Guest post from our series of Property Futures by Nicolas Kint at Rialto.
Need for liquidity will drive #proptech adoption
There are 2 big trends that I foresee happening in the commercial property industry: 1) demand for more liquidity, and 2) property technology offering room to the commercial property market to consolidate. Let me explain:
Increase in Liquidity:
A non-changing, uncertain, macro-economic climate and low interest rates will shift the investment mindset. Capital will no longer search for surplus returns, but will pay a premium for market liquidity.
By nature of real assets, they offer limited liquidity relative to other investments and are highly cash flow dependent. A vast increase in predictability of cash flow will make the property market more liquid over the next 20 years. This will be achieved through fast access to accurate data and the ability to communicate in real-time.
A concrete example for this trend is the success of leasing management tools such as Rialto which help asset managers monitor and forecast net operating income (rent minus costs, including interest). Outside of the rent, the other income sources such as debt financing or tax shelters are less predictable, given they depend on macro-economical factors.
In summary, if the traditional property industry doesn’t manage to answer the capital market demand for liquidity, their products will lose traction. This leaves room for adopters of technology that provide real-time information facilitating faster transactions and control to better hedge against risks.
According to the Global Real Estate Transparency Index 2014 by JLL, only a couple of markets such as the UK, USA, Australia, New Zealand and France are fairly transparent in terms of real estate investments.
Indeed, real estate is very much a local affair, which gets reflected in a largely fragmented industry. I predict, though, that in the next 2 decades, due to the increased liquidity, there will be an increased opportunity for real estate investors to consolidate. On the one hand, intra-organisational transparency - enabling teams to collaborate and build together for success - will allow organisations to to adopt a multi-local approach. On the other hand, property technology will be key in unlocking the current challenge of access to local accurate information knowledge.
In summary, assuming technology will help create more transparent real estate markets, I believe the opportunity lies with investors cutting indirect investment lines and directly investing in those local markets.
What that means for now:
It's time we all face today's reality where well educated property professionals are left with tools from last century to operate their businesses. They need to manually hunt for information, dig through PowerPoints, coordinate their business over email and report over Excel. Businesses that are not ready to adopt technology, will see their market share shrink away by other companies that do embrace property technology to eliminate human errors and save time.
Existing powerful data processing already allows for visualisation of historical information. Mobile and cloud technology allows cross-organisational interfaces that protect the privacy of all companies and users. The mission of Rialto is to work on top of these ever more powerful technologies, to build a toolset for the commercial property leasing industry to collaborate over; therefore not only facilitate transactions faster, but also to build up business intelligence over time.
Company bio: Rialto
Twitter: - Linkedin: linkedin.com/company/rial-to
A contributor bio: Nicolas Kint
Nicolas is a 29-year-old millennial, part of generation flux. He holds a double MSc degree in economics and entrepreneurship from top-ranking universities, and is founder of Rialto. For the last 5 years, Nicolas has been working as an internet entrepreneur in the property industry, interviewing 200+ industry specialists, which resulted in bringing several innovative #proptech business models to this market, including Rialto, a leasing collaboration platform for landlords and agents in commercial real estate. @nicolaskint