The Federal Reserve values U.S. real estate at an estimated $40 trillion, making it the largest asset class in the country. So it shouldn’t surprise us that, as TechCrunch recently reported, in the last quarter of 2014, venture funding of real estate tech firms reached nearly $300 million.
Venture capital firms that back the likes of Uber, Instagram and Buzzfeed are pouring money into rising tech startups. Residential listing and brokerage app Compass (formerly known as Urban Compass) was recently valued at $800 million and has lured top talent from tech giants like Google and Twitter. Redfin reinvented real estate brokerage by combining advanced technology with full-service brokers and raised $71 million in their latest round. And while there has been significant progress in commercial (and even single-family) real estate technology, with companies like Compass, Hightower, CompStak and Redfin, to name a few, there are still big gaps in certain areas, and problems to be solved.
Technology in the multifamily real estate sector has been particularly lagging, despite growing at an immense pace. The sector contributes more than $1.3 trillion to the national economy annually in the form of jobs, construction, management, operational expenditures and renter spend in local communities. In addition, Americans are increasingly choosing rental housing as the number of married couples with children decreases dramatically, baby boomers begin to downsize and move to apartments or condos and millennials choose to be renters for mobility, comfort and financial reasons. By 2023, more than four million new renter households will be created; by 2030, nearly three-quarters of households will be childless.
This landscape accounts for the surge in new rental listing sites, such as Apartment List, that compete with established players like ApartmentGuide.com, Zillow, Apartments.com, Rent.com and more.
But if renting is the new owning, why are we still writing a personal check to pay our rent in 2015? Research shows that 78 percent of renters prefer to pay their rent electronically, yet the industry as a whole is still only collecting about 30 percent of its payments online. This is symptomatic of a sector of the real estate industry that hasn’t quite caught up to the increasing demands for these types of functionalities and amenities.
Why are we still writing a personal check to pay our rent in 2015?
Similar problems exist in multifamily reporting, data analysis and cybersecurity. Multifamily owners, operators and vendors capture online and within their property management systems a massive amount of information about the preferences of their renters and the efficiencies of their operations that can be used to address myriad issues. Yet, in most cases, the data is stored in multiple, disparate systems that make it difficult to conduct meaningful analysis. Existing systems also open users to increased security risks because of the sheer scale of information stored in several systems that each perform different functions.
While I would love to say that tech in the multifamily real estate sector is booming, the fact is that progress and competition is fairly stagnant and the space is thirsty for tech innovations. The key to bringing multifamily real estate up to speed with commercial real estate is simply more comprehensive and open-source solutions.
Research shows that consumers who rent crave online resources: 60.1 percent of all renters used a smartphone or tablet during their recent search, and 68.2 percent of renters searched for their apartment/home extensively online before visiting the property in person. That said, almost 90 percent of respondents still feel it’s important to view the property in person before they make their final decision. This opens up the possibilities for revolutionary technology in drones, 3D and even virtual reality technologies.
Anyone will agree that the entire process of leasing and buying property will eventually take place digitally — from online documentation and payments to automated agent selection and virtual home selection. The direction we’re headed is pretty clear; it’s just a matter of how fast we intend to get there.