A Virtual Due Diligence Tool That Arrived Just In Time
When the unprecedented impact of the global coronavirus pandemic on businesses first became apparent, the tech world sprang into action. Many companies started inventing, adapting or expanding digital tools that would help a socially distanced world to operate.
For the property sector — an industry that relies on human interaction with the built environment — this proved tricky. A simple 360-tour is not enough for property investors; they need real details, a tech experience that gives them the confidence to spend money.
In what has proved to be a timely move, global consultancy Hollis had started work on creating a virtual due diligence tool a year ago in response to demand from international investors. When COVID-19 arrived, it was able to accelerate development. The result is a piece of software that combines Hollis’ walk-through tool H360 with the firm’s technical due diligence expertise, ready to go just when the industry needed it.
“We wanted to do something no one else was doing and the timing has proved excellent,” Hollis partner Mark Hampson said. “Feedback so far has been incredible, about the tool’s use of data as well as its ability to facilitate online viewing where physical viewing is tricky. The sector is finally embracing digital tools.”
A Virtual World
In the current business environment, the first benefit of virtual due diligence is the ability to view an asset from a distance. All the building data is hosted in Hollis’ portal and a link is sent to interested parties, including virtual walk-throughs. Pre-coronavirus, Hollis had already used H360 to provide information to overseas investors when they were unable to fly over quickly enough to view a potential purchase.
“When selling a property, multiple teams tend to bid, all requiring a visit to the building,” Hampson said. “This can be hard for an agent to manage even before the global pandemic. Today, the ability to view assets online is essential for UK as well as overseas investors.”
Despite the pandemic, the commercial property sector is still moving, in part facilitated by online viewing and selling methods. Hollis surveyed 4M SF of London office space for sale in one week in August, as well as 80 industrial estates in a two-week period. Unsurprisingly, the firm’s work on dilapidations and lease expiries has increased fourfold this year.
One Batch Of Data
The second benefit of Hollis’ virtual due diligence tool is its ability to host and present data clearly. The traditional mode of selling a property is for the seller to pull information into a weighty report, which is then given to the purchaser. Instead, Hollis has gathered all the physical information about a property into an online portal. Viewers are able to digitally explore a building, including any areas that need attention. Hampson believed this could fundamentally improve how properties are prepared for sale.
“The property world hasn’t changed over the years,” he said. “We used to post fliers giving property information, now we email PDFs. We asked, why not make the report a digital, interactive portal? There are other apps that do similar things, but we wanted to take it further.”
In the portal, potential building issues such as a necessary roof repair or blocked guttering are flagged up with a rating of medium or high risk. Hollis’ aim was to make it clear to the buyer what the deal-breakers might be, which is particularly important if a buyer is unable to visit the property themselves. The result is a comprehensive body of information.
“I’ve been saying to people for years, if you’re selling a property you need to get your house in order,” Hampson said. “The market is getting tighter so to sell a property effectively you need to create a thorough report. Previously, I’ve seen multimillion-pound properties for sale with just a five-page report attached. Now people are starting to dot the i's and cross the t's, using digital tools to create a much more thorough report.”
Managing From A Distance
The third benefit of the tool is that it can be used for asset management post-acquisition. Since all the data is created in-house by Hollis, rather than hosted on a third-party software platform, a buyer will own it all once the building is theirs. Ongoing information can then be added, such as fire alarm checks or repair work undertaken.
“Our aim is to create a DNA that sticks with the property,” Hampson said. “This will save time for an asset manager but also during any future sale. I’ve advised on the sale of the same industrial properties multiple times since the 1990s, each time creating the information from scratch.”
So far Hollis is mainly talking to investors about H360, but other elements of the property sector are interested such as those that arrange debt. Insurance companies are taking notice, as regularly updated information would reduce the need to inspect properties each year, leading to a reduction in premiums.
Hampson thinks it is high time the property sphere embraced the digital age. It could be that despite the crisis that COVID-19 has created for many, its legacy could be the increasingly digital sector many property players have been waiting for.
This feature was produced by the Bisnow Branded Content Studio in collaboration with Hollis. Bisnow news staff was not involved in the production of this content.