Lyceum Capital is backing management teams seeking to satisfy the accelerating demand for innovative built environment technology. Partner Ian Williams explains why it’s a compelling sector.
The UK built environment and construction sectors are gearing up to join the race towards digitisation. While leaps forward in the development of software, automation, the Internet of Things and advanced analytics among others, are transforming the commercial landscape, adoption of the latest technologies in the built environment and construction sectors has been slow and many remain entrenched in legacy paper-based practices and processes. However, where there is digital reticence, there is also huge latent potential for growth and investment.
Overall spending on IT accounts for less than 1 percent of revenues in the construction sector, according to McKinsey & Company. “There is huge opportunity for tools and technologies to assist with digitisation,” says Michael McCullen, chairman of collaborative BIM software provider Sitedesk.
Much of this technology already exists and is waiting to be deployed, but is often overlooked by building contractors who are operating on slim margins. The use of Building Information Modelling (BIM) is a case in point. In building design, 62 percent of practices have used BIM on at least some projects, according to an NBS survey this year. The uptake by contractors has been minimal. Most continue to meet only the baseline industry requirements for passing along project data to clients, who often do not know to ask for it.
The key to the adoption of BIM is its recognition by clients. Once property owners and managers see the value of project data over the operational lifetime of a building, client demand for data and willingness to pay for it will rise, removing the investment obstacle for contractors, McCullen says.
Unclogging the bottleneck and linking up the information flow across the entire lifespan of a built asset is in itself an opportunity, he adds. “There are lots of gaps in what should be a very uniform process. That opens up lots of opportunities in the tech space.”
The use of BIM in central government construction procurement – mandated since mid-2016 – is expected to push change. The public sector represents a huge swathe of construction activity, around 40 percent. BIM has already reduced costs by 20 percent for the government, according to Digital Built Britain, as well as raised awareness of the potential for digitisation across the sector.
The opportunity to digitise processes – which applies across the board from commercial, industrial and residential buildings to utilities and educational and health-related facilities – does not end at the handover of a new build. In line with evolutions in technology, the owners and operators of existing buildings are waking up to the potential to retrofit hardware and integrate software into computer-aided facility management (CAFM) or other legacy software systems.
The application of built environment technology (BET) is extensive covering building management, occupation and productivity. Its uses include:
- measuring energy efficiency
- monitors relaying information to a desktop without the need for a physical inspection of machinery
- software predicting future maintenance needs
- tracking historical service charges
- flagging regulatory compliance issues
- sensors measuring room occupancy and the way occupants behave in it
- a system to track the weather in an asset’s locale.
The potential for efficiencies and reduced costs is clear. In one study undertaken by the US Federal Aviation Administration the use of BIM and 3D models in the operation and management of a tower facility cut annual maintenance hours by more than 60 percent compared with traditional 2-D processes.
In turn, the ability to generate data about how a building is used and performs is triggering a shift in the way owners and operators perceive facilities management.
“Previously, a building was a cost centre for a lot of corporates,” says McCullen. “But active management can not only drive costs down but can improve productivity as well. There is much more awareness of that on the client side. Corporates are taking a much more a strategic approach to managing their real estate assets.”
Driving much of that attitude change is the arrival of a younger cohort of tech-savvy managers, McCullen notes. “The hunger for data is only ever-increasing. Historically, information and solutions have lived in silos. Clients are beginning to ask why and can’t we have the interoperability that means we have a lot more visibility over our asset? I expect this demand for information will be a wave and once people get hooked on very addictive data that can impact the bottom line they will be demanding more and more.”
The scope to support BET businesses to grow is wide, says Lyceum Capital partner Ian Williams. Lyceum portfolio company Bellrock, a technology-led facilities management and property services company, recently completed its sixth acquisition within a year. The company “has invested significantly in its technology capabilities through the acquisition of Concerto and is always on the lookout for additional capabilities relating to the built environment. That could be something it develops itself, or partners with another organisation for, or something it acquires,” he says.
This approach also applies to the BET sector. “It’s a big market. There are incumbent players with a lot of customers that are lighter on the ‘smarts’ and have nascent disruptors nibbling at their heels that lack customers and scale. For Lyceum, that blend is compelling. In terms of providing clients with a rounded and holistic solution, it’s very attractive. This is a global market as well. If you can develop a company successfully, there’s real opportunity to create a business with global reach.”
This involves partnering with founders to keep pace with accelerating technological advances, investing in business processes and developing the brand, as well as assisting in the internationalisation of the business’s market presence.
“Deeply experienced and supportive external capital can really help propel some of these businesses to not only scale but offer a different value proposition in five years’ time,” Williams adds. “There is a fantastic window to invest at the moment.”