• Lawrence Gellerstedt

3 Big Trends to Watch in Proptech

Proptech has been one of those catch phrases that for years seemed to be something people were trying to make happen, but that is no longer the case. In many ways, I think that the real estate industry is perhaps more susceptible to disruption than other business verticals. The illiquid nature of the business and associated high transaction fees have proliferated a massive brokerage infrastructure where companies needing to innovate are not truly controlled by the people incentivized to invest in the platform. Also, the scale of the industry has allowed for service businesses with low margins to exist simply due to the stability of the income, but not to invest against being disrupted in the future. The folks at Fifth Wall were ahead of their time in taking funding from the legacy industry stalwarts and the legacy companies were smart to outsource innovation. You can find great content in their newsletters, but this post was inspired by a recent LinkedIn post where I asked what people were looking to discuss and one of the ideas was "what's next in proptech". Here are some of the trends I'm watching:

1. Retail - There was a recent Forbes article on Fifth Wall's Retail Fund which should function more like an anvil dropping than a pin drop, indicating that retail is back. The digital revolution and e-commerce surge isn't slowing down, but what is clear is that no amount of screen time or drone delivery is going to stop people from wanting to have experiences. In my opinion, we will continue to see a deepening divergence between retail products that can play in the experiential space and commodities that can be warehoused and distributed directly. Companies that determine their lane earlier in their life or product development cycle will outperform those who mis-categorize.

2. Cars - A recent report from Ericsson suggests that by 2030 the automobile industry will be one the top four industries for 5G enabled services. The combination of smart cars and Uber-type services brings up an incredible amount of questions for the real estate industry. Will people need all this parking if they begin to share cars? Will commuting distances become less important as self driving cars and entertainment apps make the ride more enjoyable? What kind of increased density will we see without parking ratios/decks/costs limiting space planning for literally every type of use? Landlords will need to strategize now in order to get ahead of the coming change and try to figure out how to recoup the potential lost revenue of decreased parking demand. We may see a resurgence of suburban neighborhoods (albeit with more mixed-use developments at the hub) if millennials are able to endure commutes with less pollution and more engaging/productive activities for the ride. Lastly, density may continue to force micro-sizing of personal/private space and the communalization of amenities across product types.

3. Data - Every real estate expert, including me, has been guilty of wanting to "trust your gut." Even at the peak of growth at WeWork many of the key attributes we looked at for decision making were not coming from clean data sources and we lacked commitment to getting clarity on those strategies both forward and backward looking. I think the biggest influencer going forward is undoubtedly not abundance of data (that was the last wave), but ability to focus and curate the data for your intended purpose. For example, at WeWork we needed to look at predictive data like car traffic, foot traffic, retail performance etc. to determine if a new location would be successful, but also we needed to be consistently tracking these types of data points on ongoing basis for open locations to true up noise and better inform the predictive exercise. Between cell data, bluetooth, cameras, social media and payment processing, tools like Placer.ai will continue to reshape the "gut" decisions we are used to and force more discipline democratization in real estate transactions.

The intersection of technology and real estate is my favorite street corner hangout and so these are just a few of the things I'm paying attention to. What do you all think?

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