Investors funneling millions into commercial real estate technology

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December 15, 2015

It won’t be news to you that technology plays a major role in the CRE industry, and it’s only getting more central to success. Real estate professionals are adapting technologies from other fields to improve performance, and the number of tech start-ups focusing entirely on products for the real estate industry has surged in recent years.

 

According to a recent Techcrunch piece, funding of real estate tech ventures is seeing significant growth. In 2014, $605 million was invested in startups focused on developing platforms and apps specifically designed for the real estate industry.  That’s up from $241 million the year before. The last quarter of 2014 set a record: 32 real estate tech companies raised nearly $300 million in that period.

 

The first developments in technology for real estate focused on the residential side. New ways to share, organize and enhance listings and increase efficiency were slowly integrated into that side of the business. Now there are signs that innovation is heating up with regard to tools for commercial real estate. Considering the mammoth economic impact of the industry, there is likely a huge market for such innovations.

 

At the end of 2014, the Federal Reserve reported that real estate in the U.S. is worth an estimated $40 trillion (with a T). Real estate accounts for more than a $1 trillion in lending annually, and this report projects that lending for commercial real estate alone in the U.S. will reach that amount -$1 trillion- by 2030. This sort of activity is rich ground for technology, and start-ups are working on everything from property management to data collection and analysis to mobile applications. The high transaction values in commercial real estate mean that the players are likely to be willing to pay more for a competitive advantage, so the potential for profit for tech startups is great.

 

As a global center for commercial real estate, New York is also leading in tech startups for the industry. More than half of the CRE tech start-ups funded in 2014 are located here. Many, including Honest Buildings, Onboard Informatics, Hightower, and Urban Compass, are already becoming well established in the industry.

 

The market for these tech products and services is global, and investment is brisk in other parts of the world as well.  CRE is tremendously active in London, Tokyo, and Paris. There’s a great deal of investment happening for tech startups in China and India. Some significant international efforts include Housing.com, CommonFloor, and PropTiger.

 

It looks from here like the opportunities in tech development for CRE are just beginning to be realized. Research and analytics are being revolutionized by open data initiatives, online marketplaces are opening up investment, and considerations like digital currency are shaking up lending. If the last 2 years are any indication, we have some exciting times ahead. There’s great potential for major successes among these new companies, and also for tremendous gains in the industry as new technologies make us all more effective and nimble.

 

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