As we begin to close out the year and plan for 2019, we thought it might be interesting to look back and then, look forward. What is the impact of technology developed specifically for commercial real estate on our industry, and where will it go from here?
CREtech, whose mission is “to connect the commercial real estate and tech sectors, bringing a new age of innovation and growth to the industry, collected and shared a mid-year outlook; their assessments describe a landscape that didn’t exist a decade ago. Given rapid development cycles along with the rate at which commercial real estate and technology continue to evolve, who can imagine what this industry will look like in the next 3-5 years’ time?
2017:The Year of Investment in Commercial Real Estate Technology, aka Proptech
PropTech made big news. In its 2017 annual report, RE:Tech reported the VC infusion of capital in real estate technology at almost $12.6 billion, representing “a 92 percent increase in global investments, the largest fiscal year in real estate tech history.”
2018:The Year of Adoption, Right?
By 2018, the big bet on technology further evolved. Investments in real estate technology continue to grow. According to MetaProp’s Global PropTech Confidence Index, in addition to growth, those investments are beginning to show dividends. Nearly 40% of PropTech companies who benefited from significant investments in 2017 are exceeding customer acquisition growth benchmarks.
Throughout the news, commercial real estate professionals acknowledge that they will not be able to compete effectively without the right technology, but some uncertainty remains. A recent article title says it all. According to Bisnow,
Traditional real estate knows PropTech will be big, just not what to do about it.
Citing KPMG’s annual Global PropTech Survey, 93% of respondents to the survey agreed that they should be engaging with PropTech. However, only a third of all participants confessed to having a strategy in place to actually make that happen. That means that while 9/10 people can identify a “good thing,” only 1/3 of those have a plan for what to do with it.
Chief Operating and Chief Technology Officer of Rudin Management Company, John Gilbert was recently quoted saying,
We used to be a real estate company that dabbled in technology, now we're a technology company that dabbles in real estate.
Early adopters of PropTech, Rudin Management Company believes there is no need to address current challenges with analog answers where digital solutions exist. This approach represents only a small part of the calculus keeping them at the forefront after nearly a century in business; understanding the needs of their core business, commercial real estate.
2019:Identifying What Matters
What’s ahead? The market and the industry continue to move in the direction of identifying which solutions are right. If 2018 was the year where we knew what we should be doing but not quite how, time waits for no one. 2019 is approaching and is likely to be the year where decision makers commit and seize the market.
All of this is a work in progress, but this is clear; in 2019, there will still be a great deal of work to do.
- Decision makers will have the final say regarding which technologies are need-to-have versus those which ones are nice-to-have;
- Technology experts will determine how to integrate their tech stack to include a robust set of technologies.
- Technology innovators will continue leading the way by solving problems they know are on the horizon because they understand their markets and actively collaborate with partners.
Deloitte released its 2019 CRE Outlook, and placed PropTech “at the forefront.”
The survey found that PropTech is becoming increasingly popular with CRE investors, with respondents saying that on average their firms plan to commit 14 percent of their CRE capital to PropTech investments. Of that, 31 percent said they would invest in PropTech companies, 26 percent said they would partner with PropTech companies, 20 percent said they would launch or participate in accelerators and 17 percent said they would use the services of a PropTech company.
So, What is Next?
From Jeremy Neuer, Executive Vice President of CBRE, what’s next is adoption. According to him, “after years of begging peers, clients, competitors, and others to pay attention to the tech that’s available within the industry, we are finally seeing the large institutional landlords and major brokerage companies taking a leadership role in moving our industry forward from a tech perspective.”
A position supported both inside and far beyond commercial real estate, although adoption began slowly, the rate is accelerating. Change has come, and there’s no going back.
Duke Long, Managing Partner at PUR Ventures describes Proptech this way, “The mentality of adapt, embrace, engage or die. It’s not a mentality of desperation, it’s the realization that the world has already and will continue to move on without commercial real estate as it has been known. The true trend is finding the companies that will actually provide usable products or solutions to accomplish just that.”
Ryan Salvas of EQ Office talks about delivering based upon models not previously considered. “As the industry shifts more to Everything-As-A-Service, technology needs to understand the wants and needs of the consumer in more of a B2C as opposed to the older B2B model that real estate has leveraged for so long.”
For Ryan, new tech means learning new ways of doing business. It’s a shift towards delivering enhanced service. As we see it, commercial real estate owners are the visionaries of the new urban landscape. Those poised to succeed are envisioning answers to questions raised, along with questions not yet conceived.
What’s the Takeaway?
In one word, Michael Beckerman, CEO of CREtech, sums it up like this,
“Momentum. For the first time in my eight years in the space there is clear, measurable and growing momentum in CREtech. And it's not just in the number of new startups and funding sources. It’s in the number of brokers and developers that are actually implementing tech products and services. It’s the amount of joint ventures and collaborations among startups. And it’s the number of pending P&A deals as well. It’s not a question of IF tech will infiltrate commercial real estate, it’s a question of WHEN. And that time is NOW.”
What’s our takeaway? Cloud platforms and applications changed the game for owners, improving productivity, transparency, and real-time insights, all while increasing returns for investors.
Tomorrow’s answers to today’s challenging questions will be answered by those unafraid to embrace what is not yet known, armed with actionable intelligence and process.
We’re excited to lead the way.
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