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Tag: Real Estate Investor Tips

  • The Future of Capital Markets Technology

    Capital Markets are where savings and investments are channeled between suppliers, people, or institutions with capital to lend or invest — as well as those in need (Hayes, Investopedia). Suppliers typically include banks and investors while those who seek capital are businesses, governments, and individuals. Capital markets are composed of primary and secondary markets.

    The most common capital markets are the stock market and the bond market. However other, more complex, markets include the CRE (Commercial Real Estate) Market, Equity Capital Market (ECM), as well as many others that are typically geared towards a specific investor. Therefore there is not as much trading volume or frequency, since the broader excitement is not the same. Even though real estate is the world’s largest asset class, we’ve seen a recent decline in CRE investment. Medium recently posted an article detailing the advantages of a platform called Beacon Platform, Inc, which was a critical, major acquisition for Centena.

    Medium: Modernizing the Capital Markets Technology Stack: Centana’s Investment in Beacon Platform, Inc.

    Why do customers choose Beacon?

    Time-to-Value and ROI. Today, companies continue to deal with cumbersome internal applications that have been stitched together, often with legacy code and/or 3rd party vendors in the Trading and Risk Management space, which are “black box” and difficult, if not impossible, to alter.

    Beacon’s entire code base is flexible and transparent (i.e. the code is made available to customers) and seamlessly integrates with existing software and other 3rd party solutions (like Murex and Calypso), or in-house proprietary solutions, which helps drive quick time-to-value and high utility.

    In a fraction of the time and cost of alternative solutions, Beacon has helped customers achieve objectives such as migrating workloads to the cloud, expanding into new markets, upgrading legacy code by placing it within a modern developer wrapper and extending analytics and applications to customers’ end-users.

    -Matt Alfieri
    Key Takeaways

    When it comes to capital markets technology, the evolving nature of the tech space all but ensures we will see new technologies introduced into capital markets operations. Additionally, while this may sound like an advertisement for Beacon (though FinYork has absolutely no affiliation to it), the critical feature to note is this is an exemplary illustration of where capital markets technology appears to be heading.

    Vertical SaaS or cloud industry solutions, instead of legacy or proprietary in-house solutions, are showing us that they’re easier to replace than many executives originally thought. You should expect to see a similar effect here as with PropTech, as it becomes more widely available and accepted by savvy executives and high net worth real estate investors. You definitely do not want to be the firm who is continuing to use antiquated capital markets technologies. This puts you at an immediate, huge disadvantage. It makes it that much harder to catch up with your competitors, who have a leg-up as they’ve already implemented innovative technologies.

    All this goes to say that SaaS, digital transformation, cloud technologies, PropTech, and even niche technologies that aim to improve efficiency in capital markets are going to play an integral part of the future. The success of firms who will adapt them largely depends on the success those firms will have in the implementation process. To be sure, capital markets technology is only going to continue getting more efficient, robust, and easier to adapt.

  • Key Players in the CRE Market

    Many property types within the Commercial Real Estate (CRE) market are generally agreed to have had a poor performance the past few years, largely due to the COVID-19 pandemic restrictions. Particularly, office and retail property types. The real question investors are asking themselves is whether or not it has the potential for an emphatic return, or if a commercial real estate focus is not likely to be a great long-term investing strategy. The opportunities for successful CRE investments are still there. There are still plenty of marketplaces exclusively geared towards CRE investment, which have uniquely positioned themselves in the broader real estate investing market.

    Before committing your resources to a given investment strategy, new investors should understand who the market players are for a CRE deal. Below is a thoroughly compiled list of the key players (roles) in the commercial real estate market, which then goes onto provide an additional link to a description of each role.

    Key Players in CRE :
    • Buyer & Seller
    • Brokers: Buy-side and Sell-side
    • Legal Counsel: Buy-side, Sell-side, and Lender Counsel
    • Mortgage Broker
    • Lender/Loan Officer
    • Title Company
    • Capital Partners/Investors
    • Property Management
    • Insurance Provider
    • Appraiser & Surveyor
    • Environmental Consultant
    • Accountant: Buy-side and Sell-side

    The following article shares a useful and detailed look at the key players in CRE. Refer to the link below. It provides key details about the key players in CRE’s marketplace.

    What Are The Key Players And What Are Their Roles In A Commercial Real Estate Transaction

    As a commercial real estate investor, either as a buyer or as a seller, you work with multiple parties to move a deal from discovery through to closing. To manage a deal process efficiently, it is of utmost importance to understand all of the key players in a commercial real estate transaction.

    GerCNergy.com (Administrator)
    https://getcnergy.com/knowledge-base/key-players-in-a-commercial-real-estate-transaction/
    Summary

    The above players all comprise parts of the CRE deal. It is important for a sophisticated investor to be familiar with the various players as they can understand the dynamics of a deal and align with the sponsors who will work with most of the players mentioned.

  • Key Players in the CRE Market

    Many property types within the Commercial Real Estate (CRE) market are generally agreed to have had a poor performance the past few years, largely due to the COVID-19 pandemic restrictions. Particularly, office and retail property types. The real question investors are asking themselves is whether or not it has the potential for an emphatic return, or if a commercial real estate focus is not likely to be a great long-term investing strategy. The opportunities for successful CRE investments are still there. There are still plenty of marketplaces exclusively geared towards CRE investment, which have uniquely positioned themselves in the broader real estate investing market.

    Before committing your resources to a given investment strategy, new investors should understand who the market players are for a CRE deal. Below is a thoroughly compiled list of the key players (roles) in the commercial real estate market, which then goes onto provide an additional link to a description of each role.

    Key Players in CRE :
    • Buyer & Seller
    • Brokers: Buy-side and Sell-side
    • Legal Counsel: Buy-side, Sell-side, and Lender Counsel
    • Mortgage Broker
    • Lender/Loan Officer
    • Title Company
    • Capital Partners/Investors
    • Property Management
    • Insurance Provider
    • Appraiser & Surveyor
    • Environmental Consultant
    • Accountant: Buy-side and Sell-side

    The following article shares a useful and detailed look at the key players in CRE. Refer to the link below. It provides key details about the key players in CRE’s marketplace.

    What Are The Key Players And What Are Their Roles In A Commercial Real Estate Transaction

    As a commercial real estate investor, either as a buyer or as a seller, you work with multiple parties to move a deal from discovery through to closing. To manage a deal process efficiently, it is of utmost importance to understand all of the key players in a commercial real estate transaction.

    GerCNergy.com (Administrator)
    https://getcnergy.com/knowledge-base/key-players-in-a-commercial-real-estate-transaction/
    Summary

    The above players all comprise parts of the CRE deal. It is important for a sophisticated investor to be familiar with the various players as they can understand the dynamics of a deal and align with the sponsors who will work with most of the players mentioned.

  • What’s Holding Back PropTech?

    While PropTech has seen some growth in recent years, more so before the COVID-19 pandemic, we still haven’t seen the manifestation of the scale of technological revolution in the property industry we were once promised. The vast majority of buildings we come across in our daily lives are still operating in traditional ways, using outdated but proven equipment. Let’s dive into why we are yet to see the kind of transformative innovation we were expecting on a broader scale.

    Real estate is widely recognized as the world’s largest financial asset class. However, in today’s world, we often see companies rise to prominence before crashing and burning in a matter of a few short years. Most of the biggest corporations in the world today didn’t have a trace of existence 30 years ago. The real estate asset class could not be categorized more differently. It’s not only the largest asset class (by far), it’s also the oldest asset class (Hagerty, Propmodo). Historically, the property industry is a very slow, cautious sector. Unlike an App, such as Uber for example, buildings and other construction projects take many years from the design process to the completion of the physical structure. This is attributed partially to the reality that protecting buildings and the occupants inside them is paramount. In both the residential and commercial real estate sub-sectors, moving too fast and making a mistake that may lead to a potential building collapse is simply out of the question. Due to real estate’s conservative business model, even the most sophisticated PropTech products are having a difficult time gaining broad, large-scale traction (Hagerty, Propmodo).

    Ernst & Young’s Comprehensive PropTech Study

    An Ernst & Young (E&Y) survey recently found that 43% of those who provide PropTech products are majorly struggling with widespread adoption across a given client’s business. Additionally, the same research discovered that 35% of PropTech providers are seeing a very sizable lack of scaling, as a direct result of their application being adopted. Perhaps the biggest shock from this study is 39% of respondents are yet to adopt even a single PropTech tool.

    In addition to safety concerns, the attitude of business managers has been noted as a key opponent to PropTech’s success. Value in real estate is most frequently determined by three factors: 1) location, 2) size, and 3) finishes [amenities]. Reducing costs and increasing efficiency plays a major role in the construction industry, but we don’t typically see those same levels of concern in asset management. PropTech is actually attempting to change that. With the right technology, savings from efficiency, integration, and automation can start to pile up (Hagerty, Propmodo). Having the ability to tap into data generated by buildings is providing actionable insights that are too big of a potential game-changer to ignore. For individuals or companies that already have a real estate strategy in place, implementing innovative PropTech is only putting them further ahead of the pack. Executives, board members, and direct real estate investors alike clearly understand the need for PropTech. The biggest challenge remains in implementation.

    Conclusions Drawn From Ernst & Young’s Study

    We can conclude from the E&Y study that the remedy starts with ensuring the right people are in place. E&Y found 53 percent of real estate owners don’t feel they have the in-house talent to successfully adopt new technology. It’s worth taking a moment to let that sink in. More than half of executives, or very senior personnel in a position to make these decisions, are not confident in their own teams’ implementation ability. Without technology-minded talent and leadership, it’s hard to see the light at the end of the tunnel. Traditional real estate leadership has often been hesitant – or perhaps more precisely, even negligent – in scrapping outdated systems and processes they’ve relied on for decades. Again, PropTech aims to alter that mindset entirely. Leveraging technology is about focusing on future potential, rather than cost. There are undoubtedly sizable upfront costs associated with widespread PropTech adoption across a portfolio. What makes executives and board members in particular hesitant with implementing PropTech is the mindset about their obligation to stakeholders being centered around cost cutting. Why bother spending money “fixing something” that isn’t broken? Buildings are operating just fine without the need for any sweeping, technological overhaul. That’s the position traditional real estate leadership has taken; they are extremely hesitant to tolerate large capital expenditures on risky, bold technologies that don’t have a clear trajectory of return on investment. Succinctly, from the E&Y analysis we can clearly deduce that executives and board members need to ensure there are enough personnel focused on technology to help senior management understand there in fact is a return on investment from implementing various PropTech products. It’s not as clear-cut, but the long-term financial benefits are there.

    Again, referring back to the same E&Y data, almost 60% of real estate companies surveyed responded that they find new systems difficult to integrate with existing platforms. This is viewed as a further hinderance for executives because this translates to times and resources in order to get things set up, further disincentivizing them by piling on additional costs and additionally clouding the potential return on investment. The rapid pace of development and deployment is leading to piecemeal technology strategies instead of full end-to-end solutions, which is easier for leadership to recognize. As the PropTech industry matures, consolidations, acquisitions, and a wider array of products to service every aspect of portfolios could help solve some of those problems (Hagerty, Propmodo).

    “As investors begin to see the benefit of companies adopting technology, we believe they will help drive the industry forward more rapidly in the same way that investor pressure has encouraged companies to do more and report more on ESG related issues”.

    Mark Grinis, Ernst & Young Global Real Estate, Hospitality, & Construction Leader

    Perhaps an unpopular opinion, but some have compelling arguments that growing pains in PropTech industry is actually a good thing. The real estate industry was stagnating for decades, perhaps centuries. In a few short years, technology has worked its way into practically every executive conversation or board member meeting. With that being said, retrofitting existing buildings will not be a viable solution for every – or most – property owners.  Building technology into the bedrock of the property industry is a ground-up exercise, literally, which makes taking stock of progress that’s been made that much more important. That’s where PropTech comes in. There’s plenty of obstacles in the industry slowing down PropTech at the moment, but there’s no stopping it, especially it in the long-term as we’ve seen companies rapidly expand cloud and digital transformation technologies.  

  • NYC’s Real Estate Market Outlook as the CDC’s Moratorium on Eviction Expires

    When the CDC (Center for Disease Control and Prevention) last extended the eviction moratorium a third time, due to the COVID-19 pandemic, from the end of June 2021 to the end of July 2021, they were clear that would be the final extension. Republicans opposing another extension of the eviction moratorium cited the recent 5-4 decision by the Supreme Court, which suggested legislative approval would be required. Leading Democrats responded with brief arguments that the eviction ban needs to be extended, as Congress has only distributed $3B out of the $46.5B in approved rental relief. According to a study by the Aspen Institute, more than 15 million people in 6.5 million US households are currently behind on rental payments. The same study estimates the collective cost to landlords to this point has been over $20B. Landlord groups previously came together in an unsuccessful attempt to end the moratorium earlier, arguing the CDC overstepped their legal authority, but they were rejected by the Supreme Court’s ruling then. Determined not to give up, the National Apartment Association (NAA), with 82,600 members that collectively manage more than 9.7 million rental units, sued the U.S. government on Tuesday July 27th, seeking billions of dollars in unpaid rent due to the moratorium (Shepardson, Reuters).

    While opportunities for a federal extension essentially ended when the House of Representatives adjourned Friday July 30th, effectively giving up, there are states that have already extended the eviction ban. New York and California top the list, with the two states passing bans on evictions until August 31st and September 30th, respectively (Shepardson, Reuters). Keep in mind, the justification for the CDC initially issuing this policy was due to the federal government’s direction to self-quarantine during the worst of the COVID-19 pandemic. It was not primarily over economic concerns, as that would be outside the CDC’s purview. Regardless, assuming nothing changes from this point, New Yorker’s in financial crisis will only have one additional month of safe haven before they too will have to deal with the reality of federal protections stemming from the COVID-19 pandemic ending.

    What does the looming end of the eviction moratorium mean for NYC’s real estate market? Firstly, as predicted by several well-known real estate attorneys, there will be a huge backlog of cases in Housing Court. Prior to the pandemic, during routine economic and geopolitical times, evictions could take anywhere from three to six months – considered typical – or sometimes drag out for years on end (Hogan, NY Post). The backlog will in turn lead to some landlords, who have certainly been financially struggling throughout this ordeal, being forced into foreclosure or given no choice but to sell cheap to cash buyers. Landlords need revenue in order to run a building. They have expenses, such as providing heat, paying personnel and staff, building supers and contractors, as well as real estate taxes to boot.

    If you’re one of the savvy, fortunate investors who came out of the pandemic with a solid amount of disposable income set aside for your portfolio’s growth, a direct real estate investing approach could prove to be extremely rewarding. REIGs (Real Estate Investment Groups) can also become a powerful force in NYC’s residential real estate market in particular, once the moratorium ends. This vehicle gives real estate investors the ability to join together and pool both their money and knowledge to invest in multiple residential real estate properties. Similarly, members of the REIG would share the costs associated with property management. They could also benefit from diversification and economies of scale, which are additional benefits to joining a REIG. The bottom line for NYC is once the eviction moratorium does end, you’ll see solid opportunities for a long-term residential real estate investment. As is usually the case with financial markets during times of uncertainty, there’s definitely opportunity, but with that opportunity comes inherent market risk.

  • How the Green New Deal Would Impact Real Estate Investors

    Depending on your views on climate change, the Green New Deal framework will either conjure up enthusiasm, anxiety, or perhaps a combination of the two. The proposed bill, which has since been explained as a framework towards what we ought to work towards, calls for “maximum energy efficiency”. Based on scientific research, which concludes climate change is imminent and potentially disastrous, the proposal aims for net-zero emissions in the United States by 2050. As part of the plan to get there, this means every building in the country would need to be upgraded for maximal energy efficiency, water efficiency, safety, affordability, comfort, and durability.

    As of the start of 2020, approximately 40% of the United States’ carbon monoxide emissions come from either commercial or residential real estate buildings (Neiditch, Forbes). Many of the political proponents of the Green New Deal were pushing it behind the idea that up to $1 trillion of infrastructure and coastal real estate could be damaged by global warming by 2050. According to the Energy Information Administration (EIA), currently, there are approximately 5.6 million commercial real estate buildings in the United States. Specifically in New York City, as part of an ongoing effort to combat climate change, legislation was passed to force buildings that are larger than 25,000 square feet to make energy efficient alterations. The legislation mandates cutting down greenhouse gas emissions 40% by 2030 and 80% by 2050. While the parameters for smaller, residential buildings aren’t as explicit, it’s estimated 95 million homes will be impacted and the cost to owners will be in excess of $400 billion (Neiditch, Forbes).

    While the Green New Deal did not come close to passing as it was originally written and there is unlikely to be sweeping legislation on a national level to overhaul climate change, many cities and states are finding a balance between clean air and economic productivity. Unfortunately, a lot of this conversation tends to be intertwined with politics, but the reality is a rural area in Kentucky (as an example) is not going to have the same availability of economic or human capital resources as a metropolis, like New York or Los Angeles. The lack of availability of these resources puts constraints on the ability of certain regions to advance their technological capabilities, thereby making the real estate investment opportunities unattractive to potential investors.

    Though preparations to meet the 2030 and 2050 targets have begun, there are some more immediate upgrades property owners can make that aren’t as long-term oriented, including switching out lightbulbs for “smart” lighting, upgrading HVAC systems, installing remote-controlled window shades, painting roofs with light-reflecting paint, planting trees, and installing photovoltaics. Additionally, preparation for weatherization is key to having a more energy efficient property. Windows, doors, and insulation can all be switched out and there is legislation to include different types of incentives for property owners to make these changes. Upgrading electric and plumbing systems, as well as installing solar panels can make homes more marketable, considering these changes are becoming more prevalent to the point of necessity. Finally, the Green New Deal framework focuses heavily on “green spaces” – or lawns – that cover more than 40 million acres of land in the United States. Lawns limit biodiversity and encourage pesticide usage and emissions from lawnmowers. The Green New Deal supporters encourage the conversion of these spaces to victory gardens and the expansion of green landscape architecture practices. An example of this is xeriscaping, or sustainable, easy-to-maintain landscaping first used in arid regions, which uses native plants and limits turf areas. This can reduce outdoor water use by as much as 50%, saving water as well as the environment (Neiditch, Forbes).

    So, what does the ambitious Green New Deal framework and the implications it will have on commercial and residential real estate mean for investors? Firstly, investors should focus on high-tech, climate-resilient opportunities in the real estate market. Secondly, residential real estate owners who are not under pressure from legislators to make climate change friendly adjustments to their properties should do so anyway, otherwise they will be far less attractive to prospective investors. Finally, commercial real estate investors, who are under pressure to begin implementing climate change measures mandated by signed legislation, are going to face major hurdles with regards to cost cutting. This legislation poses further challenges to commercial real estate investors, who are already in a difficult position coming out of the pandemic, in addition to facing the necessity to transform their assets to handle the push towards digital transformation. One thing is for sure: the conversation will continue. Being prepared for change is the best way to not only save the environment, but your long-term financial stability as well.

  • How the Green New Deal Would Impact Real Estate Investors

    Depending on your views on climate change, the Green New Deal framework will either conjure up enthusiasm, anxiety, or perhaps a combination of the two. The proposed bill, which has since been explained as a framework towards what we ought to work towards, calls for “maximum energy efficiency”. Based on scientific research, which concludes climate change is imminent and potentially disastrous, the proposal aims for net-zero emissions in the United States by 2050. As part of the plan to get there, this means every building in the country would need to be upgraded for maximal energy efficiency, water efficiency, safety, affordability, comfort, and durability.

    As of the start of 2020, approximately 40% of the United States’ carbon monoxide emissions come from either commercial or residential real estate buildings (Neiditch, Forbes). Many of the political proponents of the Green New Deal were pushing it behind the idea that up to $1 trillion of infrastructure and coastal real estate could be damaged by global warming by 2050. According to the Energy Information Administration (EIA), currently, there are approximately 5.6 million commercial real estate buildings in the United States. Specifically in New York City, as part of an ongoing effort to combat climate change, legislation was passed to force buildings that are larger than 25,000 square feet to make energy efficient alterations. The legislation mandates cutting down greenhouse gas emissions 40% by 2030 and 80% by 2050. While the parameters for smaller, residential buildings aren’t as explicit, it’s estimated 95 million homes will be impacted and the cost to owners will be in excess of $400 billion (Neiditch, Forbes).

    While the Green New Deal did not come close to passing as it was originally written and there is unlikely to be sweeping legislation on a national level to overhaul climate change, many cities and states are finding a balance between clean air and economic productivity. Unfortunately, a lot of this conversation tends to be intertwined with politics, but the reality is a rural area in Kentucky (as an example) is not going to have the same availability of economic or human capital resources as a metropolis, like New York or Los Angeles. The lack of availability of these resources puts constraints on the ability of certain regions to advance their technological capabilities, thereby making the real estate investment opportunities unattractive to potential investors.

    Though preparations to meet the 2030 and 2050 targets have begun, there are some more immediate upgrades property owners can make that aren’t as long-term oriented, including switching out lightbulbs for “smart” lighting, upgrading HVAC systems, installing remote-controlled window shades, painting roofs with light-reflecting paint, planting trees, and installing photovoltaics. Additionally, preparation for weatherization is key to having a more energy efficient property. Windows, doors, and insulation can all be switched out and there is legislation to include different types of incentives for property owners to make these changes. Upgrading electric and plumbing systems, as well as installing solar panels can make homes more marketable, considering these changes are becoming more prevalent to the point of necessity. Finally, the Green New Deal framework focuses heavily on “green spaces” – or lawns – that cover more than 40 million acres of land in the United States. Lawns limit biodiversity and encourage pesticide usage and emissions from lawnmowers. The Green New Deal supporters encourage the conversion of these spaces to victory gardens and the expansion of green landscape architecture practices. An example of this is xeriscaping, or sustainable, easy-to-maintain landscaping first used in arid regions, which uses native plants and limits turf areas. This can reduce outdoor water use by as much as 50%, saving water as well as the environment (Neiditch, Forbes).

    So, what does the ambitious Green New Deal framework and the implications it will have on commercial and residential real estate mean for investors? Firstly, investors should focus on high-tech, climate-resilient opportunities in the real estate market. Secondly, residential real estate owners who are not under pressure from legislators to make climate change friendly adjustments to their properties should do so anyway, otherwise they will be far less attractive to prospective investors. Finally, commercial real estate investors, who are under pressure to begin implementing climate change measures mandated by signed legislation, are going to face major hurdles with regards to cost cutting. This legislation poses further challenges to commercial real estate investors, who are already in a difficult position coming out of the pandemic, in addition to facing the necessity to transform their assets to handle the push towards digital transformation. One thing is for sure: the conversation will continue. Being prepared for change is the best way to not only save the environment, but your long-term financial stability as well.

  • CRE PropTech: How Will it be Affected by the Aftermath of COVID-19

    COVID-19 will forever change the landscape of CRE (Commercial Real Estate), especially for firms who are used to operating almost exclusively in a brick and mortar, office environment. The aftermath of COVID-19 will almost undoubtedly include more “smart” CRE. To put it another way, as software like Zoom has become a household name – whereas prior to COVID-19 it was largely known to the white-collar working class – you can expect firms to invest less in physical property. Consequently, the data shows that in every sector, at least in the short-term, PropTech investment has slowed down (Abuelsamid, Forbes).

    Intuitively, successful long-term investors tend to be heavily data driven, which has been a big reason for the slowdown in PropTech. Investors within the real estate sector are exercising caution with regards to their portfolios, as well as towards new deals for CRE projects. A great deal of this is attributed to the initial concept of this piece (which Forbes agrees with): corporations and startup firms alike are showing an increased interest in technology, which allowed them to work “smart” (i.e. Zoom) despite the pandemic (Abuelsamid, Forbes). With decreased overhead being a large incentive for startups and pressure from shareholders to cut costs being a large incentive for big corporations, many are realizing that the way they were forced to do business is perhaps a more efficient way than they were prior to the COVID-19 pandemic.

    With that being said, as we mentioned in a previous piece, PropTech is still a relatively new field to most investors. The CRE investing subsector of PropTech is even smaller, so there’s definitely still plenty of opportunity for successful PropTech investment vehicles. Even with the current data showing there’s slowed growth in the PropTech CRE subsector, that’s not to say you shouldn’t keep an eye out for solid investment opportunities, as they are still out there and can definitely be lucrative. This is the main reason you’ll typically find seasoned, experienced investors in the CRE PropTech space. There is opportunity for large returns, but it is definitely slim.

    In the longer-term, there’s no reason right now to believe firms will switch back to investment in more physical property, especially when that money can be spent on human capital. Therefore, if you’re interested in PropTech investment strategies, you should not expect to see consistent positive performance from PropTech CRE investments. On the other hand – while this subject deserves a complete discussion on its own – residential PropTech is definitely on the rise (Aramati, Forbes). With a major push coming from cloud technologies and digital transformation, there’s a lot more investment in “smart” residential real estate as opposed to commercial real estate. Generally speaking, investments in “smart” technology have gained a tremendous amount of traction and thereby very large returns for earlier stage investors. Again, as we discussed in a previous article regarding PropTech, technological advancement is the future and investors who are looking for the next Amazon or Google in the real estate market ought to look into residential PropTech options with a more favorable outlook than commercial PropTech.

  • CRE PropTech: How Will it be Affected by the Aftermath of COVID-19

    COVID-19 will forever change the landscape of CRE (Commercial Real Estate), especially for firms who are used to operating almost exclusively in a brick and mortar, office environment. The aftermath of COVID-19 will almost undoubtedly include more “smart” CRE. To put it another way, as software like Zoom has become a household name – whereas prior to COVID-19 it was largely known to the white-collar working class – you can expect firms to invest less in physical property. Consequently, the data shows that in every sector, at least in the short-term, PropTech investment has slowed down (Abuelsamid, Forbes).

    Intuitively, successful long-term investors tend to be heavily data driven, which has been a big reason for the slowdown in PropTech. Investors within the real estate sector are exercising caution with regards to their portfolios, as well as towards new deals for CRE projects. A great deal of this is attributed to the initial concept of this piece (which Forbes agrees with): corporations and startup firms alike are showing an increased interest in technology, which allowed them to work “smart” (i.e. Zoom) despite the pandemic (Abuelsamid, Forbes). With decreased overhead being a large incentive for startups and pressure from shareholders to cut costs being a large incentive for big corporations, many are realizing that the way they were forced to do business is perhaps a more efficient way than they were prior to the COVID-19 pandemic.

    With that being said, as we mentioned in a previous piece, PropTech is still a relatively new field to most investors. The CRE investing subsector of PropTech is even smaller, so there’s definitely still plenty of opportunity for successful PropTech investment vehicles. Even with the current data showing there’s slowed growth in the PropTech CRE subsector, that’s not to say you shouldn’t keep an eye out for solid investment opportunities, as they are still out there and can definitely be lucrative. This is the main reason you’ll typically find seasoned, experienced investors in the CRE PropTech space. There is opportunity for large returns, but it is definitely slim.

    In the longer-term, there’s no reason right now to believe firms will switch back to investment in more physical property, especially when that money can be spent on human capital. Therefore, if you’re interested in PropTech investment strategies, you should not expect to see consistent positive performance from PropTech CRE investments. On the other hand – while this subject deserves a complete discussion on its own – residential PropTech is definitely on the rise (Aramati, Forbes). With a major push coming from cloud technologies and digital transformation, there’s a lot more investment in “smart” residential real estate as opposed to commercial real estate. Generally speaking, investments in “smart” technology have gained a tremendous amount of traction and thereby very large returns for earlier stage investors. Again, as we discussed in a previous article regarding PropTech, technological advancement is the future and investors who are looking for the next Amazon or Google in the real estate market ought to look into residential PropTech options with a more favorable outlook than commercial PropTech.

  • PropTech: What is it and Who Are the Primary Investors?

    Property Technology, commonly known as PropTech, refers to the use of Information Technology (IT) to assist both individuals and companies buy, sell, research, and manage real estate. While still a relatively new field, the convergence of technologies, cloud, and digital transformation are key forces driving PropTech forward. The goals of PropTech include: minimizing the cost and resources associated with real estate transactions, maximizing efficiency, saving time, and personalizing property management. This concept is similar to FinTech, where the focus is on the use of technology in finance. PropTech utilizes digital innovation and other technologies to address real estate market participants’ needs in the property industry.

    Efficient PropTech is specifically devised to streamline processes and connect market participants in all aspects of real estate. Therefore, PropTech directly impacts buyers, sellers, brokers, lenders, landlords, as well as others. One of the most popular current PropTech technology is virtual reality software, which allows prospective buyers to virtually walk through properties, construction sites, and more. Additional well-known PropTech technologies include software for reporting repairs, splitting rent payments, and crowdfunding new real estate projects.

    At this time, PropTech consists of three major market segments: (1) smart home, (2) sharing real estate, and (3) real estate FinTech.

    Smart Home

    A smart home is equipped with digital platforms that monitor, manage, or operate specific property assets. Amazon Echo’s Alexa is an example of something in a smart home. Generally, they are comprised of digital platforms that monitor, manage or operate specific property assets. Other examples could be something a security surveillance system that warns property owners of a threat, a smart thermostat that regulates the temperature of uninhabited units, or smart light bulbs that can be turned on by a smartphone app or digital assistant.

    Sharing Real Estate

    This refers to technology that facilitates the processes involved with sharing or renting real estate assets, such as land, offices, storage, apartments, parking lots, and more. For example, there could be a software that facilitates automatic online payments for retail spaces occupied in a building owned by a property management company.

    Real Estate FinTech

    This segment of PropTech includes applications that involve buying and selling real estate assets. A platform that reduces the amount of physical paperwork and documentation involved in a home purchase can be thought of as an example. Stay tuned for a deeper conversation regarding the relationship between PropTech and FinTech.

    With PropTech still being a relatively new field, the investors are largely comprised of wealthy, seasoned real estate investing experts (or at least those with a real estate investing background). In addition to being backed by some of the world’s largest real estate giants, it would be fair to say most of the individuals behind the world’s biggest tech companies, agree that future technology is pushing towards digital transformation (Donati, Forbes). Therefore, you’ll find investors that are interested in a sort of ‘futuristic’ technology category when it comes to financial investments. For example, PropTech investors would be very likely to also be interested in FinTech and Cryptocurrency. While the latter two seem to be more popular at the moment, PropTech is definitely something well worth looking into, especially if you have a specific interest in real estate investing.