Venture capital's relationship with real estate is now more of a question of where the money will go next. There will certainly be continued shakeout as some of the larger proptech unicorns struggle with profitability; however, there is every chance that a new record for investing could be set in 2020
FREMONT, CA: Property Technology (Proptech) is the application of information technology and platform economics to real estate markets. It comprises of a wide variety of start-ups that focus on both iterating on existing processes and finding new ways to transact, build, and manage both residential and commercial real estate.
According to data from CRETech, over $1 billion was invested in a variety of commercial real estate start-ups. The 2019 KPMG Global Proptech survey released in October found that 87 percent of those surveyed believe that the real estate companies they work with will increase their spending on proptech solutions within the next 12 months.
However, as the possibility of a recession continues to loom over the United States, some investors may adapt accordingly.
Growing Interest in Blockchain
Interest in blockchain slowly declined since last year, but the potential for how technology can secure and track investments remains mostly untouched. Few transactions have taken place on blockchain platforms, and if this follows suit, especially in the commercial real estate space, the interest could continue to grow.
The blockchain serves as a type of balance, facilitating faster international transactions that can be easily recorded and tracked. Properties can also be translated into tokens that can be bought and sold through online platforms, allowing some developers and owners to attract new investors from a wider variety of locations.
Artificial Intelligence and Big Data
Artificial intelligence will change every aspect of commercial real estate, like how buildings are leased and designed. Buildings are now connected technology hubs, continuously reviewing data on the internet, and power usage, as well as customer and worker experience and AI can use this data and turn into actionable insights. It will lead to better utilization of space, conservation of resources, and considerable savings for property owners. AI can also make informed decisions before a building is constructed. Sophisticated 3D models allow developers to make better choices at every step of the construction process.
Decrease in Investment in Short Term Industry
The short-term industry is changing, and it is taking on some of the aspects of the hospitality industry it transformed. Hospitality is one of the most sensitive areas that people feel the need to cut back. Even the impression of a potential recession may be enough for consumers to scale back on their travel and vacation plans. Therefore, some investors may choose to scale back their investments in some of these growing start-ups.
Demand for Home Equity Solutions
Home equity lines of credit (HELOCs), home equity loans, and refinancing options have existed for decades. Still, there are other varieties of new options for homeowners called alternative equity release products that allow owners to use their equity without an additional loan. Many of these companies use a model that involves an equity stake, and they make money by taking a share of a home's appreciation.
Streamlined Transaction Platforms
Real estate transactions are complicated in nature, and while many other processes have simplified because of technology, the buying and selling of property remain cumbersome and time-consuming. This is partially because of the many players involved in every transaction, including title reps, inspectors, appraisers, escrow officers, and real estate agents. And it is difficult to know who is doing what at any given moment, which can cause frustration and unnecessary delays.
See Also: Top PropTech Solution Companies