A few weeks ago we closed our Series B: a $30 million round of funding from an incredibly strategic group of partners. The investors included some of the real estate industry’s largest and most innovative commercial real estate owners alongside real estate focused venture capital funds. We raised this round to accelerate the creation of a new category of technology platform built specifically for owners who oversee the $10 trillion per year annual global construction spend. To do this we’ll continue to invest into expanding our world class team, and expand from facilitating $1 billion per month in project volume to tens of billions per month on the Honest Buildings platform.
We are incredibly excited and humbled to have Ric Clark, Chairman of Brookfield Properties, and Michael Turner, President of Oxford Properties, join our Board of Directors as part of this round. You can see the press release here, but I wanted to take this opportunity to talk about the broad change happening within the industry and how technology is unlocking hidden value for real estate owners.
I’m very fortunate to continue to have a front row seat in a defining time for the real estate industry. Before launching Honest Buildings I spent 10 years in the real estate industry, starting in investment banking, and moving to acquisitions, asset management, and operations. Fast forward to today, technology has moved from a faint idea on the periphery to being a central strategic initiative for many of the largest real estate owners in the world.
lookng back, it's clear to me now that THE GREATEST IMPACT ON THE BROADER REAL ESTATE INDUSTRY IN THE LAST DECADE HAD BEEN DRIVEN BY TECHNOLOGY.
Finally owners have been empowered to holistically improve their process, speed, and quality of decisions being made in their portfolio through real-time, data-driven insights. As a result, they have been able to move quickly, take smarter risks, and create better results for their investors and tenants.
Every single day, throughout the real estate industry globally, asset managers, development teams, property managers, construction managers, and acquisition teams are making decisions across their portfolios to add value to their assets on behalf of their investors.
These teams make very complex decisions to acquire buildings, deploy capital into repositioning, lease space, or build new buildings; all of which leads to a focus on risk adjusted returns. Owners have had purpose built systems for accounting and financial tracking for years through Yardi, MRI and JD Edwards, they have had Argus to track and manage acquisition proformas and on-going valuation, and now they have VTS to manage and track leasing - a quantum leap forward.
But what about purpose built systems for capital planning and construction?
Every single building in the world deploys capital through construction and capital projects; how owners operate, build, and reposition assets to create value for their investors is quite possibly the most fundamental aspect of buying and owning buildings. And this is big business - each year there is $10 trillion of capital spend, with the owner taking the majority of the financial risk on behalf of their investors.
Yet, until very recently, the status quo for most owners had been to use spreadsheets to manage these huge capital and construction projects across their portfolios; shockingly there had been no platforms exclusively built for institutional owners of real estate to deploy their project capital efficiently. Until now. This is where Honest Buildings has stepped in to provide the true owner focused platform for capital and construction projects, leading to better risk adjusted returns for owners and their investors. While there are currently many important technology platforms for general contractors and/or architects, we believe our system is fundamentally different, a totally new category of technology platform specifically for the owner to deploy capital.
In addition to the obvious need to get owners out of non-collaborative, error prone Excel workflows, there are three significant global macro shifts underway making the importance of technology purpose built for these real estate owners even more urgent:
1. The urban population is growing rapidly.
More than ever before people are choosing to live in urban areas. Today 50% of the world’s population lives in urban areas and that is expected to grow to 65% over the next few decades. This means that urban areas will undergo one of the largest building booms in the next 20 years the world has ever seen.
2. The rapid growth in urban areas will force owners to reposition assets that were built years ago for one purpose into a more modern use.
Think old shopping malls converting to mixed use, town centers packed with experiential retail. Old warehouses converted to high tech distribution centers. Old high rise office buildings originally constructed for corporate use, now needing to attract the younger generation tenants... As the urban population grows, cities at large will be repositioned to accommodate this macro change.
3. Trillions of Dollars a year will need to be invested to make It happen.
Today, there is $10 trillion in global construction spend per year, which is projected by McKinsey to grow rapidly over the next 10-20 years. Because of the magnitude of this opportunity PWC reported that they expect institutional real estate investors’ assets under management to grow from $64 trillion today to over $100 trillion by 2020.
These macro shifts, in what could be considered the largest market in the world (global real estate and construction), have led us to where we we are today, in the early innings of an industry transformation where technology is not a marginal gain for real estate owners but actually becomes a core pillar of every real estate organization’s infrastructure.
Our mission is to accelerate urban progress, building by building, city by city, all over the world.
We are honored to have many of the largest commercial real estate owners in the world as users of Honest Buildings. Working together with these owners, we’ve built a new category of product that has now become the standard for owners. Several of those owners have even gone outside of their investment strategy - in assets - to invest in our company as we build out this technology. To date we have raised nearly $50M from VCs and real estate owners who have validated and advocated for these value creation methods, and a centralized platform to perform them all. They share our belief that this is the future of the industry.
This is just the beginning.
We believe that as a new category of platform emerges built specifically for the needs of the largest real estate owners globally, real estate decision making will fundamentally change and investors will begin to see enhanced risk adjusted returns. This will bring the $10 trillion dollar per year construction marketplace online in a way that has not been possible to date. We are excited to play a part in this industry transformation and will be relentlessly focused each day to deliver on the opportunity ahead of us and maximize our impact.