Change Is on the Horizon For Residential Real Estate Industry
Known to be conservative in its business practices, residential real estate has been feeling the inevitable and more urgent effects of digital information technology on how properties are traded, used and operated. As an entrepreneur at the forefront of this new wave of innovation, YPO member Clelia Peters recognizes how disruption of the industry is under way.
Peters has served as President of Warburg Realty since 2015, having initially been an advisor to the company, led by her father. A graduate of Yale University and Columbia Business School, Peters worked for four years in private equity at Boston Consulting Group and in 2013 on a women’s leadership startup before joining the real estate brokerage.
A sector ripe for change
“When I first got involved in the company in 2014, I recognized it was a time of disruption for the whole residential real estate industry. I had the general feeling that things were shifting while a lot of incumbent companies were doing things the same way,” says Peters. “The industry had changed for consumers as property listings on internet platforms provided new transparency. But the brokerage approach had not changed. So, there was a gap and vulnerability to disruption. The role of the agent had shifted from being a guardian of information to a professional services provider, but most companies hadn’t changed their business model to reflect this.”
Peters also recognized the entry of a small group of well-funded startups, with aggressive recruiting practices and innovative processes, further disrupting the way the human-resource based incumbent brokerage community worked.
“While the industry at large was undergoing a fundamental shift in the value proposition between buyers and sellers, our company, like other incumbents, was resisting change. Meanwhile, a new class of companies with more aggressive recruiting practices was entering the market,” says Peters.
Technology disrupting the status quo
In response to these trends, in late 2014, together with two partners with backgrounds in commercial real estate, including Aaron Block (YPO Metro New York), Peters co-created MetaProp, a real estate technology accelerator. MetaProp initially built out an acceleration program with an eye towards bringing together entrepreneurs, venture capitalists and incumbents around the growing PropTech sector that spans information, transaction and management of property. “We ended up kicking off the accelerator with some industry support. There was interest, but few saw this as a burning need,” says Peters.
But within a year after launching the first accelerator program, a new wave of innovation and investments started to hit the industry, with more disruptive companies and services appearing in the market. “We were well positioned, among the first talking about PropTech, and incumbent industry CEOs started calling us directly to discuss what was happening. That kicked off massive growth.”
In just a few years, MetaProp has become one of the world’s leading growth programs for early stage real estate technology companies, with more than 80 mentors and world-renowned corporate partners. In addition to the acceleration programs, the company announced last year that they would be raising seed stage venture fund (targeting a raise of upwards of USD25 million) to more easily allow investment outside of the accelerator program. MetaProp has also begun to formally serve as an innovation advisor to key industry leaders, with commercial brokerage powerhouse Cushman and Wakefield as their first publicly announced clients.
A different future: Get ready
“We are still in early stages in the way technology will impact the real estate industry. I believe that PropTech will be larger than FinTech in terms of impact of GDP globally,” says Peters. “Everyone in the real estate value chain, across every point in the lifecycle, should recognize that the industry is shifting rapidly in the next decade and be prepared.”
In brokerage industries, Peters believes that a three-tier system will emerge. “At the bottom, there will be full technological is intermediation. Particularly for the lower-value residential, there will be full disruption and the brokers will be replaced altogether, using big data and algorithms to select, buy and sell homes,” she says. “Second, there will be a hybrid model with technology and people with specialized skills, while top tier high-value and high-complexity markets will have the smartest brokers supported by technology-enabled platforms.”
Her advice for CEOs in or adjacent to the real estate market is “to first recognize this is a core strategic question not an IT question for the next five to 10 years. The C-suite should be thinking now about how technology will impact their business and how to respond.”
Following that, Peters says, “The best response is to get engaged and educated. Start learning and understanding what is happening to the industry and do that with an attitude of questioning assumptions and openness.” Companies can then decide how they want to act — either by partnering, investing or buying new companies with needed expertise.
While there will undoubtedly be winners and losers in the next real estate cycle, for change-agent Peters, now is the time for entrepreneurs, the venture capitalist community and corporations to re-evaluate how they perceive these technological advancements and changing consumer behaviors.
“I think these are incredibly exciting times for the real estate industry. Embracing technological innovations can deliver products that bring efficiency and alignment to the market, providing an opportunity to look at some of the industry’s challenges with fresh eyes,” says Peters.