If 2019 is any indicator, 2020 promises to be an interesting year for proptech in commercial real estate.
In the past few years, CRE has finally been experiencing the evolution of nascent technologies into more mature tech — and the industry is responding by adopting it. From smart technologies that automate the appraisal process to machine learning that centralizes property or leasing data, and even to the use of drones in construction, commercial real estate is finally starting to catch up to its more nimble cousin, residential real estate.
So, what can adopters and innovators in CRE look forward to in 2020? As I see it, we can expect better communication, more automation and deeper insight.
For starters, let’s begin with the foundational stuff: collaboration and relationships. In an industry consumed by relationships, platforms for CRE will take center stage. Why? Because a major pain point for all players remains the time and complexities of getting different people to interact around basic transactions — be it a lender juggling multiple loan quotes or a broker managing multiple loan requests among borrowers and lenders. It’s not pretty. It takes time, and no one really likes the way it works.
In a 2016 article, Harvard Business Review defined platforms as “intermediaries that connect two or more distinct groups of users and enable their direct interaction.” In that same article, the journal ranked the world’s most valuable companies (by market capitalization). Unsurprisingly, it found that fully half of the top 10 were now platform companies (specifically, Apple, Microsoft, Google, Amazon and Facebook).
In my role as co-founder of the platform startup RealAtom, I see every day how setting up a single platform quickly removes the friction between interactions that prevent people from doing what they need to do during the course of business — chat, share, send and track transactions and data. So it’s no surprise to me that more companies are getting on the platform bandwagon.
If you’re curious about who to watch in 2020, continue with VTS, the leader in the platform tech (and proptech’s own unicorn). The platform gives landlords and brokers a single place to conduct transactions. As important, it gives them transaction-based analytics, too.
Another company, Juniper Square, created a platform, CRM and various productivity tools to help CRE investment firms with the process of raising and managing capital for projects. The platform reportedly manages a whopping half a trillion dollars in real estate. CompStak is another one to watch. This rapidly growing company’s crowd-sourced online data for property comps is being used by tens of thousands of CRE professionals.
But just because you build it doesn’t mean they’ll come. All platforms need to be good enough to both retain users and attract a critical mass of third parties. This is the challenge platform tech faces in 2020, and it’ll be interesting to see who rises to the top for CRE.
2. Artificial Intelligence (AI) And Machine Learning
The next thing to watch will be artificial intelligence and machine learning. I know that the term AI probably crosses your news feed several times a day, but there’s a reason for that. Almost every industry faces the challenge of growing complexity and an increasing reliance on making decisions based on data and trends. That need is rapidly outstripping the capacity of humans to do this unassisted, especially when it comes to manual, repetitive transactions and processes that are better off automated and performed by AI. CRE is no exception.
One company, Ocrolus, is tackling the cumbersome (manual, human) process of auditing and reviewing financial documents. The complicated name belies the simplicity of the company’s approach — its AI engine uses optical character recognition (OCR) technology to scan and analyze everything from bank statements to cellphone images of documents, claiming an impressive 99% accuracy. The believers are growing: The company recently raised a cool $24 million through venture capital funding.
A few other companies to watch in this space are Cherre and Skyline.io. Both are using machine learning to create predictable analytics that forecast market trends and opportunities.
The implications of AI for CRE are encouraging — from reducing time (and errors) in manual processes to providing much-needed responsive market intelligence for the industry — and there is a huge opportunity for CRE to leverage machine learning and streamline workflow.
3. Virtual Reality (VR), Augmented Reality (AR) And Drone Tech
To continue with our futuristic bent, let’s end with virtual reality (VR), augmented reality (AR) and drones.
The benefits of having buyers be able to virtually walk through a property using VR speak for themselves, as residential real estate has shown us. Augmented reality, while a bit slower to be adopted, simply adds more context (explanations and content about a property) to what the viewer sees — a boon for prospective property buyers. There are construction applications for AR, as well. For example, Turner Construction made big news when it created its own AR software to help manage construction projects.
Speaking of construction, drones will continue to play a larger role in CRE. Some builders now use drones to capture real-time intelligence on how projects are progressing. They’re also using drones to automate time-consuming mapping work. One company to watch is Traceair, a software as a service for construction project teams. The company’s software uses machine learning to analyze and report on data captured by drones. The idea is becoming increasingly popular with developers and homebuilders, as well as contractors and engineering teams, who like its ability to capture and analyze data and automate manual processes (like mapping) to ensure that projects run on time.
We’re only halfway through 2019, but 2020 promises to show us continued adoption of proptech in CRE. The key, as always in tech, is having industry leaders savvy enough to leverage the innovation to get a jump on the competition and — you guessed it — lead the way for CRE.