Companies investing in analytics startups to uncover valuable data
A variety of real estate players are taking a cue from venture capital investors and making early investments in companies focused on real estate analytics and technology.
CBRE Group Inc., Rialto Capital Management, Hines, and Cushman & Wakefield are investing directly in companies or in venture capital firms focused on making these investments.
Investing in a startup is much cheaper than paying a monthly fee for the company's services, said Jeffrey J. Daniels, senior vice president and national director of multifamily and student housing at Institutional Property Advisors, the institutional real estate advisory arm of brokerage firm Marcus & Millichap.
"Why subscribe when you can make equity investments in the company for $100,000?" Mr. Daniels said.
The firm is searching for investments in real estate data analytics startups to get ahead of the changing industry, he said.
For example, a number of companies have popped up to sell stakes in buildings or lease offices or apartments online, he noted. And in a potential game-changer, Amazon.com Inc. can now unlock people's doors and put their packages inside, Mr. Daniels said.
Amazon's delivery development could make obsolete the thousands of square feet that property owners were setting aside for on-site package rooms and refrigerators to store tenants' online purchases, he said.
"We have to get ahead" of the technological innovations, Mr. Daniels said.
In the past 24 months, the giant commercial real estate and investment firm CBRE has made six technology acquisitions, said Chandra Dhandapani, Dallas-based chief digital and technology officer. It is beefing up its technology in-house staff as well, Ms. Dhandapani said.
Among the deals:
In January, CBRE announced it had acquired Floored Inc., a New York company that creates interactive three-dimensional graphics and technology. Access to Floored's advanced floor plan technology gives CBRE executives the ability to develop technology innovations to enhance marketing and leasing of commercial properties.
In April, CBRE acquired Mainstream Software Inc., which offers facilities management operations technology. That acquisition bolstered CBRE's ability to offer digital and technology-enabled services to large tenants.
The aim of both of these acquisitions is to help CBRE executives improve decision-making, Ms. Dhandapani said.
"There is a lot more awareness around ... the data we collect and how we use it," she said. "We are more conscious and thoughtful around what data we have and how it could be valuable."
CBRE executives are making the acquisitions in a deliberate manner, constantly assessing if the acquisition demonstrates tangible value and whether the data will have an impact, she said.
This analysis helps CBRE executives determine where and how to invest next, Ms. Dhandapani said.
Not all firms are going it alone through acquisitions or direct investments.
Brad Greiwe, co-founder and managing partner of Fifth Wall Ventures, a venture capital firm investing in real estate technology firms, said real estate companies are just now learning how to take advantage of data analytics. So far, Fifth Wall has invested in an array of companies, including WiredScore, a firm offering a commercial real estate rating system that compares the digital infrastructure of buildings, and Appear Here, a platform for leasing short-term retail space.
The firm's limited partners are real estate investment firms and operators including CBRE, Hines and real estate investment trust Prologis Inc.
Anchor limited partners in Fifth Wall help the firm's executives determine which startups will be successful in their particular real estate sectors, Ms. Dhandapani said.
At the same time, CBRE's commitment to Fifth Wall in May helps CBRE executives "keep an eye on what's going on in the world around us and stay ahead of the game," Ms. Dhandapani said. She declined to give the size of the commitment to Fifth Wall's first fund, which closed with $212 million earlier this year.
CBRE has the option to co-invest on investments alongside the fund but it has not yet done so, Ms. Dhandapani said.
Still, there are limits to what technology will do for real estate, Mr. Greiwe said. Real estate data is "too dirty" for artificial intelligence solutions, he said. Data reporting is inconsistent and there is not a single way of reporting, he added.