If you want to have your finger on the pulse of the real estate industry, watch what venture capital investors are doing.
Today, a number of real estate players, including agents and brokers, are taking a cue from venture capital investors and making early investments in companies focused on real estate analytics and technology.
CBRE Group Inc., Rialto Capital Management, Hines, and Cushman & Wakefield are investing directly in companies or in venture capital firms focused on making these investments.
Brad Greiwe, co-founder and managing partner of Fifth Wall Ventures, a venture capital firm investing in real estate technology firms, said real estate companies are just now learning how to take advantage of data analytics.
So far, Fifth Wall has invested in an array of companies, including WiredScore, a firm offering a commercial real estate rating system that compares the digital infrastructure of buildings, and Appear Here, a platform for leasing short-term retail space.
The firm’s limited partners are real estate investment firms and operators including CBRE, Hines and real estate investment trust Prologis Inc.
Anchor limited partners in Fifth Wall help the firm’s executives determine which startups will be successful in their particular real estate sectors.
At the same time, CBRE’s commitment to Fifth Wall in May helps CBRE executives allows real estate professionals to keep an eye on what’s going on in the world around us and stay ahead of the game.
Still, there are limits to what technology will do for real estate, Greiwe said.
Real estate data is “too dirty” for artificial intelligence solutions, he said. Data reporting is inconsistent and there is not a single way of reporting, he added.
Matt Murphy, CMO of Chime Technologies, noted that for decades, the real estate industry has chugged along without too many big changes in how things were done.
“About 10 years ago, real estate information began migrating to the cloud,” he explained. “Home evaluation reports, sale prices, demographic data and more went online and became more centralized.”
Agents no longer had to trek down to a local planning office to dig up the information they needed and make sense of it on their own. With that information online, it could be analyzed, interpreted, and visualized, providing agents with clearer insight into estimated values. Appraisals were no longer a mix of guesses and intuition.
According to Murphy, transparency itself is a key benefit of Big Data, but equally as important is what that transparency enables, which is better decision-making.
“Big Data and technology, like artificial intelligence and machine learning, do the heavy lifting of number-crunching,” he explained. “The computers do the hard work of driving out analogies, conclusions and insights, which business leaders can use to make strategic decisions. It streamlines and speeds up the decision-making process.”
Murphy added that data allows agents and brokers to do more objective analyses about value and the potential of investments for a client, which reduces the risk of paying an inflated price or investing in deals that won’t bear fruit.
Agents and brokers also can embrace Big Data for marketing, with social media providing a treasure trove of customer data.
“Agents can use Big Data, as well as machine learning, to target the right people with the right message at the right time,” Murphy noted. “It helps identify customers through demographics, behaviors, and interests who are going to be responsive to messaging. It’s honestly striking how closely you can target and analyze trends, and this data-driven precision allows for a better return on investment.”
With social media, brokers and agents can view see the ages, certain behaviors, and milestones of potential sellers to better pinpoint when they are going to sell their home.
“This gives agents tools to help buyers and sellers figure out the right time to buy or sell by looking at trends around housing prices or other factors that drive a neighborhood’s value,” he concluded.
