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Buildings collect data about the experiences of occupants creating compliance questions that affect transaction values.
Modern buildings generate vast amounts of operational data through sensors, cameras, access controls, and climate systems — optimizing energy use, enhancing security, predicting maintenance needs, improving tenant experiences. Properties that leverage data effectively outperform those that don't.
But data collection creates unique privacy challenges in real estate: people who "use" buildings can't always opt out of data collection the way they can with apps or websites. Sophisticated operators are navigating this for both regulatory and commercial reasons.
Privacy considerations now surface in M&A transactions, commercial real estate deals, hotel management agreements, enterprise lease negotiations, and asset valuations. Smart operators address these questions early: What data do we actually need? Who owns the data? Who's responsible for protecting the data? Who's responsible when something goes wrong? How do we build systems that won't require expensive retrofitting later?
The Consent Problem
Privacy regulations typically require meaningful consent or clear legal justification for data collection. GDPR and similar frameworks offer individuals choices (download an app, agree to terms; visit a website, accept cookies).
Shared operational environments don't always work that way. Cameras and sensors cannot be turned on or off depending on the resident or guest present at the moment. This raises practical questions: how do operators comply with privacy regulations, and who bears the risk when multiple parties control the data?
Deal Implications
Privacy issues surface during due diligence. Buyers scrutinize data practices in PropTech-heavy assets (hospitality platforms with guest loyalty programs, office buildings with tenant analytics). How data is collected, who controls it, and whether practices comply with regulations affect deal timelines and valuations.
Enterprise tenants are asking harder questions. Banks, law firms, and regulated industries include data protection requirements in lease negotiations. They want to understand what building systems collect, who has access, and how information gets processed. Properties that can answer these questions clearly have an advantage.
The Multiparty Challenge
Property owners control the asset. Management companies run operations. Tenants occupy the space. Technology providers supply and operate systems. While responsibility for compliance with privacy laws is often allocated to the management company in property management agreements, determining ultimate compliance responsibility across this ecosystem isn't always straightforward.
Privacy law doesn't necessarily follow commercial arrangements. Under GDPR, the "controller" is whoever decides why and how data gets processed. Property owners can be controllers even when third parties operate the technology. This surprises stakeholders who assume vendors carry the risk.
Physical security complicates this further. IoT systems control building access, environmental systems, and critical infrastructure. Breaches mean more than compromised information. They could entail unauthorized physical access and operational disruption.
Case in Point: Hospitality
Hotel management agreements illustrate these tensions. Guest loyalty programs collect reservation history, health requirements, dietary restrictions, incident reports, and preferences. This drives personalized service and builds customer relationships that outlast any single stay.
But who controls the data? Operators run loyalty programs and want control over guest relationships. Property owners want rights to data collected in their buildings. When a contract ends, who owns the data and the customer relationship?
The data can be sensitive, including health conditions, dietary choices and accessibility needs that trigger heightened privacy protections.
Hotel management agreements now include detailed provisions on data ownership, processing responsibilities, and what happens when contracts terminate — including how to handle data transfers that may constitute "sales" under state privacy laws. The question isn't whether data matters — it's who controls it and who bears compliance risk.
Privacy by Design
Traditionally, operators address privacy after designing systems and negotiating contracts, often only after systems are deployed.
That sequence creates problems. Privacy issues affect transaction value. Tenant RFPs include data protection requirements. Retrofitting compliance is expensive; addressing it upfront is faster and cheaper.
What data does an asset need? How long should it be retained? Who needs access? These operational decisions determine what gets built, how quickly deals close, and whether systems need costly rebuilding.
The advantage goes to operators who treat privacy as a design constraint. Systems built with clear data justifications are more defensible. Contracts that allocate responsibility upfront avoid disputes. Properties that answer privacy questions early move faster than those retrofitting compliance.
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