Given the scope of the real estate industry, it is unsurprising that the opportunities are vast and wide. The numbers are unsurprisingly huge. Savills World Research team reported that global real estate values totalled $228tn in 2018.
Every resistance in the system represents an opportunity and a viable solution. The following are six key opportunities for investors in the near future:
1. Securitisation of Assets: While there is investor appetite for residential and commercial property, the opaque industry can get access to high-quality equity or debt investments a challenge.
Through the advent of vehicles like Initial Property Public Offerings or tokenisation, investors can get exposure to top-quality assets diversified across regions and neighbourhoods.
It is already happening in traditional loans via companies like Crosslend.
Given the compelling nature of such a product, start-ups able to replicate similar offerings in real estate stand to gain.
2. Construction Planning: Construction is a trillion-dollar market, but planning remains complicated and inaccurate. The consequences of being late or making critical mistakes tally up into the millions, yet PlanRadar estimates 90% of projects are not completed on time. Start-ups that can help improve this figure, likely via tools like AI and IoT, are expected to add significant value.
3. Location: Understanding and predicting property prices is a difficult task, mainly due to the numerous factors that go into determining the attractiveness of an area. Currently, both buyers and agents tend to use intuition in making important decisions. However, with the availability of data and AI tools, it is possible to get accurate estimates to aid in this decision making.
4. iBuyers: For those frustrated with the steps of selling a home, iBuyers are companies that simplify the process by buying the house from the seller with upfront cash. The iBuyer then takes the responsibility of the marketing, administration, and execution of the sale.
For users, this is a hassle-free way to sell, and for iBuyers, utilising AI and scaling relationships with vendors provides an attractive arbitrage opportunity.
The key European player in the space is Nested who has raised £165m in VC, but it is solely focussed on the UK, leaving room for other players in the region.
5.Smart Contracts: The engine behind blockchain, smart contracts represent a compelling opportunity in real estate to cut out the “middle man” in an industry with many misaligned interests.
Smart contracts reduce if not eliminate the need for trust in property transactions as they don’t execute if the established agreements are not met. Players like Propy and SMARTRealty are playing in this space in the US, but Europe remains ripe for disruption.
6.Tenant Experience: While the industry has been quick to improve the commercial office building experience, the same cannot be said about the tenant experience. This condition has remained mostly unchanged over the decades.
Services that enhance the lives of tenants, such as providing easy access to the building or connecting with local services is a potential base of value creation. It can be a way of differentiation for real estate operators.