As we enter a new decade, we’ve asked our Antenna Spaces team to take stock of the Proptech trends we’re tracking. What does 2020 have in store for an industry that, in 2019, saw both exponential growth and a high-profile flameout so dramatic that it’s now being developed into a movie? As these predictions indicate, next year might be just as exciting. 

Mergers and Acquisitions Will Continue Apace

Proptech came into its own in the 2010s. Fueled by a steady rise in venture capital investments, hundreds of start-ups came to market offering services and solutions to solve the myriad real estate industry pain points with surgical precision. However, many companies vying for attention in this increasingly crowded field offered, and still offer, similar or overlapping services.

As the industry matures in 2020, the trend of industry consolidation that was kicked off by Zillow’s acquisition of Trulia in 2015 will continue both vertically and horizontally. Mid-sized firms will acquire small ones as everyone in the industry strives to become the one-stop-shop platform, and to demonstrate heft to attract new cash infusions. Traditional industry players, both brokerages and owners, will continue to acquire firms to gain exclusive access to proprietary technology and take advantage of the efficiency gains these solutions offer. As M&A continues, industry leaders will emerge.

 

Win-Win Workarounds to Security Deposits and Lease Applications

This was the year when rent reform in Oregon, New York and California shifted dynamics between multifamily landlords and tenants. In New York, lawmakers capped the security deposit at one month’s rent and the application fee for a rental at $20, among many other protections for tenants.

In 2020, the race is on among technology firms in the private sector to deliver workarounds that benefit both landlords and tenants to create a frictionless leasing process. This includes technologies that aim to minimize the time and costs associated with converting leads to renters, and solutions that offer alternatives to prohibitive upfront costs (i.e. security deposits) to lower the upfront cost of renting an apartment.   

As these solutions gain traction, we expect apartment leasing to more closely resemble the mobile-first ease of ordering takeout on GrubHub.

 

Sustainability and Green Initiatives

While legally-mandated energy-efficiency standards have been rising for years, 2020 will be the first year when New York City buildings will be  graded on the amount of energy they use. In May, New York City enacted a law that puts buildings on a path to meet the city’s goal to reduce overall carbon emissions 80 percent and become carbon neutral by 2050. Currently, New York’s buildings are responsible for two-thirds of the city’s emissions.  Buildings not cooperating will be charged fees for non-compliance.

We expect scrutiny of the real estate industry to spur millions of dollars of investment in retrofitting older buildings so that they become less wasteful. Retrofitting these older buildings will prevent them from losing heat in the winter and air-conditioned air from escaping in the summer. This will present a huge business opportunity for engineering, technology, and architecture firms, as well as the technology companies that help to monitor and manage buildings’ energy usage.  

 

Co-Working Industry Shakeout

We would be remiss to not mention the biggest real estate story of 2019: the collapsed stock market debut of WeWork, its plummeting valuation, ouster of founder Adam Neumann, layoffs, and bailout by Softbank.

In 2020, WeWork’s competitors are likely to continue eating into its market share. The memory of WeWork’s rise and fall may dampen investors’ appetite for the proptech sector as a whole, even as fundraising continues.

While concerns were raised months ago about WeWork’s impact on New York City’s office market, many argue those concerns are probably overblown as the city remains a magnet for individuals, companies, and global capital.

 

Sense of Community

The ironic thing about technology is that it often helps us become more efficient in accomplishing the things that have always been traditionally important, such as cultivating communication, camaraderie, and human connection. When applied, technology can improve economic and social infrastructure for its community. In 2020, proptech will be a catalyst for fostering community

Expect to see landlords working harder to bring tenants together, whether it’s for a wine tasting in their office lobby, taco truck Tuesdays in front of an apartment building, or yoga in the plaza dotted with upscale restaurants and retail shops. In the age of social media, where users are constantly documenting their daily experiences, everyone is looking to share what drives that personal connection. Feeling like they are a part of a community inspires people to stay, to linger, and to use the physical space that landlords provide.

 

What trends are you watching as you start the new year? Drop us a line to continue the conversation.

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