The 2020s will see more transformation in real estate tech than the entire Internet age to date. Finally, 30 years of technology advancements will remake all aspects of the real estate sector.
This is no small feat, given that MSCI pegs just the global commercial real estate market at $8T and the U.S. market at $3T. The entire real estate category is worth $32T. Real estate might just be the biggest sector technology has disrupted yet – making the $5T technology industry itself seem quite small.
The forces shaping change across the technology landscape all have an impact on the real estate sector, and the cumulative effect will be transformational on the landscape. These mega-trends in technology are coming to their fullest expression right now.
There are 5.3B people over the age of 15 in the world; and there are 5B cell phones. In the U.S., mobile internet penetration for adults is over 90%. At this point, mobile is the primary way most people access the Internet.
For the real estate sector, this creates new connectivity for virtually everyone who works in the industry. Most of the work in the sector is done in the field, and making business processes and information available in the field has a huge productivity boost for every employee.
Contractors, developers, agents, brokers, property managers, inspectors, landscapers, and maintenance staff will all have powerful tools at their fingertips to make them more effective and efficient.
In the mid-2000s, a number of real estate tech companies started aggregating publicly available data and creating simple online portals for real estate information. Zillow IPOed, and Realtor.com started getting all of the disparate MLSes integrated into a common interface. These obvious data assets lay the foundation for more aggressive – and accretive – uses of data for the next decade.
The most obvious new data plays in the space are iBuyers, who will buy homes from sellers directly at very-small-to-virtually-no discount to the market rate. Offerpad and Opendoor have raised $2B between them; Redfin and Zillow have pivoted to this model; and new entrants like the brokerage Keller-Williams are launching competing offerings.
Having enough data to make a confident bet on the value of an individual property is the key technology ingredient for iBuyers to be successful. To collect that data, iBuyers have warchests of capital that will allow them to fine-tune their thesis without running out of funding before they get the model right.
The rise of commercial-scale cloud computing started just before the Great Recession, and its adoption in the intervening decade has given rise to a host of new tools. To survive the transition, real estate developers and property managers have to adapt to compete. The cloud enables much of the real-time information needed to manage projects more effectively; and also reduces the burden of technical maintenance for small, nimble teams who assemble around specific projects (like a construction project!).
In addition, enterprise cloud services service as the backbone of operations for modern real estate professionals. Platforms like Viewpoint and CMiC provide a core ERP, from which to add on additional cloud services like Yardi, Propertyware, and Appfolio can engage with tenants and staff.
Virtual, augmented and mixed reality holds huge promise for any industry that manages physical assets and sites. Tools like Autodesk and ARki dramatically lower the cost of architecture and design services. Visualizations from Reside and PlaceTime compress and shorten the funnel to find and manage tenants by allowing them to tour virtual homes. And tools like SmartReality reduce ongoing maintenance costs by allowing teams to visualize internal systems of finished buildings.
Connecting buildings means greater efficiency, less use of natural resources, and lower maintenance costs. As smart meters get added to new and existing structures, everyone will have a real-time view of energy use and optimization. Tenants will have the ability to monitor and control their spaces wherever they are. And new, differentiated experiences, like enhanced safety and shared spaces, will create new business models.
The biggest reason that the coming decade will transform the real estate tech sector is that the industry is ready for the change. After a decade of improving property values globally; and the adoption of many of these technologies in other aspects of people’s lives; leaders in real estate see the connected future as an opportunity to win their outsized share of tomorrow.