A New Wave in Real Estate Investment (Part Four)

Venture capital is pouring into real estate tech startups, and these have already raised $1.5 billion this year. Established tech providers are shortening the go-to-market time to keep up with the startups for fear of being left behind.

Trinity developed a unique perspective on real estate tech trends since an early investment in LoopNet in 2006. More recently, they have made investments in commercial, multifamily and residential housing with bets in VTS, Rentlytics, and DotLoop (acquired by Zillow) -- and, most recently, announced an investment in Nest.

All three sectors of the real estate industry are undergoing the same fundamental transition to improved data management software, depending on where technology can add the most value, improving information flows and automating tasks.

Armed for Innovation

This new "connected" generation of brokers and agents are attuned to the fact that mobile technology is essential to run their business and addressing expediency and safety on both sides of the transaction. Broker, buyers, and renters are influencing the way people search for properties. With 92% of consumers using the internet as part of their property search, the pervasiveness of mobile technology is a given.
Mobile will fully integrate with central office systems, and predictive analytics will make it easier to target buyers and renters, and virtual reality will make home and office tours more efficient.

Firms that are prepared to leverage proprietary systems or white-labeled software to enable data-informed decision-making will find the market more amenable to buyers and sellers. In turn, we expect that these changes will accept that they can quickly improve decision-making criteria (regarding schools, crime, commutes, neighborhoods, local services with the help of online and mobile tools. It is about time. Buying a home is the lengthiest and most doubt-filled financial transaction most of us will contend with, not just the largest financial decision most people make.

Technological innovation is best when it targets efficiencies that improve the experience of all stakeholders at the most critical points. In the sales funnel. In Real Estate, this is the period between when the buyer expresses initial enthusiasm and when they sign their new mortgage. The average purchase cycle for a home is now 18-24 months. Technology that is entering the marketplace now will speed closure up to happen in 12 months, or even less, over the next five years.

Beyond Deal Flow: Return on Relationship

Return on Relationship is most valuable where innovation extends beyond the deal. As property information becomes ubiquitous, customer service and branding will become real differentiators for millennial buyers in particular who tend to be tech-savvier and more decisive. Real-estate professionals will leverage social engagement and data in how they manage their relationships, provide insights and guide people through the process with particular emphasis paid to transparency.

We expect technology adoption across the industry to be rapid and expansive. Experts expect the housing market in 2016--both in the United States and globally--to see an increasing number of homes listed for sale at a modest growth rate. A connected RE marketplace can help growth by allowing stakeholders on both sides of the deal to connect and transact with greater ease and fluidity. More than any other sector dependent on technology, Real Estate demands innovation that can address the two-sided marketplace.

Given the size and complexity of the transactions, the best real-estate technology, rather than eliminating the intermediary, should strengthen the role of professionals working in the industry, provided they understand that that the consumer marketplace in which we find fragmented buyer's attention and persistent economic pressure is now the "new norm".

The very markets that support commercial, multifamily and residential real estate could not function without networks of individual professionals who rely on the trust they have built working with each other for many years. Advances in information technology have generated new efficiencies. Given uncertain economic conditions, we anticipate a vigorous and competitive marketplace for the near future. Those companies that can capitalize on global fin-tech trends while at the same time building a consumer-centric brand that speeds transactions and deal flow will prevail in the coming eight quarters.