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Monday, Dec 4, 2023

Proptech Is Shaking Up the Real Estate Industry

Proptech — or property technology — is a term being used more frequently in the real estate industry. It’s a modern approach in which technology optimizes the way people research, rent, buy, sell and manage properties.

A few well-known proptech companies include Zillow Group Inc. and Redfin Corp., both of which use technology tools to help renters, buyers and sellers find properties and close deals. Proptech is being utilized by several players in the real estate industry, including developers, agents, property management companies and buyers.

Globally, companies have been investing billions of dollars into the platform. Proptech companies received $13.8 billion in investments from venture capitalists last year, according to data firm Statista. The growth doesn’t stop there. This year’s Mid-Year Global Proptech Confidence Index from MetaProp, a venture capital firm focused on the sector, found that 62% of investors expect to make the same number of proptech investments over the next year.

Los Angeles is home to a number of proptech companies. El Segundo-based Endpoint is a digital title and settlement company that offers tools to brokers and agents to make the final stages of homebuying more efficient. The company has raised a total funding amount of $220 million to date.

Santa Monica-based Ylopo LLC, meanwhile, has created marketing tools to connect realtors with people looking to sell their property. Along with providing training classes, Ylopo has built integrations designed to improve customer relationship management.


Follow the money

Peter Belisle, president of the southwest region at brokerage Jones Lang LaSalle Inc., said the impact of technology on the real estate industry has accelerated dramatically over the past five to 10 years. JLL has implemented technology in its own practices, while also investing heavily in the proptech industry in general.

“I think real estate is one of the industries that’s been a little bit of a latecomer to the impacts of technology,” Belisle said. “If you think about the financial services industry and in a number of other industries that really have already gone through some level of technological transformation, real estate has been one of the last big industries that’s been very manual.”

JLL created a division called JLL Technologies to focus on how the company thinks about different technological platforms, how different software applications will be used, and ways to better conduct real estate now and in the future.

“We’re investing in that space not just for our own accord, but also we’re investing in third-party technology solutions and thinking about how they might be tools that are implemented even outside of JLL,” Belisle explained. “We actually have a venture capital fund that purely looks around investing in new and emerging technology companies. We’re looking to develop and grow internally, and then we also do co-investment in technology solutions that are outside of our company.”

Belisle said JLL engages in a decision process of whether to stay with a company as an investor or acquire the company as it develops.
With the evolution of technology, Belisle said the way that transactions are made will change.

Proptech companies have seen firsthand how technology tools speed up transactions.
Marina del Rey-based Commercial Real Estate Exchange Inc., known as Crexi, is a proptech company founded in 2015. According to Eli Randel, chief operating officer at Crexi, technology has helped accelerate real estate transactions.

One of the ways the company accomplishes this is through its data-product tool for investors and brokers called Crexi Intelligence. It lays out proprietary data for investors such as market-level statistics, market trends, previous ownership history and rental rate information.

Crexi 5510 Lincoln Blvd Los Angeles, CA 90094
Crexi maintains its offices in Marina del Rey.

“It’s a slew of very interactive data that helps buyers and investors and tenants and brokers make commercial real estate decisions,” Randel explained. “A lot of these are things that exist in some form, but it could be as primitive as going to the town hall to see who owns the property and going through one of those Dewey Decimal System cardholders. That used to be how you would find out who owns a property, whereas now we have it integrated into this data product.”

A majority of this information is owned by Crexi; however, some is also collected from third-party data providers or from public information such as census data.

Randel was unable to provide a price point for the product, but said “the return is multi-fold.” In terms of capital, he said that proptech tools such as Crexi’s allow companies to save money that they are spending in other places to acquire this information. On top of that, investors and brokers can save by not having to look for the information in disparate locations.

Randel said he sees the real estate industry becoming more enhanced in the next five years.

“I think it’s going to get faster. Better information is going to be more democratized; the investor pool is going to widen because it’s going to be more accessible to a wider audience,” Randel said.


Looking to the future

Vik Chawla, a partner at venture capital company Fifth Wall who co-leads the firm’s real estate technology investment team, focuses on technology for residential, retail and industrial assets. He said what drives investment in proptech companies is the need for better digital tools in one of the largest global industries.

“Real estate is the largest asset class on earth and among the most underdigitized of all asset classes, which just seems counterintuitive because market size is one of the key drivers for investor underwriting, but there’s still a long way to go,” he said.

Chawla said the long-term future of proptech is real. He explained that real estate technology tools have changed how business processes run, from accounting software to front-end customer acquisition. On the cost side, by using technology tools, real estate businesses have been able to operate more efficiently and save money by digitizing their practices.

“I think you’d be hard-pressed to find individuals who believe we’re going to go back to writing paper checks to landlords or finding our first homes or apartments with a paper,” Chawla explained.

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