When it comes to the real estate industry, not much has changed in the past 50 years.
Sure, your stereotypical realtor has changed from a sleazy salesman to a saleswoman, and we now have smartphones and the internet to make the search a bit easier, but that’s about it. The actual home buying process has hardly changed.
The downright glacial pace real estate is evolving at has left the industry ripe for disruption.
Investments in real estate tech startups reached an all-time high last year and it’s apparent that while realtors may not want the change, consumers are ready for it.
To gain a better perspective on what that disruption might look like, let’s dig into a few statistics that paint a portrait of opportunity.
Take out the middle man
Last year, 51% of homebuyers found the property they ended up buying online. However, 88% of buyers still used a real estate agent to handle the purchasing process — a number which has steadily increased from 69% in 2001. Now, many people will frame that 88% as a sign of the trust people have in realtors or an indication that people generally prefer using a realtor. But, I just don’t see it that way.
If you ask any property buyer, residential or commercial, “would you like to avoid paying commission on your purchase?” — the answer will be a resounding yes. The reason people still pay the commission and hire a real estate agent isn’t because they want to hire one, it’s because they’re afraid that something will go horribly wrong if they don’t.
Back in 2013, a study by Oxford University proposed that artificial intelligence has a 98% chance of replacing real estate agents in the future. With the pace artificial intelligence has been advancing at recently, it’s poised to replace realtors within the next ten or twenty years. Any company that can simplify the real estate purchasing process and help buyers handle the paperwork themselves(with or without AI) will cause massive disruption in real estate.
Reduce, Reduce, Reduce
According to the World Economic Forum, the real estate sector consumes more than 40% of the energy produced globally and buildings use 40% of the raw materials we produce. That makes the real estate industry the largest global consumer of resources by quite a fair margin. Businesses that can work to reduce those numbers will see major success in the years to come.
While our current president seems to be less than concerned with protecting the environment, he is the exception, not the norm. We’ve seen massive growth in green technology over the past decade, and while that growth is likely to slow down a bit for the next few years, it won’t be going away. Any business that can find ways of reducing the amount of energy and other resources consumed by the real estate industry will be a game changer.
Wasted space = lost revenue
The traditional office workplace is becoming increasingly outdated thanks to modern technology. The rise in remote workers and freelancers we’ve seen recently is reducing the need for large, dedicated offices. — And as time goes on, that trend will only increase.
Currently, 40% (in some cases up to 70%) of office real estate sits empty during the work day according to Deloitte. Factor in night time hours and those numbers can exceed 90%. That same report estimates that businesses could save up to 30% of their revenue by downsizing. Repurposing all that wasted space won’t be easy, but, it will be profitable both for the business that finds the solution and the companies who repurpose or downsize their space.
The disruption has already begun
By the start of Q3 2016, investors had already forked out $1.8 billion for real estate tech startups, which was an 85% increase from the previous year. Listing websites like Zillow offer a veritable mountain of data for potential buyers to comb through and are already changing the way we search for property. However, it’s still not a complete solution.
The largest single disruption coming to real estate will be AI that can replace a realtor. The funds and the desire are there, it’s just a matter of the technology catching up. The Uber of the real estate industry is on route, it’s just a question of who gets there first.