This year there’s been some chatter about CREtech reaching market saturation and with that a lot of buyer confusion among decision...
Opportunities for CRETech startups are vast and we’ve only begun to scratch the surface of tech’s impact on commercial real estate. At present, the most common technologies used in commercial real estate are crowdsourcing and customer relationship management.
Amazon’s Mechanical Turk first popularized crowdsourcing in 2005. The service took large projects and outsourced micro-tasks to a pool of individuals, otherwise known as “the crowd.” In 2009, Kickstarter spread like wildfire, paving the way for crowdfunding integration in many industry verticals, including real estate. Now we have Fundrise and Realty Mogul to call our own crowdfunding platforms.
The Software as a Service revolution was started by none other than Salesforce in 1999. The early differentiator was withdrawing the IT dependency and allowing anyone to instantly tap into the organization’s sales pipelines. Today in commercial real estate we have leasing-specific CRM/pipeline management tools like Highrise and View the Space.
I mention the past to illustrate that CRE is just catching up to other industries. So let’s take a look at what else has happened post-Facebook, otherwise called Web 2.0, to extrapolate what may happen in CRETech in the future.
After only two years on the scene, Zenefits was recently valued at $4.5 billion. The company creates free employee benefits tools for small businesses in hopes of upselling health-insurance plans. How can we take what we have learned from Zenefits and apply it to CRE?
There is a plethora of options for small-landlord commercial real estate management software, ranging from mobile to desktop. But there’s still no expert property manager knowledge base to tap into on landlord and tenant matters. For example, I could see a freemium property management tool for small landlords that upsells lease forms by state, rent collection, property insurance and other legal matters. The opportunity falls into the Legal and Property Management category in the CRE value chain.
GitHub was launched in 2008 and was most recently valued at $2 billion. The company creates version control for codebases. Multiple developers submit their changes and merge together, all the while storing historical versions for easy reverting. Version control can be used in CRE financial modeling.
Financial models easily become complex when you add in multiple scenarios like market rents, base case vs. redevelopment, waterfalls, promotes, and the list goes on. The result is 5–10 separate files for 90 percent of the same underwriting. A CRE modeling product that has multiple branches of the same version in one file could be of great benefit for ease of modeling scenarios. We can have our redevelopment branch and our in-place income branch in one model. Then we only edit parts of the models that are different and retain a history of our variances between them. Real estate pro-formas could borrow many best practices from programmers.
AngelList was founded in 2010 as a community for startup founders and investors. Founders can notify the community on the progress of their product, fundraising, hiring, and milestones. Investors can raise money for funds or learn about trending startups.
AngelList for CRE would have developers list projects; banks could find developments to fund; the neighborhood could learn; brokers could list spaces for lease. It’s the community aspect that Loopnet lacks. Instead of being a flat listings site, the CRE community becomes identity-driven.
The bottom-up approach to finding CRETech opportunities within existing tech companies is helpful, but we also need to look at the whole picture. Where can processes be improved? What workflow can we keep the same but make more efficient through tech? For that purpose I included an infographic of the Commercial Real Estate value chain. I look forward to startups accounting for every one of these bullet points and more. This is truly an exciting time for commercial real estate technology.