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Fintechs: Complementing the real estate ecosystem

Real estate fintechs by the numbers

Fintechs have made rapid inroads into the real estate industry. The general notion is often that startups are a threat to incumbent real estate companies as they are offering innovative solutions and enhanced user experiences at a relatively lower cost and faster pace. However, traditional real estate companies can leverage fintechs to drive operational efficiency, create powerful tenant experiences or even diversify existing business and generate new revenue sources.

February 21, 2018

A blog post by Jim Berry, US Real Estate & Construction leader, Deloitte & Touche LLP and Surabhi Kejriwal, Real Estate research leader, Deloitte Support Services India Pvt. Ltd.

Fintechs1 have made rapid inroads into the real estate (RE) industry. An in-depth analysis of Venture Scanner data reveals that the number of RE fintechs globally rose exponentially from 176 in 2008 to 1,318 through the first three quarters of 2017. Startups focusing on property development and management far outpace the number of fintechs launched to target financing and investing or leasing and purchase-sale transactions (see figure 1). Geographically, the US is a clear leader in terms of the number of fintechs, followed by India and Germany.

During the 2008-2017 period, cumulative investments in RE fintechs soared from $2.4 billion to $33.7 billion. While venture capital (VC) remains the dominant funding source, there is substantial capital flow from non-VC investors as well, including REITs, established RE services companies and investors, private equity firms, and high net worth individuals. Geographically, while the US and India are the top two countries by investments, China outpaces Germany for a third spot.

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Figure 1: RE fintechs: By the numbers

us-graph-r-e-fintechs.jpg (1364×925)

How can real estate companies engage with fintechs?

The general notion is often that startups are a threat to incumbent RE companies as they are offering innovative solutions and enhanced user experiences at a relatively lower cost and faster pace. However, traditional RE companies can leverage fintechs to drive operational efficiency, create powerful tenant experiences, or even diversify existing business and generate new revenue sources. Additionally, as RE companies have typically lagged certain technology adoptions, there exists an opportunity to leapfrog current capabilities.

Companies can consider various approaches to tap into the fintech space. We’ve listed a few for your consideration:

Launch or participate in corporate accelerators: Independent or corporate accelerators would allow RE companies to capture relevant ideas and solutions at an early stage. This may be an effective and a relatively economical way of capitalizing on the new ideas developed by the startups. For instance, European retail and office RE owner, Unibail-Rodamco, has a startup accelerator program called UR Link.2 Through UR Link, the company provides financing, coaching and mentoring, and collaborative workspace to startups and co-develops prototypes for its large portfolio, with an aim to digitize its shopping centers and improve user convenience.3

Use fintechs’ services: RE owners, developers, and investors can use the fintech platforms for a variety of services—including activities related to leasing, acquisition and disposition, managing the underwriting process, and accessing detailed financial models for property financing. As an example, Assess+RE provides cloud-based services such as property-level valuation models and related financial analysis.4

Invest: Companies that have a fair understanding of the startup business, substantial funds, and the appropriate risk appetite can invest in fintechs with a strong value proposition. In some instances, companies may want to create value for the startup by sharing their expertise, relationships or even contributing to the startup’s business by being customers for its products or services. For instance, in 2016, a group of large mall owners invested in Deliv, a startup offering same-day delivery to shoppers.5

Acquire: Companies with deeper pockets and understanding of startups could make strategic acquisitions to reduce future competition and also increase their capabilities and reach in terms of clients and markets. As an example, in December 2015, JLL acquired Corrigo Incorporated, a provider of cloud-based facility management solutions, in an attempt to improve transparency, enhance productivity, and leverage advanced analytics.Venture Scanner data suggests that within the RE fintech space, acquisitions in the property development and management space has grown significantly over the last four years. Total acquisitions swelled to 35 in 2016 and 19 in the first three quarters of 2017 from two in 2012.

In summary, we would recommend reflecting on a few questions, which will perhaps help you evaluate your journey with fintechs:

  • Change the mindset, from defense to engagement. Do you still regard fintechs as a competitive threat?
  • Examine your company strategy of working with fintechs today. Has there been a priority on investment or acquisition? What is your current collaboration strategy and engagement model?
  • Begin taking steps to operationalize how you engage with fintechs. What is your ability to match the fintechs’ pace of development, from contracting to development of proofs of concepts and pilots, to demonstrating results?

For a more in-depth understanding about fintechs, please read our reports: Fintech by the numbers: Incumbents, startups, investors adapt to maturing ecosystem and 2018 Real Estate Outlook: Optimize opportunities in an ever-changing environment.

 

Industry Leadership   Contacts
Jim Berry
Vice Chairman and Partner
Deloitte US Real Estate & Construction leader
Deloitte & Touche LLP
+1 214 840 7360
Dharmesh Ajmera
Managing Director
Deloitte US Real Estate Fintech leader
Deloitte & Touche LLP
+1 415 407 0365
Robert T. O’Brien
Vice Chairman and Partner
Deloitte Global Real Estate & Construction leader
Deloitte & Touche LLP
+1 312 486 2717
Ken Meyer
Principal
Deloitte US Real Estate Consulting leader
Deloitte Consulting LLP
+1 973 602 5237
Deloitte Center for Financial Services Author
Jim Eckenrode
Managing Director
Deloitte Center for Financial Services
Deloitte Services LP
+1 617 585 4877
Surabhi Kejriwal
Research Leader, Real Estate & Construction
Deloitte Support Services India Pvt. Ltd.
+1 678 299 9087
Industry Leadership   Contacts
Jim Berry
Vice chairman and Partner
Deloitte US Real Estate & Construction leader
Deloitte & Touche LLP
+1 214 840 7360
Dharmesh Ajmera
Managing Director
Deloitte US Real Estate Fintech leader
Deloitte & Touche LLP
+1 415 407 0365
Robert T. O’Brien
Vice chairman and Partner
Deloitte Global Real Estate & Construction leader
Deloitte & Touche LLP
+1 312 486 2717
Ken Meyer
Principal
Deloitte US Real Estate Consulting leader
Deloitte Consulting LLP
+1 973 602 5237
Deloitte Center for Financial Services Author
Jim Eckenrode
Managing Director
Deloitte Center for Financial Services
Deloitte Services LP
+1 617 585 4877
Surabhi Kejriwal
Research Leader, Real Estate & Construction
Deloitte Support Services India Pvt. Ltd.
+1 678 299 9087
Industry Leadership   Contacts
Jim Berry
Vice chairman and Partner
Deloitte US Real Estate & Construction leader
Deloitte & Touche LLP
+1 214 840 7360
Dharmesh Ajmera
Managing Director
Deloitte US Real Estate Fintech leader
Deloitte & Touche LLP
+1 415 407 0365
Robert T. O’Brien
Vice chairman and Partner
Deloitte Global Real Estate & Construction leader
Deloitte & Touche LLP
+1 312 486 2717
Ken Meyer
Principal
Deloitte US Real Estate Consulting leader
Deloitte Consulting LLP
+1 973 602 5237
Deloitte Center for Financial Services Author
Jim Eckenrode
Managing Director
Deloitte Center for Financial Services
Deloitte Services LP
+1 617 585 4877
Surabhi Kejriwal
Research Leader, Real Estate & Construction
Deloitte Support Services India Pvt. Ltd.
+1 678 299 9087

The Center wishes to thank the following Deloitte professionals for their support and contribution to the report:

Patricia Danielecki, senior manager, Deloitte Services LP
Val Srinivas, senior manager, Deloitte Services LP
Saurabh Mahajan, manager, Support Services India Pvt. Ltd
Michelle Chodosh, senior manager, Deloitte Services LP
Catherine Flynn, senior manager, Deloitte Services LP
Megan Lennon, senior manager, Deloitte Tax LLP
Erin Loucks, manager, Deloitte Services LP
Vipul Sangoi, analyst, Deloitte Support Services India Pvt. Ltd

For the purposes of this report, we have defined “fintech” as the ecosystem of (perhaps initially) small technology-based startup firms that either provide RE services to the marketplace or primarily serve the RE industry.
UR Link website http://www.ur-link.fr/.
Ibid.
Assess+RE website https://www.assessre.com/index.html, accessed on August 4, 2017.
5Venture Scanner.
“JLL to Acquire Technology Pioneer Corrigo,” JLL News Release, December 2, 2015.

QuickLook is a weekly blog from the Deloitte Center for Financial Services about technology, innovation, growth, regulation, and other challenges facing the industry. The views expressed in this blog are those of the blogger and not official statements by Deloitte or any of its affiliates or member firms.

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