Trending Benchmarks in Real Estate Industry

The worldwide COVID-19 pandemic has shown how important it is to be able to adapt. There’s hardly any field of human activity that hasn’t been affected by recent events. Like many other global economic sectors, real estate also has to adjust to our new, changing reality.

According to the National Association of Realtors (NAR), already in 2017, half of the property buyers looked for new homes using the Internet. For people under 36, this number increased to 93%. Global digitalization is inevitable. And the real estate sector is unlikely to avoid it either.

Today, the market itself determines the investment return in real estate much less. It is now more important to use the right tools for generating a profit and increasing your property’s liquidity.

In contemporary complex environments, monitoring the latest trends and using the correct real estate industry benchmarks become crucial for wise investments. Here’s our overview of the state of affairs and an up-to-date market overview.

Emerging Global Real Estate Trends

The 2020 global events shifted the housing paradigm significantly. Last year, marked by the skilled labor shortage and much higher prices for raw materials and commodity supplies, resulted in a significant increase in construction costs. On top of that, the housing shortage seems to remain an issue for years before the real estate market goes through self-correction.

However, this market is much larger than only housing. Monitoring the latest trends in commercial real estate and keeping track of the associated technologies may be a game-changer for many business owners and investors.

Remote Working and New Understanding of an Office Space

Lockdowns, self-isolation, and home offices have become people’s new routines. Naturally, the remote model has reshaped our perspective. However, the flexibility of working from home brings new demand — the living space today must have a dedicated room for a home office, especially for those who don’t want to return to offices after lockdowns.

Despite some skeptics regarding the remote model, most studies show that most employees either maintain or improve their productivity during the pandemic. Although home offices come at a cost, 77% of people say that remote work makes them happier.

The price of equipping a home office is not the only challenge of this new reality. The entire office real estate market got tremendously affected by the new working models. Like some other types of commercial property, office real estate is losing contracts and rental income. Switching to hybrid working models, companies alter the classic notion of an office. Now workers don’t have a dedicated desk but rather occupy a free space on the day when they’re required to be at the office. It resulted in 70% of companies moving into smaller offices, according to the 2021 Q1 commercial survey by NAR.

Blink

Total funding amount: $10.7 million

Blink is a full-functioning platform for organizing remote teams and increasing their productivity. It offers plenty of tools like an employee directory, calendar, discussion boards, news feed, etc. The software also has the option of creating custom micro-applications without tech knowledge.

New Approach to Commercial Real Estate

Offices are not the only commercial property type that has been affected by new circumstances. For example, the latest online shopping trend — quick commerce — brought the demand for any space that can be used as a dark store. The need for local storage places facilitating fast delivery services gave new meaning to the property that was often neglected before.

Instant services are the next evolutionary stage of the online retail and service industry. Businesses need to have locally and strategically located storage spaces to deliver goods to the end customer within half an hour. It opens up new investment opportunities as this trend is most likely to remain for a long time.

The on-demand economy has also influenced commercial real estate in the business-to-consumer sector. For example, self-storage services have now also acquired a new meaning. A stuff storage service of a new generation today 

• ShipBob

Total funding amount: $330.5 million

ShipBob is a tech-based global company that helps small and mid-sized businesses fulfill e-commerce operations and provides efficient and cost-effective logistic and storage services. ShipBob offers a software solution for managing inventory, orders, customer communication, and physical logistics for direct-to-consumer brands.

• Byrd

Total funding amount: €22.9 million

Byrd is a fast-growing European startup based in Austria. Besides offering a scalable logistics solution, the company connects online retailers to an international warehouse and fulfillment network. Using such services, retailers can efficiently carry on e-commerce operations without building their own logistics networks.

Online Real Estate Marketplaces

Marketplaces are no longer hype. Today, it’s a convenient way of buying and offering products, services, and solutions. A marketplace is a middleman between consumers and businesses. One platform provides the buyer with multiple options and easy ways to compare processes and other characteristics in this model. 

Inevitably, real estate companies also had to find a way to place their offer online. Although many processes are difficult to digitalize in the real estate business, services that allow people to rent, sell, or buy property are actively developing. 

• Zillow

Total funding amount: $96.6 million

Zillow is one of the biggest and most well-recognized US real estate brands. The platform unites a large network of property managers, mortgage professionals, real estate agents, landlords, homeowners, sellers, buyers, and renters. It helps them share information about real estate, home improvement, and mortgages.

• Opendoor

Total funding amount: $1.9 billion

Opendoor is a well-known player in the US market. The marketplace simplifies the process of buying and selling real estate. The company buys houses from sellers, offering them the value calculated with predictive analytics. The platform takes over many tedious processes like seller-buyer communication or promotion.

Technology to Reshape Real Estate

Business and innovation go hand in hand. From housing companies’ websites to green building and smart cities — real estate is massively affected by the global digitalization process. It includes four main directions:

1. Sharing information about the property with potential buyers or tenants;
2. Financial technologies associated with all kinds of transactions;
3. Share economy as a new paradigm of property use;
4. Management automation and optimization.

Naturally, the Coronavirus-related restrictions accelerated digital transformation. According to Deloitte CRE 2021 Outlook, 48% of companies already using technologies to varying degrees plan to increase investments in further tech development. The respondents emphasized the effectiveness of interactive mobile apps in building a sense of community and successful communication with end customers.

Implementation of the latest technologies is impossible without engaging specialists in this field. 58% of REIT (real estate investment trust) companies see the necessity to create and develop tech partnerships to adapt to the competitive market circumstances. Such cross-industry collaborations are focused on futuristic technologies that can now also be in the real estate business.

Internet of Things

The Internet of Things (IoT) is the essential underlying element of smart homes. It’s an ecosystem of connected devices, sensors, and trackers collecting and processing data and communicating with each other. Their ultimate goal is to automate living spaces and make living as comfortable as possible. 73% of PwC respondents stated their companies have already made IoT a priority business agenda for the coming years.

• Verkada

Total funding amount: $138.9 million

Verkada provides systems for cloud-based enterprise building security. Their solutions combine easy-to-install security cameras, environmental sensors, access control systems, and cloud-managed software. All systems use AI and computer vision technologies.

• Josh.ai

Total funding amount: $22 million

Josh.ai is an AI alternative for systems like Amazon Echo and Apple Siri. The automation platform controls the user’s home over voice commands. Josh is designed to integrate all the devices used by the user with each other and by now exceeds the smart home limits.

Virtual and Augmented Reality and 3D Tours

Virtual and augmented reality (VR and AR) technologies have already successfully invaded the real estate market. More companies implement virtual 3D interactive tours in their business practices. These innovative tools allow users to get close to the real-life experience of property viewing. Even if the house is not yet built, the potential buyer can see the size and layout and choose colors and finishing materials for future design. With a global VR market size of $4.84 billion, this technology is set to become a game-changer soon.

• Houzz

Total funding amount: $613.6 million

Houzz offers customers a leading tool in home improvement and renovation. The software is created to make the decoration process enjoyable. It also allows users to plan custom buildings. The company’s other goal is to connect home improvement professionals and their customers worldwide and create the world’s largest residential design database.

• Matterport

Total funding amount: $409 million

Matterport is a well-recognized leader in this niche. The company created a virtual platform with digital twins of millions of buildings in more than 150 countries. Besides improving planning, construction, and associated operation, the solution is designed to automate evaluation, documentation, and marketing.

Our Expertise

The Rocketech Team’s portfolio includes prominent examples of tech partnerships with innovative startups in the real estate industry. Using our rich experience in software development, we helped our clients create efficient applications with complex logic, multiple integrations, and fully functional admin panels.

• Flydesk

Total funding amount: $700k

The company offers multiple opportunities for flexible offices and teams. Flydesk application is designed to make shared office space management easier and more efficient for remote teams. The company targets businesses and teams that plan to shift towards the hybrid working model after the pandemic. Besides remote work management, the app helps users find and instantly book premium coworking spaces in 26 countries.

• QB 

Total funding amount: $490k

QB is a tech-based self-storage service for individuals and businesses. It requires minimum effort from a customer’s side — the company collects your things, stores them, provides photo and video reports, and delivers them to the desired destination at a set time. QB app allows users to instantly place orders for their valuables, make payments, and get fully automated reports.

Benchmarking Real Estate Today

Choosing the strategy to benchmark real estate business performance is crucial for investors and property owners. In principle, benchmarking is created to remove assumptions from the investment process. Benchmark indicators are the applicable results of math calculations based on the property worth and profits generated in the past. Such metrics help investors make better and more conscious decisions.

The standard benchmarks like loan-to-value ratio, internal rate of return, or gross rent multiplier are important elements in the world of real estate big business. However, the key socio-economic changes of the past year significantly affected the entire benchmarking process. Here are some aspects to consider today when choosing benchmarks to estimate your business performance or investment potential.

Advertising

Display, search, and social media ads are the underlying elements of any marketing strategy. Moreover, they allow you to measure business performance. Half of the real estate agents who use social media stated that this digital channel brings the highest quality leads.

Logistics

The aforementioned tremendous growth of on-demand services requires businesses to reanalyze the entire logistics infrastructure and functioning. The latest research conducted by JLL shows that 62% of respondents see using smart technology as very important, while 54% give the same label to robotics and automation. 

Sustainability

Sustainability and environmental topics are critical social issues that greatly impact business and technology. ULI Sustainability Outlook 2021 includes some hot topics essential for real estate:

• ESG investments (environmental, social, and governance);
• Energy efficiency;
• Reducing waste in the building process;
• Use of embodied carbon in construction materials for reducing emissions;
• Grid-interactive buildings.

One hundred twenty-eight of the world’s largest asset managers have already joined the Net Zero Asset Manager Initiative since its launch in December 2020. It’s estimated $42 trillion in assets under management for net-zero greenhouse gas emissions as the initiative’s goal.

Investment Potential

Despite all the complications the real estate market faced last year, by the first half of 2021, the total investments in the residential sector worldwide reached $115 billion. Moreover, the 2021 Preqin Global Real Estate Report shows that 81% of investors plan to maintain or increase their allocations for real estate.

Final Thoughts

Benchmarking commercial real estate is a complex multi-level process that requires cross-industry research. Last year’s global events, the exponential growth of technologies, and major social issues — many factors affect the situation in the real estate market. The latest trends show the real estate industry’s tight connection with technologies. As this business field attracts massive investments despite socio-economic instability, a well-timed implementation of innovative ideas can become the first step to success.