In 2019, real estate technology companies experienced huge founding rounds and whiplash-inducing flame outs in equal measure.
In 2020, the same tech landscape could come to include ambitious ideas like “one-click transactions” and iBuyers on a global level, according to venture capital leaders who offered their predictions for the new year with Inman.
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The ‘one-click close’
Vik Chawla | Photo credit: Fifth Wall
Real estate leaders have begun to invest deeply in creating a more seamless transaction. Zillow, for example, has focused on the entire transaction while others have narrowed in on the mortgage process or the post-closing process.
However, Vik Chawla, a principal at Fifth Wall, believes that in 2020 we’ll finally reach a place where buyers can enjoy a “one-click close.”
“We’ll reach the ‘one-click close” in the residential space,” Chawla said. “An individual will be able to purchase an apartment, a condo, a home, and have that entire process done digitally, in one click.”
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IBuyers and real estate tech going global
Roelof Opperman | Photo credit: Fifth Wall
At this point, iBuyers like Zillow, Opendoor, Offerpad and offerings from brokerages have been only focused on expansion in the United States. That could change in 2020, according to Chawla, who believes iBuyers will begin to operate outside of the U.S.
Roelof Opperman, also a principal at Fifth Wall, believes the top European real estate companies will start to invest heavily in technology like their American peers.
“Leading European real estate firms will begin to embrace technology at a similar pace U.S. leaders did three years ago, rapidly expanding the European proptech startup ecosystem,” Opperman said. “Those that don’t will not only lag their competition but are in severe risk of being disrupted by an increasing pool of talented entrepreneurs with a record amount of capital supporting them (not to mention the increasing number of our U.S.-based portfolio companies coming to Europe).”
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The We Work effect
Jeffrey Berman | Photo credit: Camber Creek
Jeff Berman, a general partner at Camber Creek, believes the industry will see downward pressure on later-stage financing for firms with poor unit economics and high reported losses, like WeWork.
“One of the impacts of WeWork’s failed IPO will be much higher scrutiny of companies with major losses and poor unit economics,” Berman said.
In the same vein, Aaron Block, co-founder and managing partner of MetaProp, believes that, “realistic expectations of profitability and sustainable commercialization will win the day in proptech.”
Aaron Block | Photo credit: MetaProp
But despite WeWork’s struggles and the impact that it may have on other, unrelated businesses, Brad Greiwe, co-founder and managing partner at Fifth Wall believes the overall ecosystem has spoken and flex office space is here to stay.
“Lease structuring will change, favoring limited downside rather than unlimited upside,” Greiwe said. “There will be a movement away from the traditional lease model, towards management contracts that offer both incumbent owners and flex office providers better long term dynamics and build more sustainable business models.”
“Co-working and the flex office space represent an opportunity to leverage technology to create a more consumer-centric product offering, contributing to a more hospitality-driven office experience,” Greiwe added.
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Acquisitions, consolidations and initial public offerings
Berman believes more institutional real estate players will begin launching their own venture capital arms to make strategic investments in emerging technologies. Ultimately, he believes there will be a significant uptick in both acquisitions and consolidation in the space, with a particularly high level of consolidation in the construction technology space.
Block expressed similar sentiments, saying he believes there will be major initial public offering and merger and acquisition activity in 2020.
“Keep a close eye on Airbnb public offering and incumbent real estate industry firms’ increasing M&A appetite,” Block said.
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Early bets from incumbents will pay-off
Block believes the incumbent firms in the real estate industry will finally begin to see a real return on investment for betting on smaller startups.
“Look for a series of major strategic wins for real estate incumbents that have piloted and scaled (and, in some cases, invested in) emerging PropTech startups,” Block said. “In particular, we’ll see some ‘needle-moving’ improvements to real estate assets’ net operating income as a result of the last couple of years of work from top corporate innovation programs.”
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Real estate will lead the way in ‘cleantech’ investing
Brendan Wallace | Photo credit: Fifth Wall
Brendan Wallace, the co-founder and managing partner at Fifth Wall, believes the real estate industry itself will become the largest investor in energy efficiency and “cleantech,” or technology to reduces negative environmental impacts.
“Consumers and tenants of buildings are increasingly demanding heightened environmental standards for real estate assets, and institutional investors & regulators are increasingly imposing sustainability requirements around their capital deployments,” Wallace said. “Leveraging technology and innovation to drive sustainability solutions at scale will be crucial in 2020 for the real estate industry.”
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Real estate technology will see even more funding in 2020
Brad Greiwe | Photo credit: Fifth Wall
The amount of money flowing into real estate and real estate technology continues to increase every year – which has even drawn some criticism from the industry – and it doesn’t appear to be slowing down.
In 2020, investment in real estate tech will continue to accelerate as real estate companies realize technology investing and venture capital is a great way to lead innovation and disruption in today’s world,” Greiwe said. “We expect to see more collaborative, consortium-based approaches to innovation in real estate and maybe even other industries.”
