For years, real-estate technology startups watched from the fringes as big banks and venture-capital firms lavished attention on financial-technology firms.

Now “proptech” has joined the party. Startups are raising more cash than ever while landlords are adopting a range of new software and hardware that is changing the way they do business.

New capital sources including some of the world’s biggest banks are taking notice. “We feel like we’ve hit that tipping point a couple of months ago,” said Allison Sedrish, co-head of the new proptech group at Barclays Investment Bank.

In the first half of 2019, venture investors poured $12.9 billion into real-estate tech startups, according to research firm CREtech, already surpassing the $12.7 billion record for all of 2017. In 2013, the total was $491 million.

Proptech Joins the PartyVenture capital invested into real-estate techcompaniesSource: CREtechNote: 2019 figure as of June 26
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New investors include some of the world’s biggest commercial property owners and brokerages. Toronto-based Brookfield Asset Management, which has $191 billion of real estate assets under management, last year began investing in proptech startups.

Brookfield is both a user of and investor in such startups as VTS, which provides commercial property owners with online tools for managing leases; Convene, a co-working and workplace amenities firm; and Honest Buildings, which helps owners manage capital projects.

“Innovation is causing revenue to go up and expenses to go down,” said Ric Clark, chairman of Brookfield Property Group.

Several times a week, a drone flies over Texas Tower, taking digital images that Hines compares with job specifications to confirm plans have been accurately followed. PHOTO: JEFF LAUTENBERGER FOR THE WALL STREET JOURNAL

The real-estate industry for years had a reputation for being slow to innovate, but investors are betting that is changing because of a confluence of forces.

For starters, the values of many properties have plateaued after rising steadily throughout much of the economic recovery. Many owners view technology as a way to keep growing their bottom lines, either by cutting costs or making their buildings more appealing to tenants.

At the same time, traditional owners are turning to technology to defend themselves against major disruptions in their businesses. In a retail world increasingly dominated by e-commerce, for example, mall and shopping-center landlords have started to test facial recognition and artificial intelligence technology to prove the value of bricks and mortar.

In-office space, the popularity of co-working firms like WeWork Cos. has triggered a race between startups and traditional landlords to provide better tenant amenities. Both sides, for example, are working with startups to develop such things as the best mobile app for office workers.

Openpath Security, which has raised $27 million, enables workers to ditch their card keys and enter their offices with a smartphone app. “We’re one of those amenities in the arms race to up the ante for tenants,” said James Segil, Openpath’s president and co-founder.

Changes taking place in Silicon Valley are making fundraising easier. Real-estate technology-specific venture funds have sprouted, including Fifth Wall Ventures, MetaProp NYC and Zigg Capital. Law firm Goodwin Procter LLP launched a proptech initiative in September with more than 60 attorneys from it’s real-estate and technology practices.

Workers at the Texas Tower construction site in Houston. PHOTO: JEFF LAUTENBERGER FOR THE WALL STREET JOURNAL

Since 2014, more than 20 proptech startups have joined the unicorn club, meaning they are worth more than $1 billion, according to Fifth Wall. Only one firm achieved that status between 2011 and 2014—Airbnb Inc., Fifth Wall said.

It helps that interest in real estate is growing among some of the world’s biggest players in technology. For example, Japanese conglomerate SoftBank Group Corp. has made big commitments to firms like WeWork and Compass, a tech-heavy residential brokerage.

“If you see someone like SoftBank piling in the extra hundreds of millions of dollars, it makes you more inclined to say ‘the money could come, so let’s make that early bet,’” said Mark Goldberg, a partner at Index Ventures.

Commercial real estate, of course, hasn’t been completely insulated from new technology until now. Data giant CoStar Group Inc. and software developer Yardi Systems Inc. are both over three decades old.

But many startups failed because they had a difficult time convincing users the costs were justified. “The reason there’s a graveyard of technology companies in real estate is they try to disrupt just to disrupt,” said Robert Reffkin, chief executive of Compass, during a panel discussion in 2015.

As the world changed and technology improved, landlords lately have been much faster to adapt and adopt. Lincoln Property Co. is testing 16 different technologies, according to Eric Roseman, Lincoln’s head of innovation.

Russell Kutach, a contractor for SiteAware, launches a drone that he uses to survey construction sites in Houston. PHOTO: JEFF LAUTENBERGER FOR THE WALL STREET JOURNAL

New technologies being used by Houston-based Hines, one of the biggest global developers, include a drone surveillance service provided by an Israeli startup named SiteAware. Several times a week, a drone flies over Texas Tower, a new office building rising in Houston, taking digital images that Hines compares with job specifications to confirm plans have been accurately followed.

Hines created the position of chief innovation officer in 2016, feeling the industry had changed more in the previous five years than in the preceding quarter-century, according to Charlie Kuntz, who was named to the job. “The volume of technology that was coming into real estate was larger than ever before,” he said.

For more information on Houston office spaceHouston retail space or Houston warehouse space and Houston industrial space, please call 713 782-0260 or see my web site at : www.houstonrealtyadvisors.com  Thank you for your interest.


Over the past few years, Houston has shown strong economic growth. It cannot be denied, however, that the commercial real estate industry in Houston does not contribute that much to the state’s economic growth. This is the main reason why the state is pursuing different businesses, particularly run by millennials, to invest in the commercial real estate industry.

Commercial Real Estate

By definition, commercial real estate pertains to various types of properties which are not used for residential purposes – this includes retail properties, office buildings, apartments, or even vacant land that can be developed for commercial purposes. Houston has several commercial real estate brokers, and CXRE Commercial Real Estate is one of the companies offering management and leasing services specifically for business properties. Even with top agencies such as CXRE, it is unfortunate that the commercial real estate industry still does not seem to witness its full potential. Hence, the commercial real estate industry in Houston aims to reinvent how they do business by enticing millennials who have the courage in starting up their own companies with a tenant-centric mindset.

Millennials and Start-up Companies

There are differences, but not opposing views, over the span of years that millennials are born. Nonetheless, millennials make up a quarter of the world’s population, making them a significant consumer group. They are also most passionate in what they believe in that the rise of social enterprises came hand in hand with the millennial generation. Alongside with the rise of social enterprises is the boom of start-up companies, powered by no one else but millennials themselves. These are the reasons why different industries attempt to lure millennials into their circle because millennials are considered the future of further economic growth.

Houston’s Commercial Real Estate and the Millennials

Houston’s commercial real estate industry is no different from other industries, attracting millennials to invest in their business. After all, the founder of the most popular start-up

companies born out of rented apartments are no other than millennials. Hence, most brokers now offer:

    • Connectivity. Brokers are ensuring that the properties and locations they offer have internet availability because this is the main factor that is essential for a business typically founded by a millennial.
    • Integrated Systems. Millennials prefer convenience, which is why walkability and systems integrated within the business location such as nearby hospitals, schools, parks, and grocery stores are being ticked as essentials in the property offer.
  • Neighborhood. Even business areas are now made friendlier, in favor of the millennials, both in terms of the amenities offered and environment sustainability. Studies show that more and more millennials are now being aware of the environmental impact of their actions, hence their goal is to minimize their carbon footprint, which is why they prefer locations that are environmentally friendly, at the same time economical.

 

Final Word

It is true that the millennial generation has a great impact, not only in the commercial real estate industry but in different industries. With the millennials accounting for a quarter of the world’s population, it cannot be denied that this generation has the potential to reshape Houston’s commercial real estate industry, and in a bigger sense, the future.