August 08 - 2022
The commercial real estate proptech sector has seen robust growth over the past few years, and for good reason. As in nearly every industry, the commercial property sector is leveraging technology to make life easier and improve outcomes for CRE professionals, brokers, appraisers, and investors. Whether it’s more efficient prospecting, deal making, management, or investing, commercial real estate proptech successfully optimizes processes and increases profits.
In 2021, a record-breaking $32 billion flooded into real estate technology and proptech companies globally. Overall funding in the sector grew 28% compared to 2020, representing $7 billion growth in spending. This was a 3.2% increase over 2019, the previous record-holder.
The reason for this explosive growth is due to the solid benefits proptech provides to commercial real estate businesses. This article will explore what’s behind CRE technology and some of the best solutions out there today.
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Commercial real estate proptech includes software and technology that improve efficiencies for commercial property asset management, deal making, and investment. In a nutshell, CRE tech is any kind of technology that improves the business of commercial real estate.
The term “proptech” is shorthand for property technology, and it encompasses a wide variety of products and solutions. In this post, we will emphasize “next generation” commercial property specific technologies rather than general business related tools.
For example, enterprise resource planning (ERP) software has been around for decades, and it is a valuable asset for the integrated management of business processes. However, emerging solutions have upped the ante to raise efficiencies and provide insight at an entirely new level. Some proptech solutions are exploring never before seen offerings in the CRE sector.
Examples of proptech in real estate include:
Market intelligence: Property data analysis provides enhanced insight into CRE asset opportunities, such as intelligent sale and lease comps databases.
Smart buildings: Includes tools such as visitor access management, advanced security, building operations / management platforms, and hybrid work tools.
Real estate finance: Used to generate deeper business insight and provide advance forecasting or scenario planning.
Deal making: Facilitates deals such as effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other CRE business activity. Tools help streamline workflows, improve collaboration across teams, and simplify reporting.
Asset management: Aims to help landlords and brokers market and lease to tenants with more connectivity and in less time.
Blockchain: For projects such as construction project management, cryptocurrency payment platforms, and smart contracts.
Digital twin: A digital representation of a physical asset, process, or system can allow for predictive modeling and proactive adjustments. Enables simulations to test innovative hypotheses.
Artificial intelligence: Enables companies to gather, process, and package data from multiple datasets to enhance property-level investment decisions.
The reason the proptech sector has seen such rapid growth is due to the value proptech solutions deliver. For example, cloud connectivity enables collaboration and communication to occur in near-real time. This accelerates acquisition processes which is especially helpful in large, complex transactions. Proptech also strengthens the tenant experience by enabling them to find solutions faster and by making building management easier for landlords.
When it comes to finding opportunities, proptech places massive amounts of reliable data at your fingertips. Additionally, many proptech solutions are affordable, even for smaller teams. This has dramatically changed the CRE industry landscape, as proptech places powerful tools in the hands of boutique and institutional firms alike.
The scope of this article doesn’t allow us to explore all of the commercial real estate proptech solutions mentioned above. Still, if we take a look at one proptech company more in depth, we can gain understanding of how technology provides major advantages to CRE professionals.
CRE firms of all sizes use CompStak to access a massive lease and sale comparable database. The advantage provided by this proptech platform is found in four key factors: data volume, data reliability, data analytics, and integration capability. Let’s break down each one of these factors.
One of the hallmarks of many proptech products is access to big data. Historically, comparables came from in-house databases or publicly available records and publications. Today, CompStak curates data from thousands of CRE professionals at leading brokerages and appraisal firms.
CompStak engages the power of crowdsourced knowledge which improves data dynamics as the information is constantly refreshed and verified. Plus, the sheer volume of data grows exponentially compared to conventional comps databases. A large part of this capability is made possible by cloud computing.
Even if you have access to huge volumes of data, how do you know if the data is reliable? As a proptech entity, CompStak combines both human and digital methods to maximize data reliability. The platform enlists a team of data scientists and researchers to ensure the comps data meets the highest level of integrity. And even before this step occurs, the data is standardized in order for visualization and analysis to occur smoothly.
When it comes to actual data verification, here’s where proptech innovation offers a significant advantage. For example, if the comps data looks suspicious or inaccurate, the comp is corrected or the data is removed. Remember, we are talking about millions of comps. For humans to accomplish this level of verification it would take weeks, if not months or more. CompStak gets this done nearly instantly by leveraging regression analysis using machine learning methods. This enables data scientists to quickly flag data anomalies for further review and verification or deletion.
Once the data is curated and verified, it must be analyzed and packaged in a way that improves insight for decision making. In the case of CompStak, the platform offers highly advanced analytic capabilities which enable you to:
Explore property details & market trends: CompStak provides a highly detailed assessment of commercial property characteristics with up to 80+ comp details. You can quickly access market starting and effective rents across office and industrial markets. Explore results by specific submarkets and properties, and scout data on hard to find comps.
Optimize asset performance: Deep data insight enables you to evaluate competitive offers and mark properties to market. New deal alerts improve your asset-level reporting and outcomes. Monitor recent lease and sale transactions for more informed decision making.
Enhance underwriting: Accurately compare properties against competitive sets, define holding periods, establish future rents and concessions, and analyze market trends. CompStak provides the capability to integrate large volumes of verified lease comps into underwriting models.
Enable acquisition: Rapidly identify acquisition opportunities and determine underlying asset value. Visualize lease expirations over time by property type, submarket, and year. Execute process from financing to disposition with reliable transaction insight.
Improve investment outcomes: Discover undervalued assets that align with your portfolio strategy. Analyze market lease rates for peer groups, and build custom market reports for sale transaction history, starting rents, concessions, and more. Gain insight into starting rent distributions to determine the appropriate starting rents for your deal.
One of the most exciting aspects about the boom in proptech is the way solutions integrate with each other. Since no platform can do it all, many products have combined efforts to further improve overall efficiencies and outcomes. For example, AnthemIQ, Vertis, Rockval, Cherre, and Trepp integrate CompStak's lease and sale comps into their platforms. This adds significant value to users of these other innovative CRE proptech products.
For example, by linking CompStak comps to AnthemIQ’s listings, brokers have added market context at their fingertips, allowing them to negotiate the best deals. Meanwhile, CompStak uses the Vertis data science platform, including its commute functionality, to provide better understanding of drive times and commute times for their clients. This helps companies develop more nuanced location strategies to meet employee demands.
Commercial real estate proptech tools are enabling CRE firms of all sizes to significantly improve their outcomes. The tools include commercial real estate software and technologies that improve efficiencies for commercial property asset management, from deal making to portfolio management to property research and more.
The future success of commercial real estate companies and investors will rely heavily on what proptech already offers to the industry. From here, there is no doubt the possibilities will continue to diversify and grow. In the end, CRE business and professionals will realize even greater gains in less time.
CompStak Enterprise delivers comprehensive commercial real estate data to lenders, asset managers, private equity investors, portfolio managers, CMBS investors, and other CRE professionals. Learn more here.