Tech Shakeout on the Horizon for Real Estate

By |2015-11-05T16:38:23+00:00November 5th, 2015|

“It’s pretty easy to get a meeting if you are disrupting something in real estate,” said Richard Sarkis, CEO of Reonomy, a startup that evaluates commercial real-estate data.

Investors are always scouting tables for a chance to jump in on the game. They know if bets are placed correctly on a disruptive startup, the payout can be huge. Large companies are able to leverage a successful startup’s technology and extract massive data sets with which they can use to better understand housing market conditions, home-buyer demographics, and commercial real estate drifts, among a pool of other trends. Therefore, investor ears are always perked up. They are listening for the footsteps of promising tech startups – especially of those belonging to real estate.

And rightfully so.

The Federal Reserve currently values U.S. real estate at an estimated $40 trillion, making it the largest asset class in the country. To feed it’s hunger, an estimated $1.4 billion is expected to be invested in real estate tech startups this year, which is up from $1 billion last year and $438 million in 2013. This growing pot of gold has left many entrepreneurs hungry for a piece of the loot. Unfortunately, many of today’s hopefuls are blinded from what constitutes meaningful change.

“The reason there’s a graveyard of technology companies in real estate is they try to disrupt just to disrupt,” said Robert Reffkin, chief executive of Compass, a technology-driven real-estate brokerage. “Just make it better.” And it’s that mentality that has resulted in real-estate firms adopting technology at a slower pace than those in other businesses. New startups that enter the market look to capture the business of both residential and commercial brokers without consideration.

Tech firms simply do not account for the hand-holding that buyers and renters desperately need when starting the property hunt. They are under the delusion that by eliminating the middleman, an agent, the industry will become quicker and smarter. This is foolish thinking. Instead, they should focus their efforts on integrating their technology and data tools into the day-to-day operation of brokers and agents. Only then will real estate see an overall improvement in the customer experience.

But given the breadth of the real estate industry and how early it is in the game, there is a lot of hope in technology firms to disrupt effectively. A piece of advice from Brad Svrluga, partner at Primary Venture Partner, is for entrepreneurs to study history. By looking back at the last 5 years and seeing when and how disruption took place in other industries, entrepreneurs can predict tomorrow’s shortcomings and leverage that information to see what it takes to hit the market with impact. After all, this is an antiquated industry begging for change. All it will take is a little fanning for the fire to roar.

Until next time…Keep It Real!

About the Author:

I was fortunate enough to flip my first house the Summer before Senior year in high school and ever since real estate and entrepreneurship have been my passions. I get to live out both of those passions every day by helping real estate professionals from around the world market, advertise, lease, and sell their properties and spaces in new, innovative ways using video.