Written by Lorena Tivadar
Aaron Rudenstine, CEO of ButterflyMX
For our latest interview in the Expert Insights series, we had the pleasure of chatting with Aaron Rudenstine. Aaron is the CEO of ButterflyMX, a Venture Partner at 3L Capital, and an Investor at Omaze, FilmRise, Button, PINATA, Clear Ballot Group, Parallel Wireless, Bling Capital, and Reddit.
Before that, Mr. Rudenstine was the Co-Founder of Citymaps. He is a graduate of Harvard University and received his MBA from Harvard Business School, where he received the HBS Leadership Fellowship Award. Read on for his insights.
I joined ButterflyMX in 2019 as a member of the board and was soon asked to serve in a full-time capacity as CEO. Before joining ButterflyMX, I co-founded Citymaps, which was acquired by TripAdvisor in 2016.
My career spans several titles, including angel investor, board member, adviser, author, and tech executive. From my earliest days as a B2B software product manager, I knew I wanted to be an entrepreneur and I’m especially passionate about working in commercial real estate. Proptech has the ability to change people’s behaviors and their lives for the better, and it’s one of our guiding principles at ButterflyMX.
COVID exposed the inefficient, people-intensive processes in all areas of the CRE industry and created a moment of reckoning. The old ways of operating simply wouldn’t cut it anymore. The industry has committed to change in order to increase revenues, decrease costs, retain staff, and overall operate more efficiently, while also improving the experience of everyone who lives, works at or visits a property.
The result is renewed interest and adoption of proptech. In 2022, there was roughly $32 billion in private investments in the proptech space, up 28% from 2021. Today, there isn’t a single aspect of the real estate industry that technology is not optimizing. And yet, we’re still only scratching the surface of what proptech can do. Greater proptech adoption and integration among systems, or consolidation among proptech solutions, will continue to offer greater control and insights into how buildings are used and where improvements can be made.
The industry is making significant gains in a number of areas — including efficiency, security, enhanced experience and greater return on investment — but proptech adoption is still in its infancy. Proptech adoption comes down to one word — optimization. There isn’t a CRE company today that isn’t looking to reduce expenses, create new revenue opportunities and deliver exceptional experience — and proptech adoption supports all of these efforts.
As an example, in the multifamily space, property managers are overburdened by routine tasks — showing vacant apartments, managing property access, handling unit turnovers — that can be more efficiently managed with proptech. Switching a building from keys, fobs and key cards to a mobile app-based access system makes on-site access management a thing of the past. With a mobile system, revoking property access for a departing tenant or adding a new tenant is now a seamless, automated process, rather than one that requires dedicated tools and time to hand out keys or rekey an apartment door. It’s also safer for everyone involved, with less opportunity for hardware to get lost or stolen.
This is just one example, but as the industry continues to assess the need to streamline processes and optimize operations, proptech will evolve to meet those needs, addressing acute industry problems, including labor shortages and high turnover.”
Use of proptech is as varied as the CRE industry. Self-guided apartment tours, automatic bill pay and maintenance scheduling support property managers. Water leak detection, smart thermostats, automatic lights and other energy-efficient solutions can help reduce energy costs. And, on the development side, there are drones, 3D modeling, and digital twins to streamline the planning and construction process.
One issue ButterflyMX is routinely called on to tackle is package delivery. Property managers are concerned with the volume of packages being delivered every day (and often multiple times a day) that have to be accepted, sorted and stored. On our platform alone, packages were up 82% in 2022, driven by online shopping and easy, free delivery of everything from groceries to mattresses. If building staff have to manage this volume on their own, it can take hours of their day — time they could spend cultivating the resident experience. But, if residents can instead provide a one-time code for a delivery carrier, it bypasses the need for so many hands on one package and has the added security benefit of creating a log of everyone who was in the building.
As additional hardware-IoT [internet of things] devices are installed into buildings new and old (e.g. sensors, readers, displays), property owners and managers will be able to automate processes that improve building operations. Doors will automatically open after detecting an authorized tenant, room temperature will adjust depending on occupancy, and critical infrastructure will share when it needs to be fixed or replaced.
There’s a whole world of possibility for proptech to continue to help CRE optimize every part of their operations, from granting building access to meeting ESG standards.
The commercial real estate market in New York is different from other major markets in its density, cost and age. New York remains one of the most densely populated, business-rich areas in the world. This has resulted in nearly 240 million square feet of commercial office space being built to support the local economy. The cost of living and working in the metropolitan area also continues to increase, with some estimates suggesting that it is growing faster than anywhere in the United States. And, finally, New York City is older than most other American cities, making the buildings old, too. When you put this all together, you realize there is an enormous need for property technology solutions that can provide operational improvements while driving down costs.
The commercial real estate industry has evolved from a place of work to a place of experience. Ten years ago, office spaces were developed, owned and operated to facilitate only work. Today, developers, owners, and managers know that, in order to secure top-dollar, long-term leases, they have to offer spaces that cater to more than just work. These spaces have to inspire, motivate and improve the lives of their tenants. They’re accomplishing this by partnering with providers that can offer amenities such as gyms, doggie daycare, wellness centers, fine dining, etc., to create a single place that tenants can get all of their needs met in one place.
Many new and existing CRE will become mixed-used properties. The lines between multifamily, retail and commercial/office have become blurred as consumer preferences shift. With remote work becoming a viable option, ecommerce continuing to grow, and commercial office spaces struggling to find new tenants, CRE developers and owners will build and renovate properties to match these new norms. This will provide residents and tenants with built environments that match their needs and CRE professionals with assets that attract a diversified pool of lessors.
One of the challenges facing the CRE marketing in 2023 is how spaces will evolve to meet different tenant behavior. We’re seeing this now in offices, which are being reimagined as not just a collection of private workplaces, but a place to engage with coworkers and community members. Leading office buildings can include everything from pop-up pickleball courts to world-class restaurants, event space, flex space and more.
The multifamily space has also had to evolve to meet the challenges of increased remote work. Simply building bigger apartments is rarely an option since it is inevitably more expensive and pushes rents higher. But, some developments have embraced on-site remote work areas or outdoor space that can give residents a break from their own private space. There’s still a balance to offering these amenities as part of the rent or making them a premium offering, including limiting access to only those residents who pay for them.
We are still unearthing the operational challenges of having office workers in a space only a portion of the day or week and multifamily residents spending more time at home. The rise of e-commerce and the related increase in package deliveries is just one consequence of this shift, but there are dozens (if not hundreds) more.
This shift is overshadowed, however, by low occupancy levels and rising interest rates, which have the potential to affect every corner of the CRE market.
Commercial-only real estate in New York City may have peaked in both development and occupancy. New commercial developments have fallen as a percentage of total developments and price-per-square foot of commercial office space in NYC continues to drop as occupancy falls short of supply. This could mean that the development of additional square footage of commercial-only real estate in New York City is unlikely in the next five years.
Interested in being interviewed for our Expert Insights series? Feel free to reach out to us at [email protected] or check out other articles from our series here.
Last modified: March 10, 2023
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