2015 was certainly an exciting year, highlighted by continued investment in new commercial real estate technology (CRE Tech) firms, as well as B Rounds in a number of companies funded in the previous several years earlier. This seems to indicate continued investor belief in the market’s appetite, and the need for technology products and services to solve definable real-world CRE problems.
Some of the more talked about start-up companies (VTS, Hightower, Honest Buildings, etc.) certainly appear to have demonstrated both the requisite growth track and management execution that investors need to see to justify additional funding rounds.
Although continued change in the industry is inevitable, I’m predicting that 2016 will see a continuation of CRE Tech adoption and absorption by the market as well as several changes which I sense will come from a number of areas including increased attention to solving problems using real-world data, mobile technology, and a little bit of improved fundamental “blocking and tackling” by the new providers.
Well, that’s enough of a tease. – Without further ado, here are my top 10 predictions for 2016:
CRE Tech Investment Will Slow
My sense is that after 3 years of frenzied activity, there will be a slight pullback by investors to evaluate how the current crop of new tools and providers are performing and allow time for market absorption of the recent tech push.
Although the nature of CRE is that it is typically a lagging indicator, there are certainly some recent macro forces at play as well (check your portfolio today?) that may apply some conservatism to additional investment.
The Rise of “Small Data”
While we’ve been inundated with several years’ worth of Big Data conversation, I believe what the market and end users of applications really want is more consumable, actionable data.
The nature of real estate, and particularly real estate management and operations is that every day is made up of hundreds of small decisions. And while there may be a lot of data available that can influence and inform their decisions, it only becomes really helpful when a system can present, prescribe, or recommend small, relevant actions that an individual can take. Folks are figuring this out on several fronts and solutions are coming.
Property Management Shifts to Workplace Experience Management
stealing, borrowing this line that I heard Phil Mobley from Koine Communications say as I think he is right on. The expectations of tenants and their use of buildings is changing dramatically and property management needs to adjust to this reality. This is not only a mindset shift but will require fundamental changes in tools and technology to meet the expectation.
System Security/Buyer Due Diligence
It’s actually pretty easy to build software applications. What’s hard is building them and the required supporting infrastructure the right way. The more mission-critical the application is, the harder it gets.
CRE Tech buyers are becoming more sophisticated and their level of understanding for what top tier service providers need to demonstrate in terms of meeting system/data security, redundancy and audited internal processes is increasing. This is particularly true at the enterprise level. Buyers will demand that providers meet higher standards.
Disappearance & Convergence
On a number of fronts, there are multiple providers (new and old,) delivering solutions that attempt to solve the same problems. Combined with the need for demonstrable growth and adoption, the market and investors will force some consolidation.
There are too many systems and services that require replicated data sets by the end user. Again, buyer understanding and sophistication in CRE is increasing and the concept of specific applications owning specific data types and then sharing those with other providers will increase. That will require that systems and providers “play nicely” together which has been challenging in the past for some legacy providers.
The CIO Role Increases
Historically, the CIO role existed in only the largest CRE organizations. With the increasing reliance by commercial real estate firms on technology for all aspects of their business, most firms of any substantial size will need someone in the CIO/VP IT role. The role is also changing from simply accommodating the needs of the business units to playing an integral role in creating and executing on strategy.
More Service & Support
I think a fundamental truth of the CRE market is that it requires exceptional service and support for all applications, regardless of how easy they are to use. This an industry going through a large shift and change of entrenched operating practices in a relatively short period of time.
Providers can’t just expect that people will just “get it” and adoption and use of their platform will be great because their software and UI/UX is wonderful. The companies and providers that invest in great service and support will win.
Densification Becomes a Larger Issue
The trend for tenant organizations for the past several years has been to pack more people in the same amount of space. Talk to a property manager and you’ll hear quite clearly about the impact on costs, staffing and building performance. Quantifying that impact and coming up with solutions is an opportunity that’s floating around out there.
More Integration of Consumer Apps
One of the things you learn in software development is that when you incorporate familiar usage paradigms and functional paths, adoption increases. Additionally, when you connect apps that people use in their daily lives to other applications (e.g. LinkedIn and SalesForce,) you increase value and usage. I look for more consumer app connections in CRE apps coming. Snapchat anybody?