Recent conversations I’ve had with more than a dozen CEOs and founders of companies at the intersection of technology and commercial real estate have focused on the status of real estate technology.
The following are a few of my thoughts on where we are and where we are going.
- About 1 percent of U.S. institutional-grade commercial space is on any of the platforms to help manage, lease, and market space. The opportunity is very big, yet there is a very long way to go. Think about what happens to the size of the opportunity when non-U.S. markets are included.
- Competition is fierce and copycats are abundant, but following the money will lead you to today’s winners and losers.
- The C-suite at developers, real estate investment trusts (REITs), and investment houses still don’t see the need or have a sense of urgency to adopt new technologies. Given the real estate industry’s “old school” nature, this isn’t surprising. But think about how quickly things will move once the old guard comes around.
- A lot of groups (industry groups, private companies, conference organizers, and others) are starting to focus on the topic of technology and real estate. One thing is clear from my conversations with real estate tech company CEOs: they don’t want to hear themselves talk. They want to hear their customers talk—the good, the bad and the ugly. With such a small group of tech startups in the real estate space, most know each other. They can learn and the industry can benefit from customer feedback.
- Trying to retrain the way an industry works is not easy. It involves a fundamental shift and will take time. You’ve got to be in this for the long haul and be willing to iterate as the market becomes more sophisticated.
- Real estate technology is gaining traction. There is interest and it’s more than just peripheral. The enlightened bunch—the most tech-savvy real estate companies—know that it’s no longer cool to say “I don’t understand technology” and it’s now imperative to be a leader in the space. It would be in everyone’s best interests to follow the lead of Blackstone and some of the other institutional investors, REITs, and developers focusing on how to leverage technology to increase net operating income.
- Venture capital firms (VCs) are taking note. There has been significant investment from VCs in the space, seeing the opportunity for these firms to “disrupt” or change the way real estate is done. That said, there is no “dominant” investment force at the VC level. Most of those who have had the greatest impact are angel investors, acting as customers and mentors for the companies and providing knowledge, leadership, and access. VCs should spend some time understanding the bricks-and-mortar real estate industry to better evaluate the platforms on which they conduct due diligence going forward.
- It’s a virtuous cycle, for once: brokers, investors, and technologist are aligned.
It’s interesting to observe and speak with officials at these companies. All are united by a common goal of creating technology-enabled platforms to change the way the real estate industry operates.
None of the companies—nor their CEOs/founders (even those directly competing with one another)—looks or feels the same. Some of the leadership comes from real estate backgrounds, some from the tech universe; others bring Wall Street skills, and others pure entrepreneurial grit.
As customers and investors decide the winners and losers, it is critical to remember the early days. The sheer size of the opportunity and scale required to have a true impact is hard to fathom. The disaggregated nature of real estate ownership in the United States makes the challenge of the long tail seem that much tougher. The strong will survive and flourish by innovating and acquiring and will leverage their relationships and learn from their customers. The others—well, they will either be acquired or they will become another tombstone in the graveyard of technology companies trying to “disrupt” an industry.
I don’t know who the winners and losers will be—although it’s apparent when speaking to these firms who has the fight and who doesn’t. But what I do know is that the tireless commitment to change that these innovators and entrepreneurs possess will have a lasting effect on the real estate industry. The real estate industry is slow to change and late to adopt, but once you go tech, there is no going back.
