How to Invest in Proptech: 3 Things You Should Know

As new technology continues to transform the real estate industries, more investors are looking at proptech companies as viable CRE investment vehicles. Given recent trends in other industries, that’s understandable.

According to Crunchbase, so far VC-backed real estate companies have raised more for Proptech in the first half of 2021 than any other two-quarter period in the last decade. In the first half of the year, $10.6 billion was raised for Proptech funding. That’s over $2 billion more than in the same time period last year.

If Proptech investment is on the rise, corporate occupiers can expect for vast improvements in real estate business intelligence that helps teams make CRE decisions smarter, better, and faster.

First, a Refresher: What is Proptech?

Proptech stands for property technology. The term has come to represent any real estate company that uses information technology to create services, products, or tools specifically for real estate, construction, or building operation purposes.

Today, Proptech organizations are focused on helping CRE companies and portfolio managers make better use of data, inform decision making, discover investment opportunities, improve the efficiency of buildings, and much more. But in actuality, the growing range of Proptech solutions helps all stakeholders – from investors to tenants.

Over the last decade, proptech has solidified itself as a sub-industry of residential and commercial real estate. For a more in-depth look at Proptech in the commercial real estate industry, check out this overview on CRE Tech.

Proptech Investment Principle #1 – Keep Your Focus on Long Term Value for Your CRE Portfolio

Even though Proptech can move at a fast pace and appreciation can come quickly when you invest in the right Proptech solution, it’s important to focus on long-term value rather than short-term gain. Finding a quick-fix Proptech solution might not help your team contribute to business alignment and overall goals.

Another thing to keep in mind: when technology is involved, you don’t want to invest in something that will be outdated within a few years. CRE teams are smart to project out when they invest in Proptech software.

You want to look for Proptech companies that share this same view. Proptech companies that are looking for a fast score or overnight success might not be the most stable or poised to help your team achieve its goals.

Proptech Investment Principle #2 – Prioritize Data Accessibility & Automation

It’s become clear that data is the big divide between CRE portfolios with average growth and those with top-tier performance. Sure, real estate is an investment that almost always pays off if you wait long enough. But if you have tools and information that can help you maximize the profitability in less time, you have a distinct advantage.

In today’s markets, a CRE portfolio is only as good as the data behind it. And portfolio managers have to continuously monitor data to keep performance on track. There’s a wealth of knowledge out there to inform decisions – you just have to have the means to collect and analyze all of it.

With the powerful Proptech tools that now exist, you can find more than big trends and obvious value in the data. You can drill down to a granular level to find something as small as an HVAC adjustment that reduces monthly energy consumption. When you’re building a CRE portfolio for long-term growth those incremental improvements add up.

Data is only going to get bigger, so automation has got to be a priority as well. Fortunately, Proptech companies understand that data management is a growing concern and automation is a viable solution. And if you want to get the granular insights that come from analyzing millions of data points, automation is a must.

But Proptech is taking data automation a step further. There are now solutions that can connect your data with building operations to automate systems. It’s a truly technology-driven solution that directly connects data with real-world usage.

Proptech Investment Principle #3 – Be an Early Adopter

Tech-savvy investors jumped on the Proptech trend about two years ago when the first tools for CRE were being introduced. These investors adhered to principle #3 – be an early adopter.

When it comes to any type of technology, it’s usually best to adopt and integrate early on for a few reasons. But if you’re just now considering your Proptech options, don’t worry. Now that there’s buy-in from the commercial real estate industry at large, it might be easier to get leadership on board and move the needle with this initiative.

The purpose of Proptech industry tools will also evolve and open up more opportunities. Right now, there is a big focus on any Proptech solution that can save time. The selection of AI-driven security equipment is also guaranteed to expand in the coming years. When Protocol recently asked experts which Proptech technologies segment has the biggest potential for growth, flex space is clearly on investors’ minds now that people are returning to work in the office space during the midst of the pandemic.

All of this potential for growth is sure to attract investors – some of which have never considered real estate investments of any sort in the past. For more on technology’s impact, read about how data science is transforming the industry.

RefineRE Helps You Make Better Portfolio Decisions

No matter what type of CRE investments you’re considering, having the right Proptech business partner can help you make more informed decisions that positively impact portfolio performance.

The RefineRE platform goes beyond simple data aggregation and reporting. We’ve created next-level tools with commercial real estate teams in mind. From providing a big picture view of your portfolio performance to benchmarking across markets to using the FLEX tool to gauge the value of utilizing more flex space, RefineRE has solutions that use today’s new technology for future growth.

RefineRE is remarkably simple for its robust capabilities. Comprehensive data paired with dynamic tools that are easy to use makes data analysis possible for any portfolio manager or investor.

Try the RefineRE platform today to see what CRE investment insights your data will reveal.