Nearly a year into the COVID-19 pandemic, we are living in the most tumultuous real estate market any of us has seen. Not surprisingly, proptech has largely marched in lockstep with the real estate industry it serves. Some companies have thrived in this new reality, while others have struggled mightily or even been forced to close shop.
Over the course of this real estate cycle, one of the constants has been the growth of real estate technology, and despite certain speed bumps in 2020, we expect that growth to sustain itself for the foreseeable future. As we continue to experience market volatility, political and social unrest, as well as rapid shifts in the way people interact with their properties, this is clearly a time of uncertainty. At the same time, we saw a strong bounce back in proptech investment in the second half of 2020, and that factor—combined with other positive indicators like Airbnb’s successful IPO—points to the continued vitality of many of these technologies.
As we kick off another year, here are three of the key trends we’re looking at that will drive the proptech sector in 2021:
The primacy of multifamily and rent tech
A year or two ago, countless millions of Americans spent half their waking hours in an office, but today that time is largely being spent at home. Now nearly a year removed from the familiar environs of an office, many companies have already decided that remote work will be a permanent fixture after the pandemic has passed. In light of that, technologies that improve home offices and address the increased wear and tear multifamily buildings are experiencing will take a dominant role.
For example, high-speed connectivity has become much more than an amenity, but a truly essential utility. Building-wide wifi solutions that provide ubiquitous broadband and cover the entire property have already been introduced in a growing number of properties—a development that benefits both residents and operators, who each rely on building connectivity for a greater number of tech tools (e.g. self-touring). We see this trend continuing in 2021.
Additionally, buildings that are now occupied 24 hours a day are being physically taxed more than they were prior to the pandemic, with more water flow, electricity and HVAC usage. And as property managers are struggling with an uptick in resultant work orders, they also have to adapt to socially distanced operations. With these driving forces, technology that supports building operations/communications for maintenance staff at multifamily properties will see increased demand.
Late-stage investment activity will soar
In recent years, the amount of early-stage investment capital flowing to real estate technology has been significant. As proptech platforms have matured, there are many signs pointing to 2021 being the year in which late-stage investment activity takes off.
Most prominent in the media right now are Special Purpose Acquisition Companies, or “SPACs”—so-called “blank-check companies” that enable companies to bypass some of the hurdles of a typical IPO. SPACs are raising capital at record rates, and many proptech companies will use them to go public this year.
But SPACs are far from the only vehicle for late-stage technology investment, and in just the past few months, we’ve seen significant exits to private equity (Thoma Bravo acquiring RealPage) and corporate buyers making strategic acquisitions (MRI acquiring our portfolio company, CheckpointID), as well as via traditional IPOs (Airbnb).
To a large extent, the pandemic has separated the winners and losers within the proptech space, and 2021 will be a year of late-stage M&A that solidifies those market positions.
Self-touring progresses to self-leasing
One of the major trends of 2020 was self-touring, as individuals looking to view apartments increasingly went solo, rather than depend on the assistance (and potential viral spread) of a leasing agent. As leasing teams scrambled to make self-touring a reality, technology like smart locks — which allow prospective renters into units at specified times — online ID verification and mapping software were instrumental.
Looking ahead to 2021, self-touring will proceed to the logical next step: self-leasing. For property operators, self-guided tours are more effective when they’re integrated with a customer relationship management system. Platforms like Funnel Leasing ensure that all of the information about prospective renters is captured prior to a self-guided tour, and then used to make the leasing process as seamless as possible in a touchless environment. Eventually, well-developed CRM software will guide prospects to the point of purchase, where they will sign a lease electronically without having to meet with a leasing agent.
Most of the technologies that facilitate self-leasing have been on the market for years, and some of the largest landlords are already using technology to manage every aspect of the process. As we move into 2021, we’ll finally see all the different pieces come together in the broader market, enabling operators and renters alike to complete the apartment rental process in a truly seamless manner.
John Helm is a partner with RET Ventures, a leading real estate technology investment firm with a strategic focus on helping build cutting-edge technology for multifamily and single-family rental real estate.
