EBI Taps Technology to Unearth Challenges Investors May Face Down the Road

By Dennis Kaiser

Technology can be a critical tool to aid companies making commercial real estate investment decisions, when used properly by experts who can translate the information gathered by drones, Artificial Intelligence (AI) or robots. Within the context of ascertaining risk an investor may face with a property in the future, there are some common issues owners face when they don’t do extensive due diligence that technology can address.

Environmental due diligence, specifically Phase I Environmental Site Assessments (ESA), in acquisitions is vitally important. An ESA, when performed according to standards, can offer certain protections to the purchaser if contamination is found on a property. An investor that purchases a property without conducting investigations in accordance with Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) standards and finds out later it is contaminated, by law could be responsible for the cleanup. The significance of retaining a proactive and vigilant environmental consulting team is also greatly underscored when considering these potential liabilities.

“Ultimately it comes down to liability and risk,” said EBI’s David Stewart. “Going through the proper due diligence specific to each building and adhering to ASTM standards should mitigate environmental risk for key stakeholders.”

Among the items typically on the red flag checklist include former or current property uses where chemicals were frequently used, such as dry cleaners, car washes, automotive facilities, gas stations, etc. EBI notes that underground storage tanks come up most often.

Today, technology is often being used to help efficiently uncover issues early. Mr. Stewart said, “Traditionally, due diligence was a tactile human experience with the assessor focusing on what they can see, hear, smell, touch, etc. on the property. This is still absolutely essential, but can be augmented and supported using technology.”

The best application EBI has found so far is drones, because they are able to survey large areas that would take more time and resources to do on foot. “You can also augment drone footage with specialty technology to gather infrared and thermal data to get a better idea of how building systems are performing,” said Mr. Stewart. “We know there are companies out there using drones to do autonomous data collection for dangerous locations, such as deep within mines, where it’s safer to send a drone than a human.”

Infrared cameras can be used for photographing building systems, in particular HVAC and electrical panels. These advanced imaging technologies can allow assessors to see where load and heat loss is occurring, and then work with the building owner to improve operations.

Although not currently being used in due diligence, augmented and virtual reality are becoming very popular in the commercial real estate experience, and EBI’s Stewart believes it’s likely consultants will use these tools to add another layer of sophistication and data to reports in the future.

AI is increasingly feeding into the commercial real estate world. “Right now, we operate with best in class databases, and many of these are increasingly using AI to improve work flows, processes, and to provide better data to our clients, faster,” said Mr. Stewart. While EBI is not yet utilizing AI, it’s certainly becoming a trend in the space.

Another trend EBI expects to see: implementation of blockchain. It is likely to play a role in the CRE space in the not too distant future, as well, handling such tasks as keeping track of and validating all the pieces of information tied to properties as they change hands.

Google glasses and other similar technology are enabling field assessors to communicate with clients and technical experts in real time, notes Mr. Stewart. These technologies can provide alerts to clients sooner when an issue is uncovered on-site, and allow them to call in expert advice without the time sink of getting them out to the site or bringing video back to them.

That said, these technologies hold the potential of being used incorrectly or not producing the information crucial to making savvy investment decisions. Mr. Stewart said, “The biggest caution would be to make sure you hire a consultant who is not replacing human expertise with technology, but is rather using it to enhance their work and the clients’ experience.”

For instance, drones can miss things like the smell of gasoline, indicating contaminated soils or a leaking tank that a drone would otherwise miss. Conversely, drones can zoom in and examine finite details on a roof that a human may have otherwise missed. “If you don’t have someone instructing the drone operator where to take a second look or spend more time, you may miss critical information that can only be learned from decades of experience,” said Mr. Stewart.

The proper use of technologies can result in better data being created faster. And, ultimately, these more interactive and immersive experiences can help to reduce costs for commercial real estate investors.

For comments, questions or concerns, please contact Dennis Kaiser