Real Estate Tech: Change We Can Believe In?
Realcomm hosted Yardi, Trimble, Onyx Properties, Honest Buildings and Measurabl for a session on disruptive real estate tech. While legacy tech providers and start-ups agreed the world is changing fast, they saw it heading in different directions. Here's three game changers from our session, how tech giants and upstarts view the new landscape, and what the changes mean for real estate owners and managers.
There is no doubt this newest iteration of CRE Tech is bringing significant innovation and energy to the CRE Tech space. - Jim Young, CEO, Realcomm
- Whitespace: If you think about the vast array of services that make up the real estate industry - from leasing, to property management, to lending - and all the labyrinthian workflows that go along with them, you can imagine just how much of the real estate industry is ripe for automation. That opportunity has finally found willing entrepreneurs: $1.7BN in venture capital was deployed to real estate start-ups in 2015, according to CB Insights. The result is the SaaS-ification (Software as a Service) of real estate. Where Excel and manual processes once prevailed, platform solutions and workflow automation now present not just viable alternatives, but are increasingly the "way it's done". This allows real estate service providers to stay lean, and investment returns to remain healthy in compressed markets. Take Costar for example, the market intelligence behemoth upended brokers' practice of closely guarded, discretely traded lease comps. But the company that once seemed leading edge is now facing an onslaught from start-ups like Hightower and VTS, who are financed by the very customers Costar once held dominion over. Expect more legacy providers like Yardi, MRI and RealPage to face such insurgencies because, as we've seen from industries like HR and telecom, no one company can build it all, well enough, to serve an industry as diverse as real estate.
- Scale: Serving the real estate industry used to be confoundingly hard. It required a building-by-building slog due to decentralized decision-making, distributed budgets, and diverse service practices. This in turn raised service costs and slowed adoption of new technology... No longer. The great centralization of large portfolios of real estate under the aegis of diversified fund managers and REITs, and the accelerating trend towards consolidation of services under a half dozen large real estate service providers like CBRE and Cushman & Wakefield, means real estate software and, to a lesser extent hardware, can now achieve great scale by deploying at the portfolio-level. That's because one platform is needed to unite the whole. And one well performing piece of hardware that clears the high hurdles of modern procurement will have entree to hundreds of buildings in a portfolio, not just one. The trick with scale is to reduce barriers to adoption sufficiently so the software or hardware can permeate an entire organization. This means building technologies that defy the large, cumbersome, and expensive shackles of legacy providers in favor of cheap, quick to deploy, and simple to use systems. It just so happens this is exactly what real estate tech 4.0, as Realcomm founder Jim Young calls it, is delivering.
- Integration: It is the single greatest unmet desire of real estate professionals: "I want my software to talk with [insert Yardi, MRI, RealPage, Angus, JD Power, here...]." But instead of building out open, freely accessible ways for software apps to share information between one another (known as Application Programming Interfaces or "APIs" for short], legacy software providers have preferred to build moats, enthralled with the ancient notion that the barbarians of disruption can be kept out long enough for winter to set in... Their attitude is starting to change. MRI, one of the world's leading real estate software providers, overtly acknowledged they can't stay competitive in the face of relentless venture capitalists and their marauding entrepreneurs. So instead, MRI let the barbarians in by creating a Partner program that allows software companies to access their APIs and exchange information. It's a model that worked for Apple's iPhone, Oracle and SalesForce. The thaw may be permanent. If so, real estate professionals will enjoy a future filled with highly specialized, highly integrated software they can customize to meet their needs.
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