Man, I love technological advancements. For example, right now I’m at 30,000 ft. on a flight from NYC to San Francisco with a fast Wi-Fi connection so I can work for six uninterrupted hours. I need this time to process all the information I absorbed over the past five days in NYC meeting with high-net worth investors, institutional capital providers, commercial real estate owners & operators and other real estate technology companies. Thanks to my new iPhone 6S and my MacBook Pro, I was able to stay hyper connected the entire week while transporting myself via trains, planes and automobiles (mainly Uber).
The Urban Land Institute (ULI) held an invitation-only, CRE Tech event in midtown Manhattan for 75 industry leaders. I was humbly honored to receive an invitation to this event and gladly accepted with an attitude of gratitude and ambition. CrowdStreet has emerged as a leader in online investing for commercial real estate and I was thrilled to be able to listen, learn and contribute to the conversations.
Here are the top three takeaways from the ULI CRE Tech event:
A panel consisting of Michael Milstein, Steve Schlafman, Tom Byrne and Andrew Cantor unanimously agreed that the “Internet of Things” and Autonomous Vehicles will dramatically change our lives and the places we live, work and play by 2025.
If autonomous vehicles of the future meet many of our transportation needs, then society will advance our thinking around how cities, highways, parking lots, commercial buildings and homes also meet our lifestyle needs. Infrastructure, architecture, design, construction and regulations will all have to be reconsidered due to the proliferation of autonomous vehicles. Consider how many fewer cars on the road there may be if vehicle sharing becomes the wave of the future. After all, why own two cars (or any) if you can hail an autonomous vehicle within minutes to your home or office? The reduction in air pollution due to gas-engine emissions alone will have a massive impact. There’s also a compelling argument to be made that autonomous vehicles will be safer than human driven vehicles. This mega-trend is mind blowing and it’s already happening. Thanks Google and Tesla!
The Internet of Things is also fascinating when contemplating the near future. My personal experience with this relates to a recent installation of an alarm system in my home. Not surprisingly, the alarm system sends me a text message when the system detects certain activity, but it also informs me about the home’s electrical usage, thermostat readings, water usage, air quality and more. It’s made my home “smart” by sensing what the environment is like. I can program the system from my iPhone and make changes from anywhere. Now, apply my small personal experience to the largest commercial buildings and every house in the developed world and that is how futurists arrive at an estimated 30 billion connected Internet of Things sensors by 2020.
Faster, Richer, Smarter
Jared Kushner, Jacob Werner and Neil Gupta appeared on a panel that generally discussed the forthcoming impact of technology on CRE. The three young, yet influential panelists agree that our industry will continually become faster, better, smarter…and richer. They cited a fresh new class of tech startups focused on the real estate industry as examples. For example, Kushner said that his company’s use of Honest Buildings has saved him $2 million over the past few months by improving his construction procurement process. Other tech companies that received complementary mentions include VTS, Hightower, Liquid Space, RealMassive and RealConnex.
The three panelists focused on investigating startup tech companies that created tangible value by drastically improving existing processes or breaking the mold by thinking differently and creating entirely new processes for our slow-moving industry. They are attracted to those tech entrepreneurs who challenge conventional thinking and present fresh ideas on how to make the built environment faster, better, smarter and themselves richer in the process. They also warned that a technology is worthless and will be quickly cut if customers don’t actively use it and easily appreciate its value.
Online Platforms Will Enrich Private Real Estate Investing
Everyone in the business knows that commercial real estate is behind the technology curve, but when you think about the fact that Charles Schwab launched their first website to process online trades in 1986, it’s insulting to consider why commercial real estate is 20 years behind the stock market. The answer is regulation, access and transparency, all of which have changed over the past three years and results are fueling an innovation boom in the financial technology (FinTech) and real estate sectors. Allow me to explain:
Regulatory: The Congressional JOBS Act of 2012 ushered in a new era of online investing by allowing general advertising of private investment offerings and a framework for online marketplaces to serve as transaction engines. For the first time in 80 years, private real estate owners/operators/sponsors can advertise that they are raising money for an investment opportunity and process those investment dollars online. Think about raising money from a global pool of connected investors who seek to invest in U.S. real estate. The total addressable market size is in the hundreds of billions of dollars (venture capitalists love this fact). Online investing works for institutional investors just as well as it does for individual high-net worth investors and it will prove to be a transformative shift for our industry.
Access: Prior to online marketplaces for private real estate offerings, the only way to invest in real estate was to purchase an entire building, buy REIT shares on the stock market or have a personal relationship with a real estate sponsor who syndicated their offerings. Today there is a fourth way: direct access to real estate sponsors and their active syndication offerings via the web. In CrowdStreet’s case, investors join our online community free of charge, tell us about their investing profile & preferences, then get access to dozens of expert real estate sponsors across the U.S. Investors can research the sponsor, view their current offerings, request an introduction, express interest in co-investing with them and if everything looks good to them, they can process the transaction and complete their investment online. Our experience is that our investor-members are building a diverse portfolio of real estate properties nationwide that meets their investment objectives. They’re also doing it at a fraction of the transaction cost, which is great for both investors and sponsors.
Transparency: a common disbelief is that private real estate is too complex to automate the investing process and make it more efficient. Nonsense! This “old-school” opinion is only held by the entrenched person who’s profiting from the lack of transparency and prefers to discuss a particular real estate deal over golf or martinis or dinner. Real estate investors love playing, drinking and eating, but why not get full access to all the research available online so we can evaluate it at our convenience 24/7? A comprehensive and transparent presentation of the information should be required for all private real estate offerings so investors can make an informed investment decision. Thankfully, innovative real estate sponsors are investing in online syndication and investor relationship management tools and services to help them present their offerings to their investors in a professional manner. Investors love this technology advancement because it helps them stay informed about an offering, pre or post closing at all times. Within the next five years every real estate syndicator will have their own investor portal to service a global audience of high-net worth and institutional investors.
It was a thought-provoking week in NYC, one that elevated my confidence in real estate technology applications and gave me a glance at what’s around the corner for the real estate industry as a whole.
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TAGS: online investing, commercial real estate, real estate, syndication, real estate syndication, fundraising, REIT, autonomous vehicles, internet of things, NYC, ULI, urban land institute, CBRE, Hines, Blackstone, Loopnet, FinTech, finance, wall street, Charles schwab, crowdfunding, crowdstreet, uber, airbnb.