Types of Technology in Real Estate
By Percy Nikora, Owner, Co-Founder
Importance of Technology in Real Estate
Advancements in technology are shaking up every industry, especially commercial real estate. There are many types of real estate technology to consider, which include both hardware and software. Both have made it easier for commercial real estate professionals to function on a day-to-day basis: from prospecting to leasing, from conducting to actually overseeing property improvements.
For a while, commercial real estate professionals were slow to adapt to new technology. Now, industry insiders such as Penn capital often educate the importance of real estate technology for those looking to stay ahead of their competition. They provide guidance and education to those who are interested in investing in the market.
In this article, we will take a look at some of the top commercial real estate technologies shaping the industry today.
Buying and Selling Platforms
One area where there’s been rapid growth is in the number of online buying and selling platforms. These platforms range from helping real estate investors identify new opportunities, such as CoStar and LoopNet, to facilitating an actual sales transaction, such as Ten-X.
In theory, these real estate buying and selling platforms are designed to increase the pool of potential buyers and sellers and to reduce transaction time and costs by facilitating transactions online. In practice, however, these platforms are mostly utilized as a supplement to the traditional buying and selling process and do not eliminate the need for third-party support.
Another breed of buying and selling platform that has emerged is the online crowdfunding marketplace. Websites like RealtyMogul and Fundraise allow commercial real estate sponsors to solicit debt and equity investment from people around the world.
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Best Real Estate Technology in 2020
As noted above, there are a few premier buying and selling platforms, including CoStar, LoopNet, and Ten-X. Other platforms include:
- Brevitas: Brevitas is both a real estate listing and project management platform that is best utilized by those looking to source off-market commercial real estate opportunities.
- RealMassive: RealMassive allows users to list, search, and share data sets through a platform designed to support deal analysis, marketing, and inventory management.
- QuantumListing: Unlike some of the larger and more established real estate buying and selling platforms, QuantumListing allows listings to be searched by anyone with an internet connection, which ensures mass exposure. Owners and brokers can post an unlimited number of listings for as little as $79.99 per year.
Major Crowdfunding Platforms include:
- RealtyMogul: RealtyMogul offers opportunities to invest in both private real estate deals as well as real estate investment trusts (REITs). The minimum investment is $5,000.
- Fundrise: Fundrise allows people to invest in either eREITs or eFunds, both of which are proprietary (private) investment opportunities unique to Fundrise. The platform enables individuals to invest in commercial real estate deals with as little as $500 initially.
- Crowdstreet: Crowdstreet is a peer-to-peer marketplace that brings together real estate sponsors and investors interested in buying and selling real estate. The platform tends to appeal to more established and sophisticated investors, and as such, has a minimum investment threshold of $10,000 – the steepest minimum investment of the three buying and selling platforms featured here today.
The Blockchain
The blockchain is another technology that’s rapidly influencing the commercial real estate market. Blockchain can be challenging for people to understand; after all, it is an abstract concept. Let’s start with the basics: blockchain is the technology that underpins the cryptocurrency system. It provides time-stamped series of immutable, recorded data that is managed by a network of computers rather than a single entity, like the federal government or a bank. Each “block” of information is secured and bound to each other, thereby creating a “chain” or a blockchain.
One of the primary reasons people are drawn to using blockchain in real estate is that it moves away from a central banking authority. Blockchain information is open to anyone, making it a transparent way to share data. Again, at least in theory, blockchain is intended to make real estate transactions more efficient than ever before. For example, rather than waiting a day (or week, in the case of international transactions) for a wire transfer to go through, funds can be transferred immediately (and securely) between accounts when utilizing blockchain.
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Best Real Estate Technology in 2020
As it pertains to commercial real estate, blockchain is increasingly utilized in several ways. Here’s a look at some of the best real estate blockchain technology in 2020:
Cryptocurrency
Cryptocurrency is another type of currency that can be traded using blockchain. It is utilized the same way people would pay for things using dollars, pounds, euros, or yen. The difference between cryptocurrency and the traditional currency is that cryptocurrency has no physical representation. It is entirely digital and exists only in electronic form. Public and private “keys” similar to identification numbers are used for trading cryptocurrency between individuals and for preventing counterfeiting.
Tokenization
This is still a relatively new form of real estate technology. In short, tokenization refers to a process in which a property owner sells digital “shares” or “tokens” of an investment property. Blockchain can help track these investments.
Virtual Walkthroughs
It used to be that “augmented” and “virtual” reality were something you’d only expect to see in one of the Matrix movies. AR and VR are rapidly becoming commonplace in the commercial real estate industry.
AR and VR are especially helpful to investors interested in taking a virtual walkthrough of a property. They can view properties without time-consuming and expensive travel between locations, which has opened the doors to investors looking to buy CRE in more distant markets.
Other real estate professionals are utilizing AR/VR at an increasing pace. Contractors, for example, can use AR/VR to check in on how the design and construction of a project are coming along. Project managers can use AR/VR to evaluate tenant fit-out jobs without having to conduct actual site visits. This can lead to more sales because the AR/VR takes prospects on virtual tours of properties, which expands the pool of buyers and helps brokers sell properties in less time.
Best Real Estate Technology in 2020
When it comes to augmented and virtual reality, here are some of the top real estate technologies to watch in 2020:
- Oculus Rift: Oculus Rift is the physical AR/VR headset that CRE companies are buying to support virtual walkthroughs. It was once popular in the gaming industry, but Oculus Rift is increasingly used by investors, contractors, brokers, and more.
- Floored: Floored is a venture-backed commercial real estate technology company focused on visualizing space in 3D. One of its tools is the Floored Plans, which is a dynamic space planning tool that allows brokers, tenants, and owners, to space plan office floors and walk through those spaces in 3D. A second product is the Floored Build, which allows any type of space to be brought to life through an interactive 3D model. The startup was recently acquired by CBRE.
Best Real Estate Technology in 2020
Many existing tech applications are already supporting the CRE industry, including financial analysis, asset and property management, lease analysis, sales platforms, and much more. There is an increasing number of CRE-focused property and deal sources, such as CoStar and LoopNet. Yet, most tools that already exist are not task-specific. That’s where machine learning can have the most significant impact.
Here are some of the ways machine learning is being used by the real estate industry in 2020:
- Market planning: Machine learning can be used to study the nuances of any geography, given an investors’ deal parameters. For example, some investors only invest in outer-urban markets where there are strong job growth and a lack of new construction. Machine learning can help identify these opportunities.
- Site selection: Software programs can also be used for more specific site selection. For example, properties can be ranked based on selected criteria, thereby allowing some deals to inherently rise to the top for investors’ consideration.
- Comparable analysis: Machine learning can further be utilized to conduct a similar analysis. Individual sites can also be ranked based on their projected performance related to other properties within that submarket.
Big Data and Personalized Recommendations
“Big data” is often utilized by industry professionals without much context. Big data, for those who are relatively new to real estate technology, refers to large, complex data sets that are so voluminous that traditional data processing software simply can’t manage them. However, big data, as complex as it may be, is critically important. These data sets can be used to address complicated business problems that individuals would have struggled to overcome otherwise.
Big data and machine learning go hand-in-hand. Machine learning is the software that helps to analyze big data sets, which results in personalized recommendations. As discussed above, those recommendations can include market and individual site opportunities. Big data, when used with machine learning, can be leveraged in many other ways, as well.
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Best Real Estate Technology in 2020
Real estate professionals are using big data. Analytical decisions that were once based on manually-coded records and years of industry experience are now being made faster and more accurately. For example, real estate developers can use past data to estimate construction schedule delays and project costs. Loan underwriters can mitigate risk by assessing borrowers’ credibility in new ways. Property managers can optimize building system performance using big data, thereby reducing operational costs.
Some of the most prominent big data technologies being used by commercial real estate today include:
- RealPage AIM (formerly Hipercept): RealPage AIM builds data analytic solutions for large-scale and institutional real estate investors. The software tackles complex data management problems such as collecting, analyzing, and benchmarking information from multiple real estate assets and property management platforms. This empowers project sponsors to drive the best possible risk-adjusted returns for their stakeholders.
- Bldbox: Bldbox is used by both real estate developers and general contractors. The software utilizes big data and machine learning to make the analysis and planning of real estate development projects more efficient. With the proprietary algorithm, the platform can help developers evaluate construction costs, build a detailed pro forma, obtain consultant quotes, and estimate hard costs in real-time.
Conclusion
The commercial real estate industry has rapidly transformed through the integration of new technology. Many startups have come to the market in recent years. Those with the most promise are often gobbled up by major industry players, such as CBRE and other brokerage firms. This has spurred many commercial real estate investment shops to develop their own proprietary software programs in-house. There are many benefits to this, such as customization that’s available when the software can be tailored for that firm’s specific interests or needs.
The CRE tech sector will continue to evolve in the coming years. Investors, developers, sponsors, brokers, contractors, and other professionals will increasingly find themselves left behind if they fail to adopt some of these new technologies. It can be financially draining to be left behind, but luckily, Penn Capital is knowledgeable about these innovations and helps consult investors on using the types of technologies out there that can help them profit in the real estate industry.
After all, many of these programs are designed to make professionals’ lives easier. Those who find ways to automate particular segments of their business will be freed up to focus on things that require real-time and face-to-face interaction.
Related: Appraisal Valuation Methods You Should Know For Commercial Real Estate
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