Real estate technology is big business. The world's fastest growing sector (technology) is quietly transforming the world's largest industry (property), with over 120 real estate startups making a huge impact on how we buy, sell and manage assets.
In 2016 alone, real estate tech companies raised over $4.2 billion to grow and develop new software solutions, according to CB Insights data.
And then in 2017, real estate tech got even more exciting. VC and seed funding for companies exceeded $12.6 billion. Although $4.4bn of that was SoftBank putting money into co-working giant, WeWork, with a further $550 million (most of it from SoftBank) going into residential brokerage, Compass.
Excluding those massive deals, $7.65 billion flowed into this sector in 2017. A sure sign of exciting things to come on the real estate and technology scene.
An overview of real estate tech
Software companies in this sector cover a wide series of categories. From new listing and search platforms, to marketplaces (residential and commercial), through to marketing, property and leasing management, DIY solutions for home sellers, financing and brokerage platforms, and numerous other solutions.
Zillow, StreetEasy, Trulia, easyProperty, Offerpad, Knock, Cozy Services, VTS and Nestio are just a handful of the players in the real estate software market that includes over 120 companies with billions behind them. CB Insights lists them all and where they sit in the market here.
Speaking in the Commercial Observer, Re:Tech founder Ashkan Zandieh (creator of a report on the state of this sector in 2017) said: "There are historically high valuation levels, and you're seeing similar companies competing for the same transactions."
Not all of this money is flowing from VC firms, which makes the funding dynamics different from other software sectors. Connell McGill, Co-founder/CEO of building data software firm Enertiv notes that "You have all these families where real estate is their core business, and now there are these new technologies that are aiming to disrupt their space or make their businesses more profitable," McGill said. "These are families that have a significant amount of resources that can be invested [in real estate tech]."
What next for this sector?
Funding has continued to flow in 2018, despite some analysts saying that the real estate tech sector was "frothy." We expect that to continue throughout this year and into 2019.
Smaller players and competitors are likely to get acquired by more established well-funded firms. We can also anticipate some lateral moves, either through acquisitions, funding or strategic partnerships from adjacent and connected sectors, such as fintech and traditional financial companies.
We can except that in the next year or so, some real estate technology companies are going to break through into the mainstream, especially in the consumer-facing space. Some of these property tech startups are going to become as well known as Airbnb and WeWork. Finance-related solutions are going to further disrupt and improve the process of buying and managing property. Real estate agents and brokers are, as a natural part of what they do, going to promote the adoption of these services when they save them time and money.
Grey Wolf, an investment firm in this sector hosted a panel on the future of real estate technology at Wharton's Zell Lurie Real Estate Center's Fall Members Meeting. The consensus from that panel is "that technology will dramatically improve how real estate assets are managed. The future of real estate asset management is a technological future, that much is clear."
How technology has changed the real estate industry?
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