As a financial services company in the CRE space, we work with brokers, tenants, and landlords every day. Over the past couple of years we have noticed a trend on the topic of new “proptech solutions….” The whole industry is fatigued. As our founding team knows (coming from CRE ownership and brokerage themselves), when the industry is fatigued, adoption will lag. We want to be clear now…this is not the brokerage or ownership communities fault!
Proptech has failed the commercial real estate industry over and over (and over) again. Raise your virtual hand if you’ve been pitched for the hundredth time on some new crm, deal-making, listing aggregator, or “community” you simply must have to make your business better. As reported by The Wallstreet Journal last month, $9.5 Billion has poured into the Proptech sector as “growing landlord demand for better data, new apps and other real-estate technology is fueling a boom in Proptech and attracting record sums of capital into the sector during the pandemic.”
We know what the majority of the commercial real estate industry is feeling:
You’re tired of “solutions” when you are good at your jobs.
You’re sick of being told you’re “antiquated” or “missing out” by twenty-something’s who have never closed a deal.
Most importantly, you are skeptical about who will even remain alive after three or five years.
For those who haven’t experienced this first hand, commercial real estate has been plagued with failed technology for the past decade. There are very few that have built real technology solutions that hit the right resonance with the industry at large (kudos to those who have!)
What are some of the reasons for this? Here is our take (piping hot)
- Founders lacking industry experience who can’t learn and adapt fast enough. There was a large number of Proptech founders claiming to disrupt commercial real estate without having any experience of the customers or environment they are selling in. You can’t take an Uber model and just drop it in CRE. In leasing, for example, there is a symbiotic relationship between landlord, tenant, and broker that one must thoroughly understand. A lot of these founders only experienced it from one side assuming solving their problem (from the tenant perspective) would make sense to landlords and brokers. Boy, were they wrong. There is a large advantage for founders with CRE backgrounds and that’s the respect they will receive in the room immediately. If you have not walked in their shoes, they are less likely to listen to you.
- Trying to cut out brokers. This may be working in some cases in residential (ibuying), but we’ve seen over and over again with solutions promising to “revolutionize the purchase or lease process” and when it boils down they essentially don’t want a broker involved. This is no bueno. Brokers are the lifeblood of the industry. Not only are clients wholly reliant upon them (yes, in some cases too much) but they have domain knowledge and expertise that software cannot replace. Relationships matter. Platforms that attempt to remove the piece that facilitates 95% of deals in this country will not bode well.
- Saturation of failed listing sites. Ask any brokerage how many calls they get from a new listing site offering to post their listings for free. They spend a large amount of time and resources to keep those listings updated to find the company goes away because it was sued by the gorilla in the industry that everybody hates. Innovation is not possible when there’s a blocker or in our industry’s case a bully kicking all the kids off the playground. Trust us, we know this one from experience!
- Pay to play appears to be the only way. We’ve all seen it – a company gets launched with millions of dollars and we all see its name all over emails, events, and social for about one year and then it disappears. There are no trusted sources for what technology or new innovation is actually helping solve problems. In fact, I’ve heard people say they cringe when seeing some of these new companies being promoted or avoid their salespeople like the plague at conferences. Resonance matters, speak the language, and show the industry why your solution is additive to their stack…without sending them a Crunchbase link.
So how do we move forward?
- Partnerships – We believe in companies working together as a united front vs. the CRE turf wars. The right solutions are legos. They can work together and stack into and onto existing technology and process stacks within the industry. You will not replace every firm’s tech stack, so stop trying to. The right tech doesn’t require “everyone” to adopt it to be successful.
- Start any conversation with the brokerage or ownership community from a place of respect and reverence. These are not yahoos. They are successful financial professionals that have been making deals for years, decades even. Telling them they’re “doing it wrong” from your first contact is a sure-fire way to turn them off to what you’re building. Their business works!
- Any Proptech solution should be supplementary and additive to the industry. The concept of complete replacement of the way a $15T industry works is misguided and somewhat insulting. Disruption doesn’t mean destroy. Build solutions that make the industry better without making the players feel like they’re bad just because they haven’t adopted your new platform. Patience!
If you like this and it resonates with you let us know! If it doesn’t let us know too! We’d love to hear from you. We’re dedicated to making commercial real estate the best industry it can be, at least in our little niche of the world 🙂 Let’s find a way to work together!