The new service seeking to disrupt the real estate space is iintoo, a social platform for real estate investments. The CEO, Eran Roth, has over 20 years of experience in the real estate investment arena. Digital Journal caught up with Roth to understand how the real estate space is changing.
Digital Journal: What is the current state of the commercial real estate market?
Eran Roth: The real estate industry is dynamic and constantly undergoing change and 2019 will be no different. There are significant revolutions underway, covering digitalization, technology, demographics, cultural norms and other developments.
Some of the biggest trends that we are helping our investors keep an eye on include startups and Alternative Capital Options. The rapid advances in technology and the substantial number of fintech startups in the real estate industry are providing lower cost solutions at a faster pace than the older, more established, institutions. These disruptive and innovative ventures are driven by the entrepreneurial spirit of our times and are focused on both fintech and operations-related technology startups.
For years, real estate investors have flocked to flashy gateway markets like NY and LA to generate capital growth. Yet the historical data suggests they should be looking to tier II or III markets if they want to see the greatest return. As commercial real estate values reach all-time highs in top-tier cities, secondary markets with strong economic fundamentals continue to attract investor interest. Investors who are reaching for yield are exploring secondary markets where the yield can be anywhere from 75-100 basis points wider, depending on the market and product type. But even within secondary markets, there are hidden gems — beyond obvious cities like Austin, Nashville, Charlotte etc. — where conditions are ripe for high returns.
There is a constant and growing need for affordable rentals for millennials, and now generation Z, across all markets, but especially in secondary markets. Another focus point on the demographic level is the aging population and their senior housing requirements. There is also a growing shortage of skilled workers in the real estate industry, which relies heavily on the baby boomer generation.
Changing demographics impact the market significantly; while multifamily will continue to remain a strong investment, we are witnessing a growing shortage of mid-sized affordable family homes. The demographics factor is key for investors to follow in order to see what housing matters will certainly be addressed for the years to come.
DJ: How is digital technology reshaping commercial real estate?
Roth: Technology has had an irreversible impact on the industry — from providing retail investors with direct access to commercial real estate investment opportunities, to the use of AI to help better predict the viability of certain projects, the transparency and efficiency of sourcing and funding deals all powered by tech — or proptech.
DJ: What impact are startups having on established real estate firms?
Roth: Crowdfunding is the buzzword of today. Rough estimates project that from 2009 to 2014, the worldwide funding volume of crowdfunding platforms grew from $500 million to $10 billion. We’ve seen this innovative approach infiltrate industry after industry. Yet historically, real estate has been on the slower side to adopt new technology. By 2014, Kickstarter alone had raised $1 billion while all of online crowdfunding for real estate lingered around $100 million.
Crowdfunding in real estate is still a relatively new concept but cutting-edge startups are now transforming the traditionally complex process, removing previous barriers to entry, increasing access to investment opportunities and widening the base of capital available to fund real estate transactions.
These platforms have provided developers with new and efficient means of funding new projects and for retail investors, it has provided them with access to a highly promising form of investment opportunity that was previously reserved for the wealthy. Startups are empowering investors and creating efficiencies at every stage of the process which provides benefits to developers, investors and those entities funding commercial projects. These startups are having a democratizing impact on real estate and we’ll continue to see investors adopt a crowdfunding approach as an alternative investment approach.
