As financial impacts of COVID-19 continue to work their way through the global economy, we’re beginning to see separations in how different real estate incumbents are thinking about, and adopting, technology. Something we often communicate to real estate incumbents is that having a focus on technology and keeping a pulse on developing trends and startups is hard. Despite what most real estate owners think, just because they own a lot of properties doesn’t necessarily mean startups will come (at least not the best ones). Learning about and working with startups can be a grind, especially earlier stage companies. These startups are lesser known, may not be monetizing products yet (or even have a product to begin with), and haven’t made their way ‘mainstream’ yet. Real estate owners’ ‘friends of friends’ haven’t gotten on their soapboxes about the new cool company they’re working with, which is how many companies are discovered, and the pressing responsibilities of day-to-day ownership and operation of real estate doesn’t leave much leisure time to focus on technology. Perhaps, more broadly speaking, these reasons help to explain why real estate has been so slow to adopt technology.
In turbulent times such as the ones we’re in, we’re getting a sense of how serious firms are about technology. It’s easy to convey an interest when times are good, but when there are road bumps and people are pulled back into their core businesses, you get a better sense of true allocation of time, resources, and money to anything related to technology and startups. The firms that have dedicated resources in place, or even just a process to assess and integrate new tech, are now standing out to us, while the firms that didn’t have that commitment are pulling back and are likely leaving opportunity on the table. I’m a bit biased as a PropTech focused venture investor, but if companies aren’t leaning in right now and trying out or learning about new optimization software and technology platforms, I think it’s a mistake. Startups are building products and services focused on increasing efficiencies, removing manual processes, and streamlining communication. Using new technology can now reduce the status quo human interactions that were previously required to do business. For example, roof inspections or something as simple as digital signatures. Paul wrote about the impact of photogrammetry in prior posts, which is a technology that’s seeing major tailwinds in this environment. All things considered, software is advantaged in this environment, which is supported by the fact that the valuations for SaaS companies are at an all-time high amid a global pandemic. Software can, and should, help, and the public markets are telling us that companies are going to use software to do more.
There has also been a prevalent argument from real estate firms that they’re hesitant to adopt technology because the costs to do so are too high. Using different tech requires too much training, upfront investment, or isn’t needed because there were existing processes or people in place to do the work. The current COVID environment has changed that, and I will argue that many of the costs of adopting technology right now are much lower, relatively speaking than the cost of continuing to do business the “old way”…because that means you aren’t doing business at all. Reducing human interactions is a forcing mechanism to adopt technology because we have no other option but to find a new way. I also expect regulation to come to the forefront and hopefully loosen some restrictions to allow for more digital capture and use, from inspections to access to signing documents. Such regulatory advances would be another catalyst for change and hopefully spark some good to come out of this economic environment.
We’re all in trying times, but we should be thinking about how we can do things better as a result. Many in PropTech believe that technology can do that. Many real estate firms say they believe that, but I suspect we’re going to find out if they really mean it.