with their tenants regardless of where their employees are working from.
The biggest challenge that Tenant Engagement Apps have faced to-date has been adoption. These Apps consolidate many services that had been available for years, but required the use of dozens of single purpose apps. For example, tenants can order food, register visitors, call an Uber, and communicate across their tenant base about everything from social events to emergency notifications. The common pushback that I hear from occupiers resistant to adopting these Apps has been, “Why would I order lunch from our landlord’s App when I can just continue to use DoorDash”. Then, the magic bullet was discovered: Access Control.
Tenant App providers realized that if they built access control into their platform, it would immediately accelerate adoption. If a tenant’s employees need to use the App to park their car, access their building, get through turnstiles, call an elevator, and get into their suite, they would create a forcing function to get users to open the App and interact with it. And since the occupiers of these buildings need to engage with the App multiple times every day, the likelihood is that users would start leveraging the other services that the platform offers.
The need for seamless access has accelerated along with the popularity of hybrid work and flexible real estate. For example, I may work from home one day, in my office the next day, and across a network of different flex spaces such as WeWork, Regus, and Industrious on the other days. The last thing that a worker wants to do is spend time checking in at the front desk, having their license scanned, and waiting for a representative to meet them in the lobby and escort them to their workspace. The dream has been for employees to carry a single credential that grants them seamless access to every workspace or meeting room that they plan to work from on any given day. Unfortunately, this dream cannot be achieved with BLE.
As mentioned, I honestly believe that many of these Apps provide real value to their users. In addition to benefiting their tenants, building operators benefit by collecting valuable data to increase operational efficiencies, cost savings, optimize energy usage, and ultimately to increase NOI. These App providers have partnered with access control companies by embedding their SDKs to seamlessly enable mobile access with BLE Technology. With Apple’s recent opening up of NFC, these App providers can and will now include NFC powered access control just as they did with BLE. Most users likely won’t know or care that they are using a different technology (NFC vs BLE) to power their Access Control, but it is this very technology that will create the biggest headwinds that Tenant Engagement Apps developers have ever faced. The issue is not about the reliability or functionality of NFC, but rather the way in which users interact with it. The issue is not NFC, it is the Apple Wallet.
When a digital credential sits in an Apple Wallet, there is no need to open an App…. it just works.. Think about how Apple Pay works today. You do not need to open an app to use it. You just need to hold your phone up to the POS solution, select the card that you want to use, and then you are on your way. The same is true with NFC powered mobile credentials. If your digital credential is loaded into your Apple Wallet, all that you need to do is approach the reader and you are granted access. Tenant Engagement Apps continue to offer tremendous value, but when the Apple Wallet is in play, tenants no longer need to open the App to enable access. Embedded mobile credentials powered by BLE are the utility that drove adoption for Tenant Engagement Apps, and if users no longer need to open these Apps to gain access with NFC, it is probable that their adoption will fall off a cliff. Remember, Apple Wallet’s purpose is not limited to accessing your office. Its purpose is to conveniently organize everything that people formerly needed to carry in their pocket, wallet, or purse.
The Future of Tenant Engagement Apps
Tenant Engagement Apps were not created for the sole purpose of access control, and their value extends well beyond this singular task. It just so happened that this singular task turned out to be the reason why users decided to engage with them. These Apps continue to offer value to tenants and building owners, but they will need to find a new forcing function to drive adoption. Some ideas may include loyalty rewards, exclusive invitations to events, and by promoting social causes such as commitments to ESG initiatives.
It is impossible to predict the future, and rarely would I pick a winner this early in the game, but this particular situation is different from most. Apple has more brand loyalty than almost any company on this planet, and with a market cap of over $2T, they can easily throw enough money at almost any problem to guarantee success. Apple is highly motivated to dedicate resources to make NFC the new standard, because the prize is colossal. For starters, the more that people rely on their iPhone to accomplish everyday tasks, the stickier it becomes and the easier it is for Apple to retain existing customers, sell new devices, and convert Android users. Secondly, the treasure trove of data that Apple can collect about the daily activities of their customers will enable them to provide more personalized experiences tailored to the wants and needs of the customer.
My assumption is that NFC will become the digital credential standard within the next few years, and companies need to get onboard with this technology or risk extinction. Commercial office leasing has become so competitive, and with so many options available to sign a lease at, there is a flight to quality. Quality doesn’t just include the location of the building, or the view from the office. Quality includes the amenities that are offered and technology that increases efficiencies and conveniences.
Apple Wallet Roll Out
Apple Wallet has created enormous buzz in the real estate industry, but since it is so new, many questions remain from property owners, developers, managers, and occupiers. Since Kastle Systems was selected as one of the very limited number of Launch Partners by Apple, we are fortunate enough to have a front row seat to the development and roll out of this exciting new technology. A large portion of my time is now spent meeting with portfolio owners and managers, working with them to determine how NFC and Apple Wallet fits into their broader strategy. If anyone reading this is interested in learning more, please feel free to reach out to me at any time. I am always happy to share my views on this latest innovation.