Deidre Woollard: This is Deidre Woollard, editor over at Millionacres. Today, I am here with William Sankey, who is the Co-Founder and Chief Executive Officer of Northspyre, which is a cloud-based intelligence platform that uses data-driven insights to predict the effects of planned and unplanned changes on overall project costs and timelines in real estate. He's got a great background in commercial real estate, been a developer and project lead for big firms like Madison Realty Capital, Macklowe Properties, and Jones Lang LaSalle. Welcome.
William Sankey: Thanks so much for having me, Deidre.
Deidre Woollard: Absolutely. I feel like you're ahead of the curve on using data to make decisions. Now, post-pandemic, everyone is data-obsessed. Do you feel like this is a permanent shift or is this just because people couldn't get into buildings for the last year or so?
William Sankey: No, it's definitely a great insight and question. I really believe the pandemic has accelerated a shift that was already underway in the previous decade. I think at Northspyre, we've really been at the forefront, and the front row of this rapid adoption of data-driven solutions. Our teams have really learned to navigate only working in this remote world, but reinforcing their operations and gaining more certainty during what has been a bit of market upheaval, to say the least. In general, I think high-skilled capital-intensive industries, if you think of some like aerospace, finance, advanced manufacturing, they've really been leveraging data, not to mention automation and AI for decades and many years. They cracked the code on how to achieve predictable outcomes with high efficiency years ago and I think those same principles are really easily applied to other industries and I guess in our case, for real estate development. I think there's so much project and portfolio data flying around, it goes and categorize and harness, maybe lives in convoluted spreadsheets on the back of people's head. I think all that data can be used to employ more proactive, faster decision-making, which is at the heart of delivering a project successfully. I agree with you, Deidre. I think we're at the start of what we could call data mania. I think there are so many ways that people are using data to drive efficiency. At Northspyre, we really expect to continue to get the forefront of leveraging data in that fashion.
Deidre Woollard: Why do you think commercial real estate has been so slow to adopt to these types of systems? Why are we still attached to our spreadsheets?
William Sankey: Yeah. That's a great question. It's a good observation and I think one that other people in the industry and even outside of the industry, there is a report by McKinsey, where they quote that something like retail and agriculture, and other industries have increased productivity by 1,500 percent over the past 50 years. Then when you turn and look at construction and real estate, productivity is barely increased at all. I think part of it is because real estate projects are complex, but every product is unique in its own fashion and way. I think that's made it very difficult in the past with older, more rigid technologies to layer that into what is unique complexity. I think today, technology in Northspyre, they're leveraging this next wave of what I like to call augmented Cloud 2.0 technologies. They're much more flexible, they're much more easy to use and to adopt and to deploy. You don't have to have a consulting come on and spend weeks and months, and years sometimes trying to onboard a complex software that's thrown around every edge case for your specific company and built in a proprietary fashion. We're leveraging this advanced flexible technologies like automation, data analytics, artificial intelligence, as the back-end and that just makes it very easy for teams that might otherwise be slow to get up to speed, to do it in a matter of days instead of a matter of months and years. I think that gracefulness of the new technology has made it easier to adopt. I think the second thing is that people in real estate are smart, intelligent. They see it happening in other industries all around them. Bloomberg terminals existed in the '80s and '90s for finance. Even in the construction industry, you had a plethora technologies around the late 2010s that really have taken off in a broad adoption. I think real estate owners they see this and they see the opportunity. What would've been early adopters a few years ago and now it's gone mainstream. It's good adoption of technology in commercial real estate. They're really seeing higher returns, they're really seeing the benefit of these decisions to leverage technology three or four years ago and they're talking to their peers in the industry. I'm really optimistic about the uptake of technology in the commercial real estate space, especially around real estate development where it's been really difficult and slow historically.
Deidre Woollard: We're starting to see commercial development pick up a little bit after 2020 when things were paused. How is this cycle going to be different? Do you think that people are going to be using these real estate systems and technologies earlier on?
William Sankey: Yeah. I do agree with the sentiment that people are using it early on and it's something that we see even across users that we talked in our own customer base. I like to maintain and it's something I've always maintained is that pandemic or no pandemic, real estate is a very cyclical industry impacted by all these macroeconomic, microeconomic influences. The savvy developers, savvy real estate team, they've always been prepared for the ups and down and unexpected things to happen. They try to account for those risks by running various scenarios of how our outcome might play out, so they can be a bit more nimble. I think what we're seeing today is that the one difference is maybe the nature of projects and the asset types have shifted a little bit. You have people may be moving away from the traditional concept, old-fashioned, cubicle office, which is a trend already happening. But you see a lot of developers focusing on mix-use residential anchor, and industrial [inaudible 00:06:55] , distribution centers. But you also see a focus on this more nuanced workplaces for corporate campuses, the Googles of the world reinvesting and a different idea of what it means to be an office and then even life sciences. I like to think that even as we settle into a new normal and even in the post-vaccine phase, I think the ways that people, they live, they work, they sample, I like to say the joys of life, they will probably somewhat different. Development teams will be making faster decisions to accommodate that. The smart ones are leveraging technology earlier and earlier in the cycle of their projects. Whether that means sometimes even in the feasibility phase all the way through the first tenants or buyers in a place. That is something that we're seeing and I think we've seen in our existing customer base, but also in the fast-growth and adoption of new customers that have come on board in the past year.
Deidre Woollard: You mentioned life sciences, which is one of the areas that we've been focusing a lot on at Millionacres. We're watching so much attention and capital go there. Are you seeing a lot of conversions to life science, are you seeing more ground-up development in that area?
William Sankey: I think the broader answer and I can narrow in and say, in the past six months that you see a lot more life science and you do see a lot of starts. But a lot of development projects have these long, multi-year timelines. A lot of them, people were thinking about doing it before the pandemic in a lot of ways. I think there's been a broader part of our economy that's been taken on like bio-technologies and health-related industry. I think we're seeing it, we're seeing our customers that are doing more projects. I don't have stats throughout these, I don't want to be too specific. But I can say I'm seeing a general trend and especially in markets where life sciences is a big thing, whether it's Boston or places like Nashville, you're seeing that continued motion towards life science as a workspace that's not really impacted by the shifting. People that work in labs have to go to the lab.
Deidre Woollard: Exactly.
William Sankey: I don't think there's a big change there in terms of remote and hybrid work trends.
Deidre Woollard: Very true. Let's talk a little bit about the rise in materials costs. I've talked to everyone about lumber lately, but I know prices for steel are going up, prices for concrete. Is this temporary or is this something that developers have to factor in and does what you do connect with that?
William Sankey: Yeah, definitely. At Northspyre, I like to think that our goal is to help teams see a little bit into the future, Maybe see a bit beyond the horizon. I think developers always are trying to account for fluctuating material costs, whether it is the industry today where you have lumber costs increasing in multiples, or even if you go back four or five years ago when there were still tariffs put on steel from China, which caused a major spike in steel costs in the industry. I think it's something that developers try to factor into their projects, at least the savvy ones. Again, they try to have various scenarios of how they can finish a project successfully, even when underlying assumptions like material costs change. One of the ways people do that or do it more easily is by using technology by Northspyre that allows you to run various scenarios or see worst-case outcomes given certain adjustments and potential exposures to higher costs with things like lumber that we're seeing today. I do hope that as we reach the end of the pandemic, we really start to see prices normalizing. But I think in terms of just the industry in general, you always see certain materials escalate in costs. It might be a brief slowdown as people reevaluate assumptions, but developers have a lot of ingenuity and they will find a way to build.
Deidre Woollard: Yeah, that is absolutely true. Let's talk a little bit about machine learning and AI. There hasn't been a ton of innovation in the real estate sector using machine learning yet, but there's so much potential in predicting outcomes and things like that. How does Northspyre factor that end?
William Sankey: Yeah, definitely. At the core of what Northspyre is that we are a technology and intelligence platform that enables real estate teams to get easier, more predictable outcomes. They do that by leveraging Northspyre's technologies like automation, data analytics, as well as things like artificial intelligence and machine learning. They do that in some way to replace what is today a very manual spreadsheet-driven process. These were a legacy software that require a lot of manual effort, a lot of data entry, a lot of manual uploads. Then the information is static. Maybe it's organized, but it's static. I think Northspyre is really transforming the way projects are delivered. I think this is one of the first times, at least on the commercial development side of things where you're seeing teams who realize the importance of predictive analytics and technologies that has some ways can act as what I like to call like a digital project assistant. I think it's absolutely the future. I think I know there's a debate sometimes that I think it shouldn't be feared. I think this technology is really designed to complement what is deep expertise in human knowledge of project managers and senior leaders on real estate firms. They have more flexibility to focus on what is the strategic direction of their projects without the hassle over a lot of the tedious administrative work or deep dive time, roll up your sleeves analysis. That's something that when you're using a technology like Northspyre which can constantly comb to your project looking for actionable next steps, challenges, and opportunities. This really gives teams are leg up on their competitors. You see companies that have started to adopt the technology and especially ones that adopted it two or three years ago, they are really starting to get out-sized returns and profits in the industry. Even more importantly, a lot of the large financial partners, whether it's construction lenders or real estate private equity firms, they are looking to partner and invest with developers who are using these technologies. Is becoming an expectation. I see this is part of the future, artificial intelligence and partnership with human knowledge and expertise to get those just like smarter, faster decision-making and better outcomes.
Deidre Woollard: I like that. Good point about traditional software in the construction industry and in real estate to some extent clunky, little bit ugly. How important is making it pretty and using data visualization and things like that in what you do?
William Sankey: I'm really happy you asked that. My background is in architecture. I'm a few lives away now, being in technology. But I think because of that, I personally always had an eye for usability and good design. I think that shows through in our philosophy for Northspyre. I think I was saying a little earlier, one of the difficult things about real estate development and real estate owners is the adoption of technology was slow in the past because one, it was just very hard. The learning curve was slow and long. Usually, that's the usability issue. That is something that's really unique about system in Northspyre where you can get 90 percent of the value of an incredibly powerful platform; AI, data automation, 90 percent of the value in less than 10 minutes of using the software. We do that by making it very easy. There's a lot of complexity in difficult things that went on in the background. But we layer that with like not only beautiful enterprise, but one that is easy to understand, intelligible, and navigate. You see teams, you even see people that may have described themselves as not tech-savvy, which most people in the industry might. You see them saying, "Wow, this is the easiest tool that we've used and I don't even know if we should call it implementation. We just picked it up and start using it off the shelf." I think that has been the present of software and a lot of other industries that consumerization of design and ease of use. I think now, especially tools like Northspyre that has now real estate owners, they have an opportunity of for the same thing.
Deidre Woollard: That brings me to another question which I think a lot of about which is construction jobs, the aging of the construction worker, traditional construction workers, not really tech savvy, started to see iPads on job sites and things like that. How do you think that innovation is going to change how we build? Do you think the construction worker of the future is computer first, camera second.
William Sankey: I like the way you put that computer first, camera second. I do agree that I think innovation that exists today is really driving and forcing change in the industry. I think even as you've seen, the more traditional commercial real estate space, they've been more traditional in the past. They are very aware that other industries are using modern technology solutions to drive productivity. This is something that McKinsey observed several years ago. I think if you look at even within the industry, people see the more transactional side or the consumer-facing sides of commercial real estate. They're probably 5-8 years ahead in the adoption of smart technologies around things like amenities, brokerage, leasing, property management. That's really only on the transactional side. Oftentimes the bigger part of the real estate industry, well, I like to say the bottom of the iceberg is the creation of real estate. Those people that are creators building the real estate that makes up our cities. I look at our customers and they are in prospect [inaudible 00:17:40] they're really hungry for modern sophisticated solutions to help deliver projects effectively. Historically, they were a little jealous. They said even the construction teams, they had technologies like PlanGrid and iPads in the field over a decade ago now. But we're still using a convoluted spreadsheet. That's no longer the case. Now you see teams that no longer have to rely on gut-driven instincts or steel spreadsheets or 150 things in the back of your head. Now you have a machine in the background that's proactively doing a lot of the legwork and allowing you to make just like these smarter decisions. What we see, I think I can say this, it's not just like an early adopter mentality anymore. If you go back when we were founded almost four years ago, you have the early adopters. But now it's really become mainstream where financial partners like lenders and investors, they just expect real estate teams to leverage technology. It's one of the few industries, if you think about it, where you can borrow $200 million from a bank and someone is going to try to manage that in a very convoluted [inaudible 00:18:55] spreadsheet that people are very aware has a lot of errors. I think that's changing now, these technology exists, this is becoming mainstream. The desire for innovation is not just there, but also the desire to adopt the innovation. I'm excited to see the next couple of years as developers that aren't aware even open their eyes what exists in the market and the ones that already have adopted Northspyre we've facilitated over $20 billion of projects historically. You're going to see those firms leveraging that data looking for, but also leveraging all the insights and institutional knowledge that now AI and machine is organizing for you to get to just like better returns and profits and beating the market.
Deidre Woollard: What do you see as the future of Northspyre? What are you looking for for the business in the next couple of years?
William Sankey: That is a great question. One is, we see an opportunity to transform the way that modern real estate project teams will deliver projects. So not only they are their lives in the work becomes easier, but that they can mitigate risk proactively and get to just more predictability around outcomes. I think the bigger, broader picture is that Northspyre is actively continuing to work on building out new parts of our product. We continue to delight our customers. We want every single customer that's using Northspyre to be delight not just by the technology, but by the service we bring. I think we're definitely up to some interesting things in the future. I think this is the beginning of the revolution and adoption of technology at the real estate owners level. Especially those that are delivering complex projects. I think if you ask me that question a year from now, you're going to actually see some new products and some really fascinating, transformative things that will continue to revolutionize the industry.
Deidre Woollard: Awesome. We'll have to circle back. One last question. You're in the prop tech space, you're in the heart of all of it. What do you think of what's happening right now with so much venture capital around the SPACs we see, new companies going public very quickly? What's your take as an insider on all of that?
William Sankey: In some way I think it's a great thing that this investment, whether it's venture capital or SPAC fuels of innovation. I think prop techs startups, a lot of them are in hyper growth mode right now. They're always looking to find creative ways to secure more funding or an attractive exit for their investors and reach their goals and target. I like to think it's definitely something to watch and keep an eye on. At Northspyre though, we continue to grow really fast. It's something that we tend to be very focused on growing our platform, delighting our customers. I'd like to keep you updated as things develop.
Deidre Woollard: Awesome. Well, William, thank you so much for your time today and you could take out northspyre.com, so that's North and then S-P-Y-R-E, dot com. Stay well and stay invested.
William Sankey: Thank you, Deidre.