Situations are beginning to simmer in real estate technology. The very first phase of technology rise in the course, that was mainly focused around listing services for that residential side of the market, has led the way for industry leaders to broadly reconsider how technology could make their lives better.
For individuals within the technology world with a few background in real estate, the chance may appear apparent. But real estate is really a sector from the economy that’s produced immense wealth without altering their workflows or approaches for many decades, so there is a predisposed insufficient emergency to upgrade the old tool belt.
The term “trillions” will get tossed around a great deal when individuals make reference to real estate being a resource class. Generally speaking, real estate may be the biggest resource class within the U.S. worth a believed $40 trillion based on this December 2014 report.
To obtain specific, residential housing may be the single biggest “tangible” U.S. real estate resource, worth roughly $23 trillion, and commercial real estate makes up about another $15 trillion. To place this in perspective, being a resource class, real estate is meaningfully bigger than other U.S. heavyweight industries like fixed earnings, equity and healthcare.
Real estate lending is undoubtedly the biggest lending category, shaming charge card debt by orders of magnitude. Residential mortgages alone paid for pretty much $12 trillion by December 2014 in comparison with $882 billion in charge card debt. $1.6 trillion in new real estate debts are released every year – $1.1 trillion in residential and $500 billion in commercial. Based on this report by Johnson Lang LaSalle, annual commercial real estate lending is forecasted to achieve $1 trillion by 2030.
The National Association of Realtors may be the biggest industry trade association around with 1.25 million people and you will find roughly 3 million active real estate agents within the U.S. You will find roughly find 500,000 construction professionals and most 120 million positively handled commercial properties. To sum up, there’s a great deal of money altering hands within the sector.
Venture funding of real estate technology online companies arrived at an optimum within the 4th quarter of 2014, with 32 companies raising nearly $300 million. As a whole, venture funds invested $605 million in real estate tech in 2014 versus $241 million the prior year – greater than 2.5x growth. You will find numerous signs recommending the popularity continues through 2015 because the category moves from niche status to 1 that gains common attention.
In my opinion the next thing of growth – and many exciting possibilities – is going to be fueled by items and services that provide the commercial side from the real estate market.
Residential Versus Commercial
The very first technology leaders to pay attention to real estate mainly addressed the residential market. The likes of Zillow, Trulia, Realtor.com, RedFin and StreetEasy displayed the energy that technology might have when put on an industry as large and lucrative as residential real estate. All these companies operate, in most cases, as residential listing services, which has shown to be the reduced-hanging fruit from the real estate vertical.
Commercial real estate includes office structures, hotels, malls, stores, multifamily housing, industrial property, warehouses, medical centers and garages. So far, technology innovation around the commercial side from the market continues to be limited, with two outliers being CoStar and LoopNet.
This really is partly caused by data that’s tiresome to collect and “dirty” – making it difficult to use, information about the industry that’s opaque with incumbents who’ve incentive to help keep it this way, and a few of the early momentum that collected within the mid 2000s being stymied through the economic crisis and subsequent pullback that commercial development and investment experienced.
Using the economic recovery under way and cash flowing back to commercial development, a few of these roadblocks happen to be lifted and also the marketplace is, once more, ready for brand new newcomers to construct upon the job from the early pioneers in commercial real estate technology.
Items and services that address the commercial side from the market tend to be more exciting (versus residential) and represent an enormous chance for any couple of key reasons:
Greater transaction values mean there’s more on the line for that gamers involved. Given greater transaction values, your competition is more powerful so the gamers are prepared to repay for competitive advantage.
Single transactions frequently involve multiple ingredients – property brokers, lenders, loan companies, designers, appraisers, contractors – all of whom want an advantage. There’s plenty of relevant commercial data open to parse, which naturally plays into the wheelhouse of skilled data researchers and tech entrepreneurs.
Large diversity of funding sources produces newly found chance for prices and product optimisation. The marketplace is old and grossly underdeveloped.