The Internet's Lasting Impact on Real Estate

The recent pandemic dramatically increased reliance on the internet for essential activities like shopping, work, and social connection. As restrictions ease, the real estate industry is now tasked with understanding the long-term implications of this shift.

To gain insight, a survey was conducted among proptech investors – those actively funding innovation within the sector. Unlike some landlords and lenders who anticipate a return to pre-pandemic norms, these investors are concentrating on the evolving concept of 'place' and its future trajectory.

Further Exploration on TechCrunch

A comprehensive analysis, featuring extensive excerpts and detailed commentary, is available on TechCrunch. This piece delves into the resurgence of local retail, the revitalization of urban centers, and other key developments.

Due to space constraints, not all valuable discussion points could be included in the TechCrunch article. This encompassed the swift changes observed in both residential sales and rental markets, advancements in construction tech, and related climate-tech innovations, among other pertinent issues.

Complete Survey Responses

Below are the complete, unedited responses from the surveyed investors. Access requires an Extra Crunch subscription. Previous editions of this survey, conducted in fall 2020, spring 2020, and fall 2019, may also be of interest to startup founders, employees, and investors.

Participating Investors

The following individuals contributed their expertise to this survey:

• Clelia Warburg Peters, Venture Partner, Bain Capital Ventures
• Christopher Yip, Partner and Managing Director, RET Ventures
• Zach Aarons, Co-founder and General Partner, MetaProp
• Casey Berman, General Partner, Camber Creek
• Vik Chawla, Partner, Fifth Wall
• Adam Demuyakor, Co-founder and Managing Partner, Wilshire Lane Partners
• Robin Godenrath and Julian Roeoes, Partners, Picus Capital
• Stonly Baptiste, Founding Partner, and Shaun Abrahamson, Managing Partner, Urban Us
• Andrew Ackerman, Managing Director, Dreamit

Clelia Warburg Peters, Venture Partner, Bain Capital Ventures

Considering the pandemic’s potential conclusion, how are the shifts experienced during this time influencing your real estate and proptech investment approach? Are current major trends, such as robust housing demand and widespread commercial vacancies, prompting a reevaluation of your investment priorities?

Primarily, I believe COVID-19 acted as a catalyst for pre-existing trends within both the residential and commercial sectors. It effectively compressed a decade’s worth of innovation into a 24-month timeframe.

The pandemic undeniably heightened focus on the home environment, and coupled with historically low interest rates, it created a favorable climate for companies operating within the housing market. My initial involvement in proptech stemmed from work with a family-owned residential brokerage, making this sector a long-standing area of interest. Even before COVID-19, significant changes were underway. Residential transaction disruption is now manifesting in three key areas: iBuyers (companies directly purchasing homes from sellers, aiming to control the sell-side marketplace), neobrokers (employing agents and integrating services like title, mortgage, and insurance for increased revenue), and tools for elite agents (platforms designed for top-performing real estate professionals). Furthermore, consumers are increasingly receptive to alternative financing options, including models involving home equity stake sales or phased homeownership acquisition. The expansion and diversification of these new models are consolidating the residential market, effectively merging brokerage commissions with those from mortgage, title, and home insurance into a single, disruptable market. While current valuations may appear somewhat inflated, I am confident that we are experiencing a period of substantial and lasting innovation in home buying and ownership, and these trends are expected to persist.

Within the commercial sector, a shift in how companies viewed office space was already occurring, largely influenced by the innovations introduced by WeWork. However, the pandemic accelerated this change, fundamentally altering the dynamic between landlords/managers (historically holding significant power since the 1950s) and tenants (now possessing greater influence, resembling consumers of a premium product). Consequently, I anticipate that successful landlords will recognize the need to transition from simply providing physical space to offering tenants a comprehensive, multichannel work experience. This could involve a blend of physical and digital systems encompassing access control, space management (in both central and satellite locations), and digital platforms for meetings and collaboration. These offerings must be delivered with a more personalized, tenant-focused approach. As lease durations shorten, landlords will need to actively cultivate and support tenant relationships.

Looking ahead, how do you envision major cities adapting to post-pandemic life – or will they? What specific solutions are you prioritizing for the future of urban living, such as co-living, ADUs, or commercial-to-residential conversions?

I believe the post-pandemic experience will vary significantly across cities; for example, the paths of Austin and New York are likely to diverge considerably. I remain uncertain about the long-term viability of co-living or large-scale commercial-to-residential conversions, but I foresee several consistent areas of interest.

Firstly, smaller-scale urban living will continue to gain prominence. We can expect further expansion of bike lanes, a focus on walkable neighborhoods, and increased reliance on community-building tools like Nextdoor.

Secondly, the use of outsourced services will likely increase – ghost kitchens for takeout, rapid grocery delivery, and the technologies supporting these services will represent a growth area.

Finally, I believe ADUs will see growth, particularly in sprawling urban areas, as seniors seek additional income streams to facilitate aging in place. However, this market may be dominated by a limited number of geographically concentrated leaders.

Suburban living is experiencing a resurgence – for the time being. What are your key areas of focus within this category over the next one to two years, including new residential services, amenities, and build-to-rent housing developments?

The current shift from urban to suburban environments coincides with evolving attitudes towards homeownership among Americans. Over the past decade, homeownership has declined while renting has increased, driven by both necessity and preference. A key tech-related opportunity within these migrations lies in rental platforms and multifamily amenity enhancement. Currently, there is no comprehensive data aggregator equivalent to the MLS for the rental market, with numerous portals – including Zillow Rentals, Apartment List, Zumper, and RentalBeast – competing to provide listing information. Multifamily operators are increasingly recognizing the need to integrate work, life, and leisure, leading to a demand for enhanced amenities and services. We can anticipate a greater emphasis on hospitality-style branding within the multifamily space, facilitated by technology-driven amenities.

The influx of both institutional and private capital into the single-family rental sector is also noteworthy. It’s conceivable that a significant portion of the population will rent their primary residence while gaining exposure to the property market through ownership of these types of real estate assets. This growth is supported by property management services like Mynd, marketplaces like Roofstock, and innovative financial products from companies like Zibo and Knox Financial.

Furthermore, this is occurring during a period of historically low homebuilding starts that have recently rebounded, creating opportunities for technology within the homebuilding industry. Companies like Mosaic (facilitating construction for midsize builders) are enabling existing players, while next-generation builders such as Icon, Homebound, and Welcome are disrupting the entire homebuilding process.

Commercial retail was already transformed by the internet, but what will remain after the pandemic? Will restaurants, gyms, salons, and other services even survive? Do you anticipate a renewed focus on the “in-person experience” that retailers were emphasizing before the pandemic?

Humans are inherently social beings, and I believe there will be a strong desire for in-person experiences once it is safe to resume them. Moreover, the shift towards fewer days spent in the office will likely increase the demand for “third spaces” – locations that are neither home nor a traditional office environment. I expect to see more retail experiences modeled after Apple Stores, prioritizing customer interaction with products and brand immersion over simple inventory sales. Given the anticipated decline in retail rents post-pandemic, I believe we will witness even greater experimentation than before. This period will be particularly interesting for the retail sector.

Midmarket malls that were already struggling may face significant challenges, potentially being repurposed as fulfillment centers for online delivery or remaining vacant as the market seeks new solutions.

Beyond widely discussed trends, what emerging areas present opportunities for startups? For example, virtual brokerages are challenging traditional real estate incumbents in home sales, and several title insurance startups are gaining traction, albeit in the early stages.

I would contend that brokerage is currently the most advanced area of disruption within proptech, with multiple publicly traded companies (Zillow, Redfin, Exp) and substantial funding dedicated to the sector.

In 2021, I believe the two most significant emerging areas in proptech are construction technology and climate technology. A robust ecosystem is developing around both, with the emergence of dedicated funds (in contech: Building Ventures, Brick and Mortar, and corporate venture funds like Suffolk Ventures) and dedicated climate focus areas within funds such as Fifth Wall and AO Proptech. There is increasing industry engagement and a growing number of entrepreneurs entering these fields.

Christopher Yip, Partner and Managing Director, RET Ventures

Considering the pandemic’s potential conclusion, how are shifts from this period influencing your real estate and proptech investment approach? Are current major trends, such as robust housing demand and widespread commercial vacancies, prompting a re-evaluation of your investment priorities?

Macro trends invariably shape the success of proptech solutions, and the substantial changes spurred by the pandemic necessitate careful consideration. We are closely monitoring key factors including residential migration patterns, housing affordability levels, and regional vacancy rates. A central question remains: how enduring will the work-from-home model prove to be once public health mandates are lifted?

However, our core strategy remains largely consistent. We have consistently prioritized technology serving the single-family and multifamily rental sectors, and these property types have demonstrated relative stability. Technologies supporting these segments have often excelled recently, due to their capacity to transition interactions to online platforms.

How do you anticipate major cities adapting to post-pandemic life – or will they? What specific solutions are you prioritizing for the future of urban living, such as co-living, ADUs, or commercial-to-residential conversions?

The rise of remote work has led to a significant increase in commercial vacancies, as businesses delay occupying new office space and residents explore suburban or temporary living arrangements. Determining the longevity of remote work, particularly outside the technology sector, is a crucial factor.

Should employees return to offices in large numbers, cities should experience a relatively smooth recovery, with life gradually returning to pre-pandemic norms. Some changes may persist – a public more attuned to health concerns might favor individual transportation options, boosting parking and bike-sharing technologies. Real estate management tech facilitating comfortable and healthy high-density living will also gain traction, with consumers seeking touchless solutions and self-leasing tools.

Conversely, if a substantial portion of jobs remain remote, city life could undergo significant transformation. Retail and office properties might face continued challenges, and some officials are exploring converting office spaces into affordable housing. High city vacancies could increase demand for short-term rental platforms like Airbnb and Kasa, allowing landlords to generate revenue even with weaker residential demand.

Furthermore, environmental considerations are gaining prominence. The United States’ re-entry into the Paris Agreement and increasing building energy regulations are driving demand for technologies enabling building owners to meet ESG goals for the foreseeable future.

Suburban living is experiencing a resurgence – for the time being. What areas are you concentrating on within this category over the next one to two years, such as new residential services, amenities, or build-to-rent developments?

Remote work has fueled the revival of the suburbs, with increased demand for homes from both buyers and renters. The single-family rental (SFR) market has seen significant growth in the past decade, attracting substantial investor interest. This migration from cities is poised to benefit the SFR sector, and supporting technologies will likely have a positive impact.

Operating SFR portfolios efficiently at scale presents unique challenges. Compared to multifamily properties, SFRs have more varied unit layouts and are geographically dispersed. Technology can streamline operations and maintenance, with smart home tools like SmartRent enabling self-touring and management of these distributed portfolios. We are optimistic about this space and actively monitoring relevant proptech solutions.

Commercial retail was already evolving due to the internet, but what will remain after the pandemic? Will restaurants, gyms, salons, and other services even survive? Do you foresee a renewed emphasis on the “in-person experience” that retailers were prioritizing before the pandemic?

The home has become central to daily life, creating opportunities to shift aspects of the retail experience to a new location. Tools like Amenify – which provides services in apartment buildings, including fitness classes and meal delivery – effectively bring retail activities into the home. Platforms like Fernish allow furniture rentals, achieving a similar effect. As retail falters, consumers will seek alternative ways to access the benefits it once provided.

However, it’s premature to declare the end of retail. While it has been in flux for over a decade, and the pandemic accelerated e-commerce growth, people still crave in-person experiences. Even with incomplete city recoveries, major metropolises will retain enough foot traffic to support retail, and innovative models like pop-up shops can address vacancies. Public markets also maintain some confidence in the retail sector, with many REITs recovering from early 2020 struggles.

Beyond widely discussed trends, what emerging areas present opportunities for startups? For example, virtual brokerages are challenging traditional real estate incumbents in home sales, and title insurance startups are gaining traction, albeit early on.

The listings market is currently a hot area, highlighted by Redfin’s acquisition of RentPath and CoStar’s bid for CoreLogic. This underscores the increasing strategic focus on the residential sector, and we anticipate further developments in this space.

Construction technology, while not entirely new, continues to be compelling. With the current real estate cycle and the trend toward suburban living, multifamily property owners are investing in new development, creating opportunities for “contech” platforms. Our recent investment in Falkbuilt – an off-site manufactured interior construction solution – reflects this focus.

The impact of remote work on the physical condition of properties is another area to watch. Extended home occupancy has accelerated wear and tear on building systems. Startups offering tech-enabled property management and home maintenance tools are emerging, representing a significant growth area.

Finally, discussions surrounding rent payments, eviction moratoriums, and affordability have spurred the development of fintech tools facilitating rent payments and mitigating deposit barriers. This is a clear growth category within the proptech landscape.

Zach Aarons, co-founder and general partner, MetaProp

Considering the pandemic’s potential conclusion, how are the shifts experienced during this time influencing your real estate and proptech investment approach? Are current significant trends, such as elevated national housing demand and widespread commercial vacancies, prompting a re-evaluation of your investment priorities?
Our core investment strategy remains largely consistent with our approach from six months prior. Nevertheless, we are proactively seeking opportunities within the hotel technology sector, specifically companies poised to gain substantial market share as leisure travel resumes, anticipated to occur in the autumn.

How do you envision major cities evolving post-pandemic – or will they successfully adapt? What specific solutions are you prioritizing for the future of urban life, including co-living arrangements, Accessory Dwelling Units (ADUs), and the conversion of commercial properties to residential use?
The majority of large cities will likely expedite pre-existing trends. These include a reduction in vehicular traffic, an increase in pedestrian activity at street level, and the growing adoption of bicycles and micromobility options as alternative transportation methods.

Demand for suburban living has experienced a resurgence – at least for the time being. What areas are you concentrating on within this category over the next one to two years, such as innovative residential services and amenities, or build-to-rent housing developments?
Were we still directly acquiring physical real estate assets, as some members of the MetaProp team have in the past, we would be actively pursuing suburban office properties. Organizations will need to provide employees with access to urban headquarters, remote work capabilities, and supplementary office spaces in suburban locations, allowing for convenient work options without lengthy commutes.

The commercial retail landscape was already undergoing transformation due to the internet, but what will remain after the pandemic’s impact? Will restaurants, gyms, salons, and a limited number of other service-based businesses even survive? Do you foresee a significant resurgence in the emphasis on “in-person experiences” that retailers were prioritizing before the pandemic?

We are currently observing a demonstrable surge in consumer desire to resume these activities in person.

Aside from the widely discussed trends, what emerging areas present opportunities for startups? For instance, virtual brokerages are challenging established real estate firms in home sales, and several title insurance startups are making inroads into that market – though traction is still in its early stages.
We are increasingly interested in the senior housing sector. Many of the adoption and acceleration patterns observed in multifamily and office properties a few years ago are now beginning to materialize within senior housing.

Casey Berman, General Partner, Camber Creek

With the pandemic potentially receding, how are the shifts experienced during this period influencing your real estate and proptech investment approach? Are current major trends, such as robust national housing demand and significant commercial vacancies, prompting a re-evaluation of your investment priorities?

Our core investment principles remain consistent. Over a decade ago, we recognized the potential of innovative problem-solvers and technology to transition the industry from fragmented, business-specific solutions to a unified, streamlined real estate ecosystem. The pandemic, and the adaptive measures it spurred, simply expedited this evolution. It elevated real estate technology from a desirable addition to an essential component for a substantial portion of the industry.

We have observed widespread adoption of novel software and hardware solutions since the pandemic’s onset. Platforms like Funnel, for instance, empower prospective apartment renters to locate a building, conduct a virtual tour, complete an automated financial assessment, and finalize a lease—all within under ten minutes.

How do you anticipate major cities evolving in a post-pandemic landscape—or will they? What specific solutions are you prioritizing for the future of urban living, including co-living, accessory dwelling units (ADUs), and the conversion of commercial spaces to residential use?

COVID-19 is exerting dual, often conflicting, influences on cities. Initially, the pandemic demonstrated the feasibility of transitioning a large segment of white-collar work to fully remote operations, granting individuals greater locational flexibility. Simultaneously, it underscored the inherent value of physical proximity and human interaction. We believe cities will continue to attract residents seeking opportunities for living, working, and leisure due to the density and experiential offerings they provide, which are now even more highly valued.

Assuming this holds true, demand for urban spaces and properties will likely rebound. Our portfolio includes companies delivering solutions to meet this demand, and we foresee increasing adoption of these offerings. Flex facilitates online rent payments in manageable installments, enhancing the likelihood of timely payments from tenants to landlords. Latch’s access control systems are now integrated into one in ten newly constructed multifamily buildings. A significant number of individuals acquired pets during the past year, and PetScreening simplifies the management of pet records and verification of service or support animal status.

The pandemic has accelerated the automation of virtually all processes, including those related to real estate services and transactions.

Demand for suburban living has resurfaced—at least for the time being. What areas are you concentrating on within this category over the next one to two years, such as new residential services and amenities or build-to-rent housing developments?

This increased desire for space reflects broader trends in rental, purchase, and renovation behaviors within the housing market. We are collaborating with companies offering innovative solutions across each of these segments. For property owners, Darwin Homes provides comprehensive management services for single-family rental properties. In the realm of home purchases, Notarize streamlines the online document verification process. Curbio offers financing and renovation services for homes prior to listing, maximizing seller value upon market entry.

The internet had already transformed commercial retail, but what will remain after the pandemic? Will restaurants, gyms, salons, and other services even survive, and if so, will they? Do you foresee a resurgence of the “in-person experience” focus that retailers were emphasizing before the pandemic?

The service sector has consistently represented a substantial and growing portion of the U.S. economy for decades, and this is unlikely to change. People will continue to seek proximity and human connection. The pandemic has simply introduced a wider array of options for these interactions, many of which will endure.

There has always been a spectrum of transactional experiences, ranging from high-touch interactions like dining with a large group to low-touch alternatives like takeout. The pandemic has expanded this spectrum. For example, app-based ordering with trunk delivery offers a new, low-touch option for many consumers. Individuals will continue to desire a full range of choices for services and experiences. In-person interactions will remain relevant, but retailers will refine their niches and specialties along this continuum.

Beyond the widely discussed trends, what emerging areas present opportunities for startups? For example, virtual brokerages are challenging traditional real estate incumbents in home sales, and several title insurance startups are gaining traction in that market—albeit in the early stages.

The advent of the internet and automated tools is making it increasingly viable to manage single-family rental homes at scale, while maintaining a high level of quality and efficiency.

The real estate sector plays a crucial role in efforts to measure, benchmark, and reduce the nation’s environmental impact. We are observing companies like Measurabl spearheading the ESG transformation on a global scale.

Vik Chawla, Partner, Real Estate Technology Investment Team, Fifth Wall

Considering the pandemic’s potential conclusion, how are shifts during this period influencing your real estate and proptech investment approach? Are current major trends, such as strong national housing demand and widespread commercial vacancies, causing a re-evaluation of your investment priorities?

From the firm’s founding, Fifth Wall’s investment strategy has centered on business models that are fundamentally reshaping the real estate sector, where we can leverage our network of corporate strategic partners and their distribution channels to facilitate growth. This core strategy has remained consistent throughout the pandemic. However, the accelerated digitization witnessed over the past year has prompted a refinement of our focus areas.

For example, both business activity at the property level and the technologies supporting those spaces have experienced significant growth in the single-family and industrial sectors. Conversely, businesses operating within retail, office, and hospitality have faced challenges, many of which are considered temporary and expected to improve as the pandemic eases. The multifamily sector has demonstrated varied performance, with suburban multifamily properties generally benefiting from increased tenant migration from urban centers.

These market accelerations and decelerations have led to adjustments in our investment vertical prioritization, but our underlying investment philosophy remains unchanged.

How do you envision major cities adapting to post-pandemic life – or will they? What solutions are you particularly focused on for the future of urban living, such as co-living, ADUs, or commercial-to-residential conversions?

We project that major cities will continue to be magnets for skilled professionals and top-tier talent even after the pandemic. However, we anticipate remote work becoming a more integral part of the work landscape, leading to greater flexibility in how time is divided between the office and other locations.

This shift will likely result in a moderation of rental rates in cities compared to pre-pandemic levels due to reduced demand. Nevertheless, cities that have demonstrated resilience during the pandemic will likely enter a phase of innovation, characterized by increased housing density, the proliferation of ADUs, and the adoption of modular construction methods.

Suburban living is currently experiencing renewed interest. What areas are you concentrating on within this category for the next one to two years, such as new residential services and amenities or build-to-rent housing developments?

We foresee a greater emphasis on amenities within suburban real estate assets as a key differentiator, attracting individuals weighing the benefits of city versus suburban living. However, the technology sector generally favors businesses with broad market applicability. Truly successful technology companies are typically highly scalable, performing effectively across diverse locations.

Therefore, we don’t anticipate a surge in technology companies exclusively targeting suburban residents, but rather an increased integration of amenities as a means of attracting tenants to suburban properties.

Looking beyond widely discussed trends, what emerging areas present opportunities for startups? For instance, virtual brokerages are challenging traditional real estate incumbents in home sales, and several title insurance startups are gaining traction, albeit in the early stages.

We expect to see the rise of companies utilizing artificial intelligence and machine learning to enhance established and successful business models. Consider the evolution of sales technology. Initially reliant on manual methods like Post-It notes and spreadsheets, the industry adopted platforms like Salesforce. Now, a new wave of companies, such as Affinity, Dooly, and Outreach, are emerging.

We anticipate a similar cycle of innovation within the real estate technology sector, leading to the disruption of existing successful models, particularly in areas like software, marketplaces, payments, fintech, and insurance.

Adam Demuyakor, co-founder and managing partner, Wilshire Lane Partners

Considering the pandemic’s potential conclusion, how are shifts from this period influencing your real estate and proptech investment approach? Are current major trends, such as robust housing demand and widespread commercial vacancies, prompting a re-evaluation of your investment strategies?

A core principle of our strategy has consistently been optimizing space utilization and identifying technological solutions to maximize revenue from underused areas. This is evident in recent investments like Stuf and Neighbor, which focus on monetizing basements, parking spaces, and other vacant areas. Similarly, MealCo, WorkChew, and Saltbox capitalize on unused kitchens, restaurant seating, and warehouses, respectively.

We believe landlords can leverage these strategies to lessen the impact of rising vacancy rates currently observed across the real estate sector.

WorkChew, which recently announced new developments, is experiencing significant demand from both those seeking space and those offering it. Hotels and restaurants are eager to partner and monetize underutilized infrastructure. Employers also value WorkChew as a convenient amenity for their hybrid workforces who desire alternatives to traditional headquarters.

How do you foresee major cities adapting to post-pandemic life – or will they? What solutions are you prioritizing for the future of urban living, such as co-living, ADUs, or commercial-to-residential conversions?

Despite the pandemic, the cost of living in major cities like New York, San Francisco, and Los Angeles remains prohibitive for many millennials and Gen Z individuals given current income levels. Consequently, we anticipate continued demand for solutions that reduce the financial burdens of urban living.

Co-living, for instance, is fundamentally an economic choice. Solutions that facilitate easier access to desirable locations, such as Accessory Dwelling Units (ADUs), are also expected to flourish.

Suburban living has seen a resurgence – for the time being. What areas are you concentrating on within this category over the next one to two years, including new residential services, amenities, and build-to-rent developments?

We believe suburban living is increasingly viable, partly due to the reduced emphasis on mandatory five-day-a-week office attendance resulting from the pandemic. The extent to which companies will maintain large, in-person headquarters and associated commutes remains a key area of observation.

Should a hybrid model – combining office and remote work – become standard practice, opportunities will arise for businesses providing goods and services closer to where people reside, including storage, food, healthcare, and entertainment.

Commercial retail was already evolving due to the internet, but what will remain after the pandemic? Will restaurants, gyms, salons, and a few other surviving services even endure? Do you anticipate a renewed focus on “in-person experiences” as retailers previously emphasized?

We expect experiential retail to persist and potentially experience a temporary boost as people seek engaging in-person activities.

However, retail primarily focused on selling goods readily available online will likely continue to struggle. Consumer habits have shifted; categories like apparel, electronics, and furniture, once largely purchased in stores, are now frequently ordered online. Furthermore, the pandemic has expanded these online purchasing behaviors to new areas like groceries, fitness, and healthcare.

Beyond widely discussed trends, what emerging areas present opportunities for startups? For example, virtual brokerages are challenging traditional real estate companies in home sales, and title insurance startups are gaining traction, albeit in early stages.

The evolution of startups themselves, driven by the geographic flexibility afforded by the pandemic, has been a noteworthy observation. Previously, startups, particularly those in real estate, felt compelled to locate near customers, investors, and talent pools.

This dynamic has begun to change in recent months.

Observing the choices startups make in the coming years (2022 and beyond) will be insightful. Startups are uniquely positioned to leverage remote work technologies and face intense competition for talent. Therefore, their decisions may offer clues about the future of work as the pandemic subsides.

Robin Godenrath and Julian Roeoes, partners, Picus Capital

As the pandemic appears to be receding, how are the shifts experienced during this period influencing your strategies for real estate and proptech investment? Are current prominent trends, such as robust national housing demand and widespread commercial vacancies, prompting a re-evaluation of your investment approach?

Considering the global impact of the pandemic, we are confident that proptech will maintain a crucial, long-term role in addressing evolving trends within the real estate sector. While factors like strong housing demand and commercial vacancies may fluctuate as the pandemic subsides, the impact of technology in enabling these trends is steering the industry toward a “new normal” centered on technological utilization. We also observe significant momentum in business models promoting fairer and more accessible housing, including reduced cash deposit requirements facilitated by insurance solutions like those offered by Rhino Insurance, one of our portfolio companies. Consequently, we firmly believe the primary post-pandemic trend in real estate will revolve around leveraging technology to enhance access to and efficiency within the entire real estate landscape. We are strongly convinced that technology will continue to be employed to streamline renting, buying, and selling processes – through virtual tours, online platforms, and alternative financing – and to support hybrid work models with flexible spaces, shared space monitoring, and tech-driven workflow management. Our investment decisions will reflect evolving market trends, without altering our core hypotheses established before COVID-19.

How do you envision major cities adapting to post-pandemic life – or will they? What specific solutions are you prioritizing for the future of urban living (co-living, ADUs, commercial-to-residential conversions, etc.)?

During the pandemic, numerous major U.S. cities, including New York City and San Francisco, experienced high COVID-19 infection rates and contributed significantly to the virus’s spread. Many cities were unprepared for the pandemic’s effects, leading to substantial reverse migration and a corresponding loss of jobs and economic activity. As the pandemic hopefully diminishes, cities will prioritize mitigating this trend, incentivizing residents to return to urban environments through post-pandemic solutions. Despite uncertainties surrounding the future of urban living, particularly with the rise of remote work and the decline of traditional social scenes, we are optimistic that cities will regain their vitality, and the real estate industry will flourish alongside them. However, critical questions remain regarding urban densification, mass transit, and housing. We see proptech as vital for enabling the return to urban living and integrating evolving trends like food delivery and remote work into a seamless tenant experience. Monitoring solutions will be essential for managing mass transit occupancy and providing real-time information to riders. Solutions focused on building management, tenant engagement, digital amenities, and community features will be crucial for ensuring safe living and fostering social interaction. Flexible living options will also allow remote workers to experience different cities with affordable, managed rentals, while converting commercial spaces to residential use can lower per-square-foot costs and attract returning residents. While co-living increases density, we believe it will remain relevant as remote work increases the importance of community living.

Suburban living is experiencing renewed demand – for the time being. What areas are you concentrating on within this category over the next one to two years (new residential services and amenities, build-to-rent housing developments, etc.)?

As noted previously, the trend of reverse urban migration is driving increased demand for suburban-style living. Proptech companies have been instrumental in facilitating this shift by digitizing the home buying, selling, and renting processes – through iBuyers, alternative financing, and tech-enabled brokerages. These companies have also reduced physical interactions through remote appraisals, 3D/VR viewings, and digital communication, enabling safe and efficient transactions during the pandemic. We believe the acceleration of digitalization, coupled with increased demand for suburban housing and evolving buyer demographics (such as tech-savvy millennials), creates numerous opportunities for proptech to impact suburban living across construction, access, and lifestyle. This includes companies focused on built-to-rent developments, modular homebuilding, affordable housing, community building, and digital amenities.

Commercial retail was already being reshaped by the internet, but what will remain after the pandemic? Restaurants, gyms, salons, and a few other services that might survive, perhaps? Do you anticipate a resurgence of the “in-person experience” focus that retailers were emphasizing before the pandemic?

Over the past decade, traditional commercial retail has undergone a significant transformation driven by e-commerce. The pandemic forced many retail businesses traditionally considered resilient to e-commerce – such as restaurants, gyms, and salons – to drastically reduce operations or close entirely. We strongly believe that the digitalization of retail will continue to be a dominant trend. However, we expect retailers who tailor their offerings to provide a comprehensive in-person experience to succeed post-pandemic, given the strong desire for community and face-to-face interactions that many people have missed. As the pandemic hopefully subsides, this trend will accelerate. For example, cinemas, often key shopping center anchors, were already enhancing the theater experience with reserved seating, 4DX visuals, and in-theater dining, and the pandemic has spurred further expansion of these offerings, such as private theater rentals. We anticipate this trend will extend across the retail industry, from immersive culinary experiences in restaurants to integrated online-offline shopping. Proptech will play a crucial role in helping retail property owners identify tenants, market properties, and assist retailers in driving in-store engagement and gaining customer insights. We also foresee potential in hybrid models seamlessly combining online and offline experiences. In the fitness sector, for instance, in-studio classes could be broadcast to a wider audience, while apps track fitness progress during both in-studio and at-home workouts.

Beyond the widely discussed trends, what emerging areas present opportunities for startups? For example, virtual brokerages are challenging traditional real estate incumbents in home sales, and several title insurance startups are entering the market – with early, but promising, traction.

The increased reliance on technology, driven by the pandemic’s remote work environment, has compelled large real estate companies to adopt and become more comfortable with technology – including remote management, workflow tools, lead generation, and virtual viewings. This has created favorable conditions for the proptech industry and opened up numerous disruptive opportunities. Disruption in the brokerage space has been ongoing, but the pandemic has accelerated the digitalization of residential real estate processes, including home discovery, viewings, transactions, and virtual brokerages. Furthermore, the shift toward hybrid remote work presents challenges and opportunities for companies providing innovative solutions for flexible office space, home office setups, office management, capacity and access control, and communication tools to manage a distributed workforce. The construction industry has also seen significant development, and new trends in digital procurement and monitoring have emerged, driven by the pandemic’s need for a more digital environment. Increasingly, proptech companies initially focused on point solutions are expanding into comprehensive, end-to-end offerings. The success of companies like Lemonade and Procore in broadening their product lines demonstrates a clear market need for innovation across the broader real estate ecosystem.

Stonly Baptiste, Founding Partner, and Shaun Abrahamson, Managing Partner, Urban Us

As the pandemic situation improves, we are evaluating how resulting shifts are impacting our real estate and proptech investment approach. Current significant trends, such as strong national housing demand and substantial commercial vacancies, are prompting a re-evaluation of our investment priorities.

Generally, we analyze these trends in relation to our core investment principles.

Specifically regarding proptech, we view it as contributing to urban densification, and are therefore focused on understanding the inherent benefits of city living.

How will major cities adapt following the pandemic – or will they succeed in doing so? What specific solutions are you prioritizing for the future of urban environments, including co-living, Accessory Dwelling Units (ADUs), and the conversion of commercial properties to residential use?

Cities possess significant untapped potential, particularly in publicly owned spaces currently dedicated to automobiles. A key shift we anticipate is the reallocation of parking areas from private vehicles to micromobility solutions – including bike lanes, scooter parking, and similar infrastructure. We observe strong demand for companies in our portfolio like Coord, which manages curb space for commercial vehicles and smart zones, Qucit, which handles bike and scooter share programs in numerous cities, and Oonee, providing secure parking for bikes, scooters, and boards.

This transition will also facilitate the adoption of electric micro-EVs for logistics purposes. Furthermore, the creation of parklets and expanded seating areas will enhance public social spaces. While the European Union is leading the charge in restricting car access, a broader reduction in vehicular access to city streets is likely, potentially increasing urban appeal – trading private space for expanded communal areas. This trend is also expected to encourage co-living arrangements, reducing the cost of urban living while maximizing the benefits of shared amenities, which are difficult to replicate in less densely populated areas. Companies like Starcity are experiencing success, as co-living addresses not only cost concerns but also the often-overlooked need for community.

We also foresee an increase in nomadic lifestyles. While much attention has been given to migration to cities like Miami, a more pertinent question for many locations may be whether people will choose to spend several months of the year there. This could mean destinations near activities like mountain biking, surfing, or snowboarding for remote workers. Starcity facilitates easy relocation between urban locations, and Kibbo extends this concept beyond cities by fostering communities centered around van life.

Simultaneously, a substantial portion of the workforce still requires physical interaction, spanning industries from food preparation to construction. Fundamental urban challenges, such as affordable housing and transportation, will persist.

Suburban living has seen a resurgence in popularity – for the time being. What areas are you concentrating on within this category over the next one to two years, such as new residential services and amenities or build-to-rent housing developments?

We are allocating less focus to this area, as we question the sustainability of this demand. We believe a desire for community and social connection may draw people back to higher-density environments, potentially leading to new commuting solutions.

The internet has already transformed commercial retail, but what will remain after the pandemic? Will restaurants, gyms, salons, and other services even survive? Do you anticipate a renewed emphasis on in-person experiences, as retailers were prioritizing before the pandemic?

In essence, yes, although this is not a primary focus for us. We are observing innovative proposals for repurposing commercial spaces, often related to logistics or reverse logistics for circular economy initiatives.

Beyond widely discussed trends, what emerging areas present opportunities for startups? For example, virtual brokerages are challenging traditional real estate companies in home sales, and several title insurance startups are gaining traction – albeit in the early stages.

Our focus on climate influences our perspective; we are interested in how climate risks will impact proptech. The pandemic and recent events, such as the Texas power grid failure, have heightened awareness of these risks. We anticipate increased demand for understanding and mitigating climate risks, from consumers to mortgage holders. Portfolio companies like One Concern, Gisual, and Dorothy are assisting stakeholders in assessing and responding to the impact of climate change on sectors including telecommunications, energy, logistics, and housing.

Other areas of interest include the increased focus on consumption patterns driven by the rise of delivery services, leading to greater attention on reusable packaging and lower-emission delivery options like Kiwibot and electric bicycles.

For remote workers, we expect to see more nomadic options – individuals moving more frequently than before, between various locations globally. Our team is evaluating solutions like Starlink, as connectivity remains a primary challenge for remote work.

For those unable to work remotely, we are exploring the potential of teleoperations for tasks ranging from remote driving to online healthcare.

Andrew Ackerman, Managing Director, Dreamit

With the pandemic potentially receding, how are shifts from this period influencing your real estate and proptech investment approach? Are current major trends, such as robust national housing demand and significant commercial vacancies, reshaping your investment priorities?

My investment focus remains solely within the technology sector; therefore, I will defer to others regarding investments in real estate assets themselves. Regarding proptech, while COVID-19 caused short-term disruption, it has largely accelerated existing trends rather than fundamentally altering the landscape. Currently, it presents challenges for companies selling solutions to commercial real estate, but as the market stabilizes, the pre-pandemic issues and opportunities will persist.

Early-stage investors generally prioritize substantial opportunities, making minor adjustments in cost or timing less critical. Consequently, while I am closely monitoring portfolio companies’ runway and burn rates to ensure viability during the transition to the new normal, my overall investment strategy has not undergone significant change.

Adapting to Post-Pandemic Urban Life

How do you envision major cities adapting to life after the pandemic – or will they? What specific solutions are you prioritizing for the future of urban living, including co-living, ADUs, and commercial-to-residential conversions?

I have previously discussed how the pandemic and the shift to remote work will likely result in more flexible work arrangements, rather than the complete abandonment of the office. As leases are renewed over the next 5-10 years, this will lead to a gradual, though not catastrophic, decrease in demand for office space. The central question becomes: what will become of the surplus office space?

Converting offices to residential use presents complexities. Building layouts often pose a significant obstacle, with many modern offices featuring deep, windowless interiors that are difficult to repurpose. Even with more conventional layouts, structural elements may be improperly positioned.

Extensive modifications, such as drilling numerous holes in concrete to relocate plumbing and gas lines, represent a substantial undertaking.

I am currently exploring whether co-living or microunits could offer a more viable conversion pathway. Repurposing office break rooms and open areas into shared kitchens, dining spaces, and flexible work or recreational areas may be more efficient than a full-scale retrofit. Furthermore, it might be feasible to convert and revert individual floors based on fluctuating market demand for office and residential space.

Suburban Living and Emerging Trends

The preference for suburban living has resurfaced – for the time being. What areas are you concentrating on within this category over the next one to two years, such as new residential services, amenities, and build-to-rent housing developments?

The single-family housing sector has been comparatively underserved, gradually becoming more appealing from both an asset and proptech standpoint. For instance, Dreamit has invested in companies like NestEgg and Abode, which cater to this market. These investments were made prior to the pandemic, and COVID-19 has proven beneficial to these startups, increasing attention on opportunities within the single-family sector.

Commercial retail was already being transformed by the internet, but what will remain after the pandemic? Will restaurants, gyms, salons, and other services even survive? Do you anticipate a resurgence of the “in-person experience” focus that retailers were emphasizing before the pandemic?

This situation exemplifies COVID-19 accelerating pre-existing trends rather than initiating new ones.

I anticipate a rebound in certain sectors. The term “revenge travel” is emerging to describe the anticipated surge in demand for vacation experiences, but I don’t foresee needing multiple haircuts to compensate for a missed appointment during the pandemic.

Ultimately, many in-person experiences are as much social as they are transactional. We inherently desire social interaction. Given our evolutionary history – considering we once routinely removed parasites from one another – I expect restaurants, bars, gyms, and similar establishments to return to normalcy within a few months.

Emerging Startup Opportunities

Beyond the widely discussed trends, what new areas are emerging for startups? For example, virtual brokerages are challenging traditional real estate incumbents in home sales, and several title insurance startups are entering the market – with early, but promising, traction.

Instead of listing a variety of general real estate tech trends, I will highlight two key challenges facing startups in the near to medium term.

Startups that adapted their products to address COVID-19 and offered these services as immediate solutions must determine if they can expand these client relationships beyond the pandemic context into their core product offerings. Failure to do so will likely result in the erosion of those relationships and revenues as the urgency of COVID-19 mitigation diminishes.

Conversely, there is a considerable period between the peak of the pandemic and the establishment of the “new normal.” Startups need a strategy to compete and succeed during this gradual transition. Waiting until after the transition to re-engage customers risks losing ground to competitors who have already secured those customers.

Interested in this survey and wish to share further insights on cities, proptech, and our coverage? Please email me at eldon@techcrunch.com.