Why CRE Technology Is Moving From ‘Gold Rush’ To Consolidation Phase
Following the $300M union of VTS and Hightower and CBRE’s acquisition of Floored, more of CRE’s disruptive technology startups are being scooped up by large companies.
Rather than stifle innovation, having the backing of major industry players has promoted adoption of technology in an industry that depends on human interaction, and a strong, reputable financial partner gives platforms an edge in an oversaturated market.
For News Funnel founder and 25-year public relations veteran Michael Beckerman, this is all part of a new growth phase for real estate technology.
Beckerman founded the News Funnel in 2011, and it has become the largest real estate news aggregator and content platform in the industry. While the platform initially attracted real estate professionals who wanted quick access to local and national market information, Beckerman soon had several startups interested in tapping into his audience to learn how to best sell their platforms. In 2012, he launched Real Estate Tech News to serve that purpose.
“You had a tremendous influx of people that said, ‘Hey, this is an enormous industry where technology is not a cornerstone of the way people operate. We should jump into this market and build something to help efficiencies, bring Big Data to the sector and improve communications,’” Beckerman said. “Literally hundreds of tools and sites and solutions have been built over the past few years alone.”
It was a gold rush.
But as more products have entered the market, it has become harder to fund individual sites. Real estate professionals are overwhelmed, and consolidation has become the next step forward.
“The brokerage firms, developers and institutions are going to lead tech investment and innovation in the next phase of the cycle. It is therefore an opportune time to sell, merge and to get rolled up into a larger solution, because we are going to enter an era of rapid consolidation in the sector,” Beckerman said.
Companies like CBRE are leading the charge in acquiring innovative platforms and the teams behind them. Floored CEO Dave Eisenberg and his roster of software engineers and 3D modelers came with the keys to their property visualization tool.
“CBRE is continually looking to leverage data and technology to build more differentiated abilities in-house, so acquiring the Floored team was incredibly powerful for us,” CBRE chief digital and technology officer Chandra Dhandapani said.
Dhandapani came to CBRE after serving as a senior technology executive at Capital One Financial for 17 years, where she developed technology solutions across desktop, online and mobile platforms for both customers and staff. The transition from banking to real estate has involved a different approach to becoming a digitally native company.
“In banking you typically have a standard platform that the industry uses, whether for credit cards, auto or consumer banking,” Dhandapani said. “In CRE, there doesn’t seem to be a single operating platform. Banking also has a lot more automation and is focused on automation and data as a way of working, whereas commercial real estate is people-driven.”
CBRE was the only real estate services company to invest in Fifth Wall Ventures, the first significant capital fund focused on backing new technologies specifically for the built environment. The fund closed with $212M of capital commitments with the hope it will spur focused innovation in real estate products that will change how the industry operates.
“Every company and every industry is going through this evolution. Technology can't be something that you think of after the fact, it must become an embedded part of who you are and how you work,” Dhandapani said. “I think that is going to be true in real estate as well.”
NAIOP's annual I.CON: Trends and Forecasts will offer an in-depth look at these trends and upcoming industrial development projects.
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