CRE Tech 4.0 – Boom, Bust or Fizzle?
We have heard this story before – or have we? There have been various tech booms and busts throughout history, with the most notable being the dot.com crash. The dot.com bubble occurred from 1995 through 2001 and had a significant impact on the general economy. The NASDAQ, well known for being a high-tech exchange, lost more than half its value and has only recently reached and exceeded pre dot.com levels.
The commercial and corporate real estate market also participated in the general dot.com euphoria and we estimate that approximately $2 billion was invested in real estate technology startups. About $1 billion was focused on the information and transaction market and the other $1 billion was geared toward broadband infrastructure. In many cases, these investments evaporated into thin air.
There were, however, a good number of companies that survived the crash and went on to become well-known and successful. One of the most notable successes from this period was LoopNet (later merged with Property First and then acquired by CoStar), while some of the less fortunate were companies such as RealtyIQ, Broadband Office and Real Centric.
Many in the industry are starting to ask how Phase 4 of CRE Tech investment (which began in 2009/2010) compares with earlier bubbles and what the next 12-24 months will bring. Will we see more notable exits, M&A activity, new entrants, or closures? To date, the VTS/Hightower merger, WeWork and the CBRE acquisition of Floored are the most recognized success stories of CRE Tech 4.0.
Our best estimates show that if you include transactions, operations, user experience and smart buildings, the level of investment in new companies could be in excess of $10 billion. This represents well over 3,000 companies, old and new, trying to sell some form of technology, automation and innovation to the commercial, corporate and institutional real estate industry. Comparing the two most recent cycles, dot.com was seven years ‘start to bust’, with about $2 billion invested in CRE Tech. The current cycle is now in its eighth year with at least five times the investment level of the dot.com era.
From our vantage point, here are a few observations:
- Innovation is good; it removes inefficiencies, creates new experiences and improves the industry
- There are a lot of new smart, curious minds trying to solve our industry’s problems
- The degree of innovation is forcing all companies, new and old, to push forward and improve the way we conduct business and serve customers
- Without the restrictions of legacy systems, innovators are free to re-think processes and procedures with no limitations
- Sources of capital: much of it is coming from investors with very little knowledge of the industry who are not aware of our specific challenges, most notably slower, calculated adoption (one senior level RE executive speculated that literally thousands of outreaches by new companies result in only four new evaluation projects each year)
- The patience of investors for reaching profitability goals has been extended from two to three years to five to seven years
- Given the high magnitude of investment in CRE Tech 4.0, there has been a relatively low number of high profile exits
- There are too many new competitors in an already crowded space
- Lack of industry-specific knowledge by many startups
- Tactical ‘app’ approach without a comprehensive understanding of strategic issues such as enterprise integration, data integrity and cyber governance
With so many new companies focusing on commercial, corporate and institutional real estate, the innovative ideas that rise to the top are important to the progress of our industry, and that is why Realcomm and IBCON will continue to showcase the ‘best of the best’ ideas. We will provide a forum for discovery, discussion and debate on the challenges and opportunities of the innovation emerging from Phase 4 of CRE Technology.
To learn more about the future phases of CRE Tech, join us at Realcomm | IBcon 2017, which will be held in San Diego on June 14-15 (June 13: Precon | June 16: Innovation Tech Tours).
This Week’s Sponsor
Now in its fourth decade, Yardi® is committed to the design, development and support of software for real estate investment management and property management. With the Yardi Commercial Suite™, Yardi Multifamily Suite™, Yardi Investment Suite™ and Yardi Orion™ Business Intelligence, the Yardi Voyager® platform is a complete real estate management solution. It includes operations, accounting and ancillary processes and services with portfolio-wide business intelligence and platform-wide mobility. Yardi is based in Santa Barbara, Calif., and serves clients worldwide from offices in North America, Asia, Australia, Europe and the Middle East. For more information, visit www.yardi.com.
For more information about the event, course and its design: Realcomm | IBcon Golf Outing
The golf outing is open to all registered Realcomm | IBcon attendees. Conference registration (early bird rates expiring 4/14/17) and advance reservation is required.
Contact information: Alicia Riddle | 757-333-2332
UPCOMING REALCOMM WEBINARS
COMMERCIAL REAL ESTATE & Technology – The Importance of Developing a STRATEGY - 9/19/2019
It wasn’t long ago that a Commercial Real Estate CIO was responsible only for functions such as networking, file and print servers, computer hardware, desktop applications and e-mail. Over the last 5+ years other responsibilities have entered the sphere of the CIO including marketing, operations (smart buildings), occupant experience and cybersecurity, to name a few. Additionally, emerging technologies such as AI, Machine Learning, Blockchain, AR/VR, autonomous, robotics and others are impacting their world as well as their clients. Never before has it been so important for a Real Estate CIO to develop a comprehensive digital strategy, encompassing all aspects of the organization. This webinar will focus on the importance of developing a comprehensive digital strategy.
Founder of Realcomm Conference Group, an education organization that produces Realcomm, IBcon and CoRE Tech, the world's leading conferences on technology, automated business solutions, intelligent buildings and energy efficiency for the commercial and corporate real estate industry. As CEO, Jim interacts with some of the largest companies globally pertaining to some of the most advanced and progressive next generation real estate projects under development.
Ilan Zachar is currently Chief Technology Officer at Carr Properties, a privately held REIT known for its portfolio of trophy-quality properties in the Washington D.C. In this role, Ilan leverages vision and foresight to cross-pollinate best practices, processes, systems and resources across corporate operations/affiliates. Under his leadership, this has resulted in improvements in bottom-line costs, top-line business growth/scalability, operational sustainability and high performance and overall, strengthening his company’s role as a market leader. For over 20 years, Ilan has been executive business leader and innovative technology strategist for multinational real-estate and property development companies worldwide.
Sineesh Keshav is the Chief Technology Officer at Prologis. In this role, he oversees all aspects of the technology strategy and is responsible for leading the company’s global data and digital transformation. Since joining Prologis in 2018, Sineesh and his team have been focused on a capability driven, customer-centric approach to innovation and digitalization.
With over 24 years of experience in real estate, Kevin's expertise encompasses enterprise IT design, integration and ecological adaptation, helping his clients deriving ongoing value by improving their manageability, effectiveness and ongoing efficiencies. Prior to joining RealFoundations, Kevin served as a CIO for a large-NY owner operator and as a SVP of IT for an Ohio based REIT overseeing the strategic planning, enterprise architecture and information architectures.
Mike Salazar has extensive experience in consulting and sales with Enterprise companies, regarding strategic cross function technology, mainly focused on IoT and AI platforms. Named Star on the Rise by Security Industry Association in 2016, he is currently the Practice Director for Smart Buildings at HID Global. Through innovative solutions he helps organizations unlock value and realize business intelligence. Honored to call many of the most notable companies of our time happy customers.
Dharmendra is the Industry Principal at Yardi Systems. Dhar’s well-rounded and practical background in the industry includes experience as a software vendor, consultant and customer. Prior to Yardi Systems, he was the Vice President of Revenue Management and Analytics for Denver-based Apartment Investment and Management Co. (AIMCO), one of the largest multifamily REITs in the U.S., where he led the development and implementation of revenue management and business intelligence systems.
Malcolm Hobbs is VP of Marketing and Market Development at Join. Malcolm has extensive startup and enterprise marketing and business development experience in markets including SaaS, Industrial IoT, Analytics and Sustainability. At Join, he is helping to redefine how owners secure their buildings from digital threats and deliver advanced digital workplace services in today's tech-forward buildings.