The pandemic has greatly impacted the real estate industry.
On the one hand, offices were empty, hotel occupancy plummeted, and construction was suspended for months. At the same time, the demand for residential housing increased as people sought more space to work and study.
As a result, in 2020, the global flow of VC deals in commercial real estate technology fell by almost 80% compared to 2019. Meanwhile, residential technology venture capital investment fell by less than 10% over that time, according to PitchBook.
As the pandemic-related shutdown gradually dies down, venture capitalists are re-engaging in both segments. As of June 18, PitchBook reported that residential venture capital transactions had already hit an annual record of $ 6.2 billion in about six months of the year. the second most important year for venture activity.
Unlike in previous years, when the most fashionable companies in the sector were serving commercial clients, the bulk of venture capital dollars goes to startups focused on disrupting the hot residential real estate market.
“There are so many interesting trends happening in the living space that it’s hard to ignore them,” said Frank Rothman, co-founder and partner of the company. QED Investors…
A severe housing shortage in the US and a large number of millennials reaching their peak home buying age, coupled with outdated ways of buying and selling homes, are creating momentum for real estate-focused startups.
“To build a really big business, you only need to cover single-digit percentages of these markets,” said Lisa Wu, partner at Norwest Venture Partners… Her firm just ran a $ 136 million Series B. Home and was one of the leaders of the $ 150 million Series C project for Flyhomes, which offers platforms to help buyers buy homes on an all-for-cash offer.
Venture capitalists are also targeting companies that are digitizing home sales outside of the United States.
Real estate in emerging markets is seeing one of the biggest gains in valuations, Rothman said. QED invested in Loft as well as Quinto Andar, two Brazil-based providers of marketplaces and real estate search platforms, each of which has recently amassed multi-billion dollar mega-rounds.
Meanwhile, the segment is also creating a chain of outlets for the public.
Earlier this year, a real estate brokerage Compass went public with a valuation of $ 7 billion. Notepad for suggestions agreed to merge into SPAC, which valued digital brokerage activities at approximately $ 3 billion. In another reverse merge with a blank check, It is better, a mortgage lender, is set to bring $ 7.7 billion to the stock market.
Many investors believe they can predict the future of the housing market and that demand for home ownership will continue to outpace supply for years to come. But the post-pandemic commercial real estate landscape is full of the unknown. Rothman said the opportunity for investors is to “name the right future” for these sub-segments. “You have to be very familiar with these markets,” he said. “Office buildings in Manhattan are very different from shopping centers in the suburbs.”
But some trends in the commercial market are starting to show.
The explosive growth in online shopping has been a boon for logistics and warehousing technologies.
“We have the thesis that retail and logistics are essentially merging as an asset class,” said Zach Aarons, co-founder and general partner of the company. MetaProp, a venture capital firm specializing in early-stage real estate technology startups that just closed its third $ 100 million fund.
Flexe, which offers large retailers a marketplace to buy warehouse space on demand, raised $ 80 million in Series C last winter. Some investors are betting on the need for flexible office space in a post-pandemic world. We are working, whose IPO attempt famously failed in 2019, agreed to go public earlier this year through a $ 9 billion SPAC merger, including debt.
While the residential segment is currently ahead of the commercial segment, Aarons is confident that it will have more opportunities for technical disruption in the future. “Commercial transactions are much more complex, but over time they will also be digitalized,” he said.
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