1) Tech entrepreneurship in real estate
Let’s face it, much of the technology we use to analyze commercial real estate is archaic compared to the up-to-the-second innovations in other industries (want an example, check out what Palantir Technologies is doing). While the argument could be made that commercial real estate hasn’t had to adopt new technologies, products, and services recently because the market simply didn’t need it; we are now at a point where this just isn’t the case.
Tech entrepreneurship should get stronger in commercial real estate over the next year. We are already starting to see the emergence of new businesses and products kicking the old tech guard to the curb. The next year should prove to be an exciting one for the likes of 42Floors, Compstak, and other companies focused on disrupting the status-quo in the commercial real estate realm.
Want a fantastic resource for keeping tabs on tech entrepreneurship in real estate? Here’s one of the best sources out there: astudentoftherealestategame.com.
2) Big data becoming more democratized and transparent
Observing what happened in other industries (technology, retail, healthcare), he who holds the data holds the keys to the castle. This shift is gaining tremendous traction in commercial real estate, yet it hasn’t occurred on the scale of other industries despite the sheer size of the real estate industry. Pay-to-play data services should still have their place, but a shift is occurring where big data gets more democratized and transparent.
What does this mean for your business? More democratized and transparent data provides a clearer picture of your deals—which is certainly a good thing. However, this could also drive up competition because the outcomes of your deals will become less subjective.
3) Wall Street takes a stroll down Main Street
Tell anyone you work in real estate and they almost immediately ask you if you’re on the residential side or commercial side. With the emergence of single-family home rentals as a viable asset class for large financial institutions, this line might not be so clear anymore. Many large Wall Street powerhouses, including private equity giants The Blackstone Group and KKR, are investing billions in distressed single-family home rentals across the country.
Quick example: In my market, I was approached by one group looking to acquire 500 single-family homes in the next six months. They want them and they want to move fast. WHOA!
While the motivations and incentives are certainly there for Wall Street to play on Main Street, skepticism is high within tight-knit real estate investing circles. Many investors argue that the sheer magnitude of money pouring in will wipe out smaller and more fragmented investors. Others simply don’t see how large institutions could manage market expertise and operations at such a local level. Arguments for either side are flying high online and in the press (recent WSJ piece).
Regardless of the validity of such large financial institutions pouring copious amounts of cash into a niche asset class, everyone can agree that the trend will likely be disruptive for this piece of the real estate industry. As throughout history, whenever a disruptive measure occurs, there are always disproportionate opportunities to be made for those that are able and ready to seize them. While the shift is unresolved and its outcome unclear, it’d be prudent to, at the very least, keep a watchful eye over the pulse of this disruption. The outcomes, if managed well, could prove to be well worth the effort in the long run.
Good luck in 2013!