Why Tech in CRE Is Finally Exploding

Technology in commercial real estate is finally exploding. Real estate tech investment had its best year in 2019, and 2020 is expected to be even better. Institutional investors are driving this change by piloting tech programs and software in select properties and markets to demonstrate the benefits.

“People have become very comfortable with innovation in technology,” Ashkán Zandieh, chief intelligence officer at CRE Tech, tells GlobeSt.com. “From 2010 to 2015 were learning years for the industry, and while adoption has still been a laggard, it is being offset with owner operators piloting a lot of the innovation themselves.”

Small mom-and-pop owners, on the other hand, are just the opposite. They are lagging behind on technology adoption and will likely be one of the last to make the investment. “They don’t have to change. They are not under financial constraints—yet,” says Zandieh. However, most owners are learning that technology adoption is ultimately a necessity.

While technology adoption is accelerating, there are still plenty of opportunities for tech disruption. Zandieh has a long list of areas that could benefit from an infusion of technology, but is most excited about the future of co-living. “Co-living stands to greatly benefit from what is happening in multifamily,” he says. “It is making great strides. The fact that banks underwrite them as multifamily and not as student housing was a big win.” New York, San Francisco and Los Angeles stand to see the biggest investment in co-living, particularly next year.

Still, there are more changes to come as the real estate technology industry matures. Next year, the Asian proptech market will become a dominant player in this market. “There will be strong investment activity,” says Zandieh. “You are going to see the Asia proptech market assert its financial dominance in the industry more vocally. While the US and more European markets have received a lot of the proptech attention, the Asia markets are a very strong and financially sound market. That is going to be one of the biggest winners next year.”

For now, fintech is still the most popular sector for tech investment, followed by flex-space operators and property management technology. “Venture capital dollars are getting invested in fintech companies,” says Zandieh. “That has been the biggest category. Flex-space, including co-living, co-working and any other hybrid spaces in the built world, is the second category. Finally, management software—anything management related, from tenant experience to CRM platforms and software-enabled solutions.”