The main takeaway from Thursday’s afternoon panel discussion at The Real Deal’s New York City Showcase + Forum was that the real estate business is undergoing its most significant upheaval in decades.
“I think we are actually in the midst of one of the most significant shifts in and around the real estate industry than we have probably been through since the Industrial Revolution,” said Clelia Warburg Peters, managing partner at Era Ventures. “And it’s on us in this room, whether we’re investors in that innovation or participants in the incumbent industry, to recognize that that’s happening.”
Only a few years ago, substantial transformation in real estate, one of the digital age’s final holdouts, was not a given. Owners of primarily inhabited buildings had no need to change direction.
However, significant developments in consumer behaviour, notably in retail and the workplace, as well as the push toward a zero-carbon economy, rendered it unavoidable.
“To adapt to a changing environment, to adapt to changing consumer needs, to adapt to a changing climate — these are elements you didn’t have to deal with before, or at least they weren’t at the top of the list,” said Brad Greiwe, co-founder and partner at Fifth Wall.
Panelists stressed the gap between proptech that “enables” existing business models and proptech that destroys them. Industry incumbents may be overly focused on the former today, leaving them unprepared for the latter, which can arrive rapidly, they claim.
With a record amount of capital from proptech-focused venture firms and, increasingly, generalist investors, a new generation of founders, many of whom emerged from the ranks of proptech pioneer companies such as Zillow and Trulia, has created a self-sustaining “flywheel” of innovation, according to Era Ventures’ Peters.
The recent drop in tech values is most likely simply a temporary setback, and a whittling of the field will allow for more strong companies to emerge.
“As that flywheel starts to spin faster and faster, it grows out of each point,” Peters said. “You don’t want to be on the wrong side of what I think is an inevitable and very powerful push forward.”
According to Peters, a fundamental shift is already underway in the brokerage industry, with iBuyers and others who lessen their reliance on intermediaries like agents poised to take over swaths of secondary and tertiary markets.
So-called “neo-brokers” — tech-enabled employee-agents rather than independent contractors — are fundamentally transforming the industry by acting as “quarterbacks for a number of other transactions,” she claims.
High-performing agents, particularly in high-cost coastal locations with diverse and idiosyncratic inventory, generally don’t need to worry about their jobs, but the concept of the brokerage is changing and maybe under threat.