Business enhancement opportunities for owners and operators reside in each of the verticals – from improved data accuracy to tenant engagement and improved operations.
The shape of things to come
Although the market is still relatively nascent, we expect a number of distinct trends driving VC activity in the built-world tech industry to develop as the market matures:
- Data and information are king. AI and automation will gradually influence owners/operators over time.
- The future lies in ROI. There is a huge opportunity for startups to build platforms to deliver better ROI for owners and operators.
- Watch for emerging leaders. Many startups have reached their tipping point, and the race to get acquired is on.
- Owner/operators become direct acquirers. Many are assessing current processes and pain points with an eye on the tools that can aid their operations, cut costs and increase profitability.
Although a lot of existing technology may have enhanced efficiency or added new insights, it has yet to make a significant impact on ROI. This is a particular issue facing start-ups and their offerings, but we expect the next wave of solutions to offer precise ROI suggestions.
Similarly, we expect there to be a number of tech and real estate convergence opportunities. Should some of the best real estate landlords of the future start out as built-world tech companies, they could have an opportunity to deploy their tech into their own portfolios. If it makes a significant difference to ROI, it could point to more efficient ownership and management.
A number of other trends such as new business models, crowdfunding for syndicated investment opportunities and the growing popularity of co-living will also greatly influence how capital is invested across the sector.
How EY can help
Capital transformation
In today’s increasingly competitive global marketplace, the optimization of capital invested in real estate and how that real estate is used can be a significant factor in overall corporate performance.
Read moreBuilding a lasting model
By and large, VC activity in the built-world tech market can be defined by two dynamics. On the one hand, it’s a marketplace driven by huge inflows of capital. On the other, adoption (although evident) lags behind this flow of investment.
There are three major hurdles standing between greater VC investment and adoption which if remedied could transform the real estate industry:
- Infrastructure: Owners and operators that wish to solve their operational and value challenges through technology must hire the right talent, analyze the processes and functions that would benefit the most by replacement technologies and develop strategies that will deliver these needs. Organizations can do this by taking a closer look at existing solutions and bringing in the right talent to implement adoption.
- Absence of single-source solutions: On the provider side, greater adoption may occur if start-ups consider creating connected umbrella solutions to solve a range of challenges and needs. The buyer profile in our industry does not always respond when a value proposition is not clear, yet innovation is incremental, and firms need to demonstrate that their solutions are adaptable and have an acceptable shelf life.
- ROI: Ultimately, this is where all commercial real estate firms, no matter the size, reside. In current product offerings, there are few quantifiable returns on investment, i.e., an anticipated reduction in costs or increase in revenues. However, over time, as more technology is adopted and outcomes are measured - and the needs of the market are more clearly identified - a more definitive link between product and ROI will be established.
Although clearly there are issues that remain unresolved, current momentum and progress suggests that the built-world tech market is creating a new and exciting era in real estate—one that we are watching with anticipation.
Summary
Commercial real estate has a long-standing reputation as a technology laggard; slow to respond to the disruption that has swept across other industries. But with venture capital investment in ”built-world tech” at an all-time high, how can the real estate industry make sense of the emerging technologies and opportunities that could transform their businesses?