Blog December 20, 2017

Top real estate technology predictions for 2018

By Brian Zrimsek

The commercial real estate industry has made significant progress in its adoption of technology in recent years. Mature companies and startups are all thriving in the U.S. and around the globe.

What will 2018 bring? Here are eight real estate technology predictions we can expect to see in the coming year. Check out our podcast to hear more.

1. Consolidation of real estate tech companies
As the industry evolves, we’ll see continued consolidation of ownership, management, brand, and possibly consolidation of products (but not always). This is one of many commercial real estate technology trends from 2017 that will continue into the new year. My company, MRI Software, is a prime example of this, as we have acquired seven companies in 2017 alone.

2. Innovation through startups
As expected, many CRE tech startups emerged in 2017, and this trend will continue into 2018 as more real estate businesses around the globe increase their reliance on technology, seeking means to differentiate. In some cases, these startups focus on specific verticals within the market, such as student housing or senior living. These new entrants contribute to the cycle of innovation in the industry, while mature companies consolidate.

3. Cycle of assimilation
The combination of the first two items meet when established providers assimilate specific features developed by real estate tech startups. As innovations mature, integration is a logical next step. When large acquires small, there is great value in organizational scale, client relationships, sales team capability and reach, as well as world-class systems and processes for support and G&A functions. This is a common trend within the software industry in general, and it’s finally now relevant to real estate tech. Make no mistake, however, that innovation continues to the next area. This cycle is truly never-ending.

4. Fall of the single stack
The new digitally savvy workforce will drive demand for more flexibility and control over their organizations’ software. Seeking the ability to leverage the solutions from stalwarts and innovators alike, the market will gravitate toward providers that offer a flexible, industry-specific solution with open APIs and the ability to configure to unique business requirements.

5. The Internet of Things (IoT)
In the real estate industry, IoT will gather information from physical places, and as a result, create actions for traditional software and staff. Essentially, IoT will build a bridge between the physical and logical. As an example, property managers can rely on sensors to find standing water, which leads to maintenance staff fixing a plumbing leak. If there are material changes in the number of people in a building, the HVAC system can automatically adjust the temperature and optimize energy consumption and cost.

6. Artificial intelligence in commercial real estate
Similar to IoT, AI could lead to improved operational efficiencies for facilities and building management. As job growth continues and the demand for apartments increases, AI could be helpful for organizations that need to manage a larger number of properties. Tech-savvy real estate organizations that take advantage of AI will be well positioned to gain competitive edge by improving customer service for tenants, reducing complaints, and increasing resident satisfaction. If AI can take care of routine, repeatable actions, then the human workforce will be free to focus on more productive, value-added tasks. This is already taking place as chatbots engage with prospects and residents to gather information and provide responses to the most common requests.

7. Macroeconomic unrest
This isn’t a pleasant topic, but we are past due for a market correction. What will that mean for the real estate industry? The number-one forward indicator of real estate and real estate tech is job creation. Businesses need office space, people need somewhere to live, and retailers need shoppers in their stores. Fundamentals are still strong with U.S. job growth by month continuing to trend upwards (excepting for the impacts of recent natural disasters) and unemployment at 4.1% as of October 2017. The markets continue to rally, but history tells us that there are headwinds in our future. The unpredictable part is when, how substantial and for how long. The impact on real estate technology will come as a result of belt tightening by real estate firms as they face increasing vacancies and softer prices until growth returns.

8. Student loan debt keeps them renting
The student loan burden elongates the time between graduation and the first home buy. The average 2016 graduate has over $37,000 in student debt and averages a monthly payment of $350 per month over a ten-year term. While this is good for apartments, it’s not good for those who are trying to sell their houses. In the near term, the apartment demand should benefit as new grads focus on paying off student loan debt before taking on long-term real estate debt. With continued strong demand from recent grads, investment in technology to drive differentiation will continue, in turn driving continued innovation.

Tune in to Building Success: A Real Estate Podcast to hear more on this topic and other industry news and trends.

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