Nine Four Insights

PropTech Post COVID-19

Last week, we discussed some of the devastating effects of COVID-19 on not only the real estate industry, but also the world. Airlines, hospitality, restaurants, brick and mortar retail, and nightlife are some of the industries seeing near standstills, as people continue to self-quarantine in their homes. Although the health and safety of the community is priority number one and the shift has generated “little positive economic news” (from last week’s post), we’re also here to tell you it’s not 100% ALL bad news.

In this post, we’ll discuss some of the businesses that have been positively impacted so far, and some that we believe are slated to see new growth opportunities as the world turns on its head. I’m sure by now we’ve all been on more Zoom calls, watched more movies on Netflix and Hulu, ordered more groceries and household itemsonline with Amazon, Instacart, and Fresh Direct, ordered more take out with Postmates, Seamless and Grubhub, and done more at home work outs with Peloton, Nike, and Melissa Wood Health than ever before. These are some of the companies reaping the benefits of our new – socially distanced – world. Some other categories and companies seeing further engagement or increased sales the last few weeks are cleaning supplies, hand sanitizer, puzzles and toys, online tutoring companies, Babbel, Blue Apron, and Master Class. By no means is this list exhaustive, instead, it is an illustration that any business focused on making life at home better, easier, more productive and more fun, is most likely seeing an uptick.  

So, the question of the month (for us at Nine Four, at least) remains – how will COVID-19 change the real estate world moving forward? What shifts will we see not only now, but also when this is all over? I think we are bound to see a more hygienic and sanitized real estate world. There are many ways this could play out, but the main theme here will be that people will turn to technology even more than usual – transactions will still need to take place, but people will care less and less about the so-called “human touch”. Less human interaction means more automation, more computer vision, essentially, more technology. That said, here are some sectors of PropTech we think are sure to see upticks in a post COVID-19 world.

  • Home Services: As we continue to stay home, many of us for what already seems like weeks on end, we’ll start to get more comfortable with the idea of working from home. We’ll eventually get into a routine that makes it easy for us to be productive, plus eliminate commute time, potentially making us even more productive than we were in our offices. As our homes see more and more of us, we’ll start to see appliances break down more frequently. Whether it’s our toilet, our fridge, our heat, our internet, or anything else, people will be looking for the quickest, easiest, and most cost-effective solution to get back on track. 
  • Voice Automation: Even as COVID-19 worries wind down, the recently escaped pandemic will continue to be top of mind. In that vein, people will think more about sanitization, and will especially think twice about touching anything they don’t need to. Locks, air conditioning, and music boxes, to name a few, will be better served by voice or even gesture control versus by touch, which is the status quo. Nine Four portfolio company SmartRent, home automation and IoT platform, is well positioned to capitalize on this trend.
  • Cost cutting: As the economy has come to a near grinding halt, cost cutting measures have become more important than ever before. Increasing revenue for those owning retail, offices, multifamily, or pretty much any asset class is near impossible right now, as we continue to lock up at home and pause new purchases.  Therefore, we’ll have to focus on cost reduction. More specifically – how can we become more efficient in a time where our revenue is stagnating? One answer for real estate operators is smart energy technology that increases the efficiency of buildings (i.e. when a building is empty, the lights automatically turn off and the air conditioner lowers). On another note, energy efficiency is also better for the environment, and as the global lockdown creates less pollution (i.e. fewer cars on the road, factories shut down), we’ve seen a resurgence of birds in China, fish in Venice, and cleaner air in the USA, so the environment may be top of mind when this is all over. Another cost cutting example is for companies to increase the throughput of employees by doing more with less. Nine Four Portfolio company Bowery Valuation is well positioned here given that Bowery offers faster, more in-depth appraisals to help increase the speed in which banks can serve their real estate owner customers.
  • Remote Processing: This category speaks to our ability as a world to continue “business as usual” as much as possible, even when our world is shut down. If and when we are unable to get to the office, or unable to meet others in person, or stuck at home, we want to make sure important transactions are still going through. Because of this, we will continue to see the acceptance of remote processing such as online payments and signatures rise. Nine Four portfolio company Built Technologies, construction loan automation software platform, is well positioned to capitalize on this trend because it’s cloud native solution enables a seamless work from home environment.
  • Computer vision: Computer vision technologymanifests across many verticals, but ultimately serves the purpose of limiting our reliance on humans by increasing their efficiency, thereby decreasing human interaction and increasing NOI by cutting costs. Nine Four portfolio company OpenSpace uses computer vision technology to create a digital twin of your building under construction. The end result is similar to “google street view” for construction sites. Construction has been deemed essential during the COVID-19 shelter-in-place and as a result, OpenSpace is helping to keep contractors on construction sites safer by limiting the number of stakeholders on-site and allowing lender, insurer and municipal inspectors to track progress from the comfort of their own homes. Openspace has already seen an uptick in usage in the last few weeks, as owners want to ensure increased efficiency and cost cutting measures in place.
  • Senior living: Seniors in their 60s and 70s once seriously considering going to live in senior living facilities are thinking twice about that and will most likely push that decision as far out as possible. As a result, more seniors will be aging in place which presents an opportunity for technology solutions to enable seniors to live in place more comfortably. Don’t know in what shape or form the technology will present itself, but it’s certainly a demographic we’ll be watching closely.

Overall, as a result of the shelter in place mandate, offices around the country have closed and people have set up makeshift offices at home. At first, it was tough to acclimate to the new normal, but with time, many have realized that they could be just as productive (and sometimes even more productive by eliminating commute time) from home. It will be interesting to see the long-term impacts on the office industry moving forward. Will people continue to work from home more frequently? Will this help reverse urban densification, as people in the suburbs can eliminate commute time and work from home? Will office leases continue, but decrease in size/space? These are some of the changes we’re considering might take place consequently (because of COVID-19). In the meantime, Nine Four portfolio company Branch Furniture is capitalizing on our new normal by providing customers with flexible work from home office furniture solutions. 

On a similar note, we think COVID-19 could act as a “forcing function” compelling large industry incumbents that were previously using inflexible, legacy monolithic solutions to cloud-native solutions enabling a seamless transition to a decentralized, work from home work environment. Along with this influence, we’re bound to see a shift in the overall environment, where customer purchase decisions swing from a focus on revenue generation to cost efficiency. As the work from home dynamic continues, we’re interested to see how the real estate and therefore the PropTech environment will alter, and if it’ll change for good.

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