The impact of technology can be felt across virtually all sectors of the economy and real estate is no exception. In fact, technology affects all aspects of real estate from its procurement and development to its management and use. Real estate-specific technology is often aptly referred to as “RealTech”.

Explaining RealTech

The KPMG White Paper, “The Future of RealTech – Real Estate Technology: Threat or Opportunity?” defines RealTech as “technologies that impact the built environment and the real estate sector, either through business model innovation or product innovation, affecting the way we live, work and play”. The UK company, Popertee, is instructive. This company uses artificial intelligence to strategically match retailers with optimal locations for pop-up shops based on their respective customer bases. Some other prominent examples of RealTech include virtual reality and simulation technologies to assist in selling real estate, software for managing transactions from beginning to end, programs that screen tenants and peer-to-peer leasing, just to name a few. The scope of RealTech is evidently broad.

Investing in RealTech

As of late, investments in RealTech have been on the rise. From 2012 to 2016, venture capital funding of RealTech companies increased a resounding 1200 percent, as investments rose from $221 million USD to $2.6 billion USD over that four-year period.

MetaProp NYC, a real estate technology investment and advisory firm, conducts a survey called the Global PropTech Confidence Index. This survey solicits experts’ projections for the future of the real estate technology market globally. According to the survey, as reported in an article from The Wall Street Journal, investors and start-ups in RealTech expect an increase in merger and acquisition (M&A) activity in the coming year as the market continues to develop. More specifically, 76% of investors surveyed indicated that they expected to see more M&A activity in the coming year (as compared to the previous year where only 58% of investors predicted increased M&A activity in RealTech). Similarly, a sizable proportion of the surveyed start-up founders and executives predicted a strong likelihood that, within the next two years, their businesses would be purchased, make an initial public offering or undergo some other type of major transaction. It therefore appears that investments and corporate changes in RealTech are beginning to occur at more rapid rates and with an increasingly international direction, both of which are indicative of a strengthening and growing RealTech market.

Overall, it is apparent that the real estate sector is not immune from technological change. In fact, real estate technology is on the rise and, given impressive venture capital funding, presumably viewed as a worthwhile investment. As such, real estate companies of all sizes and structures may have to embrace and adopt these technologies in order to remain competitive or else risk being rendered irrelevant.

The author would like to thank Samantha Sarkozi, Articling Student, for her assistance in preparing this legal update.

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