This year there’s been some chatter about CREtech reaching market saturation and with that a lot of buyer confusion among decision...
Thinking Contrarian About CREtechAnthony
I’ve been thinking about this sentence lately from Zero to One by Peter Thiel; “What important truth do very few people agree with you on?” or put another way “What does everybody agree on?”
It seems that every CREtech article including mine has the same theme and should all start with TL;DR – The real estate industry stands to benefit massively by making static processes dynamic. Done. You never need to read another CREtech article again. You’re welcome.
We should be consistently challenging our assumptions and reassessing the state of CREtech. With that in mind, I challenge you to think contrarian about a few reoccurring statements I see in social media and blogs.
“We must eliminate all real estate inefficiencies.”
What if the real estate industry likes market inefficiencies? Perhaps real estate investors are profiting immensely from keeping rent comps close to the vest or marketing investment sales to a small group of highly qualified buyers. The internet at its nexus is about sharing and I more than anyone want to see that come to fruition but I’m also a realist. A large part of real estate investing is beating the competition through economies of scale and having better info than the next guy. Yet you also need friends and confidants to collaborate with because this is a relationship business. The “off-market” marketplace companies understand this dynamic very well.
“Brokers need a cheaper alternative. ”
LoopNet increased their prices, big whoop. I’m sorry to say it but a cheaper alternative to LoopNet is not a strong enough value proposition. The costs are negligible for most full-time brokers when compared to the power of LoopNet’s network. Just do a Google search for “Broadway Manhattan for lease” or any variation and most likely LoopNet is in the top five organic search results. You will never out LoopNet at being LoopNet. Although, I suppose the Google founders Larry and Sergey could’ve said the same thing about Yahoo when they started. Google’s experience was 10X better through quality of search. Focus on that – not costs; but hey prove me wrong.
“Commercial real estate is a tech laggard industry.”
Here’s the granddaddy of them all. This was so true less than three years ago…but I’m starting to feel differently now. Firms are still using tech products, just not necessarily industry specific ones via Dropbox, Salesforce, LinkedIn, Google Drive and more. Leasing management platforms have now paved the way for proving return on investment in commercial real estate tech. Additionally, firms are developing technology in house like JLL’s HiRise and making investments such as CBRE Group and Avision Young in LiquidSpace. Real estate firms are increasingly looking to startups, venture capital, and consultants for solutions. Maybe tech adoption is lower than we’d all like but at least the industry is self-aware of it’s own problem. Now it’s on smart entrepreneurs to execute on big ideas.
“CREtech is disrupting a multi-trillion dollar market.”
CREtech companies dangle trillion dollar markets in front of venture capitalists and journalists. I like the way it sounds too. Sure the valuation of all cumulative real estate is trillions of trillions of dollars but the amount spent on technology is quite another thing. Using the tippy-top valuation of $26 trillion and assume it’s owned at a 10 cap, that’s $2.6 trillion of NOI and if we further assume 1% of firm revenue is spent on technology that is roughly a $26 billion dollar market – still a lot of money but not quite as sexy as trillions. But enough harping on the dollar amount, it’s also the term “disruption.” Disruptive innovation creates a new market and value network – Peter Thiel refers to it as going from zero to one. There’s nothing wrong with incremental or bridge technology because it leads to better things. To say the present state of CREtech is “disrupting” commercial real estate is a stretch – but keep it in the pitch deck.
If you have any other contrarian CREtech ideas you would like to share, please let me know in the comments. Thanks for reading.