Built World Market Opportunity, Part II: Real Estate Tech

Sites like Zillow have already revolutionized the home search. How else is technology going to transform one of the biggest industries in the United States?

Construction and real estate industry veteran Todd Hitt, founder of Kiddar Capital, has $50 million of his private capital at work in built world technologies modernizing the world’s most fundamental industries: construction, real estate, logistics, and automation.

In Part I of this series, we explored the untapped, multi-trillion dollar market of construction tech. In Part II, we look at how technology is transforming the real estate industry. Kiddar Capital is an active investor in real estate tech and plans to place additional capital into this sector.

THE INDUSTRY

The real estate industry manages massive assets and generates equally large amounts of income. Housing alone contributes 15–18% of the United States GDP every year, and the value of every home in America combined is more than the GDPs of the United States and China added together.

Real estate is also one of the least modernized industries today. According to Strategy&, only the construction and hotel/restaurant industries are less digitized.

Here are a few issues that tech is already solving in the real estate space:

  • The majority of tenants still pay rent with a physical check. According to the Wall Street Journal, writing a check can be five times as expensive as using an e-payment. Cozy solves this problem by offering landlords online rent collection, among other services.
  • Utility companies usually check traditional meters once a month , so issues can go unnoticed for weeks even with consistent checks. Our portfolio company Aquicore offers a powerful platform for commercial real estate to collect and analyze real-time utilities data, cutting energy and water costs by up to 30%.
  • Planning to relocate? Apartment or house-hunting can be difficult. Virtual reality technologies allow potential tenants and homebuyers to view properties without having to fly cross-country. Matterport uses 360° scanners to create immersive VR tours of built spaces.

The bigger the problem, the greater the opportunity. The sheer size of the real estate market means that technology has a lot of room to offer solutions that improve industry efficiency and the bottom line for stakeholders.

THE STAKEHOLDERS

Real estate intersects with many other industries. Utilities, previously mentioned, is one: commercial and residential real estate account for 40% of energy use in the United States. Other crossovers include construction, management, finance, legal, environmental, communications, and design. Major stakeholders in the real estate industry include:

  • Home buyers and homeowners
  • Tenants
  • Realtors
  • Building owners and operators
  • Investors and lenders

Each stakeholder has different motivations and decision-making powers. For instance, property owners and operators want to raise a building’s NOI to increase their asset’s value. Brokers want to increase their commissions. Tenants are looking for easier and cheaper ways to rent property. Investors want technology that facilitates real estate transactions.

So what does this mean for tech?

While the number of stakeholders multiplies the opportunities for tech to provide solutions, it also makes the selling process much more complex. Tech companies in real estate have to negotiate long lists of “who’s who” to figure out their targets. Generally, the people who are naturally motivated to adopt certain technologies are not the same people deciding whether the company, building, or portfolio in question will adopt those products. For example, sustainability departments want green tech, but they don’t always have the power to write a check for it.

One of the ways new companies looking to grow in the real estate technology space can navigate this is by partnering with an investor, like Kiddar Capital, familiar with the industry.

THE TECHNOLOGY

Real estate technology has started to gain serious traction, with funding for startups in 2016 ten times what it was in 2012. Homebuyers and tenants look at potential properties on mobile devices. Realtors utilize websites along with multiple listing and comparative market analysis software. Building management actively looks for ways that tech can improve their processes, including setting rental rates, collecting rent, marketing to prospective tenants, and maintaining the property.

Technology currently on the market for the real estate industry includes:

Listing and search platforms:

Data analytics platforms:

Property management platforms:

Financing marketplaces:

  • Connecting mortgage brokers and financiers (Stacksource)
  • Connecting crowdfunding investors with property owners and developers (Fundrise)

Buying and selling marketplaces:

  • Connecting investors and property owners (Ten-x, Crexi)

THE FUTURE OF REAL ESTATE

At Kiddar Capital, we say that progress is what happens when the old embraces the new. Real estate is one of the oldest industries in the world. New technology has the capability to cut costs, create new efficiencies, and fine-tune everything from finding a new home to evaluating the best site for a skyscraper.

Kiddar Capital real estate technology investments to date include:

  • Aquicore: Known as the “Fitbit for buildings,” Aquicore turns sustainability into profit through real-time collection and analysis of utilities data along with streamlined tenant bill back. Buildings with Aquicore installed are more efficient, sustainable, and improve building NOI by cutting utilities costs up to 30%.
  • Upside Door: Selling your home? Traditional brokerages charge a 6% fee, but UpsideDoor uses technology to bring that cost as low as 1%. They take care of the entire process, including pre-inspection, pricing, listing, staging, photography, custom marketing, buyer curation — even the paperwork.
  • MeWe: MeWe’s inspection technology, CoInspect, is “TurboTax for legal compliance.” The technology consolidates the entire inspection process, usually done with pen and paper, into a single, easy-to-use application. Features include inspection checklists, reporting, and performance tracking. MeWe’s clients are important real estate tenants, including restaurant and hotel chains.

Real estate has remained largely unchanged for years, but the price is right, the time is now, and the next step is widespread adoption. “The future of real estate is technology,” says Kiddar Capital CEO Todd Hitt.


The Built World Market Opportunity Series

Part I: Construction Tech

Part II: Real Estate Tech

Part III: Logistics Tech (coming soon)

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