Hamilton Ventures Research Insights: Vol. 1
Revolutionizing Real Estate: The Data-Driven Transformation
*Special shoutout* to our MBA Venture Fellow, Jacob Groden, who spent much of his time with us in 2023 researching the intersection of data and proptech.
In recent years, the real estate industry has undergone a significant transformation thanks to the widespread adoption of data-driven technologies. Data has become the cornerstone of informed decision-making in real estate, from property valuations (Housecanary) to identifying market trends (Markerr) and better understanding customer preferences.
The Evolution Of Data Usage In Real Estate
Historically, the real estate sector heavily relied on traditional practices, often involving manual processes like drawing circles on roadmaps to pinpoint ideal business locations. However, with the advent of the internet age and ubiquitous mobile devices, data availability and accessibility have increased exponentially.
Today, over 90% of prospective homebuyers initiate their process digitally, signifying a monumental shift in the industry. Additionally, 85%+ of real estate agents/brokers suggest using MLS software (Multiple Listing Service) when selling/renting property. Some of the most active MLSs include Combined L.A./Westside (CLAW), California Regional MLS (CRMLS), Midwest Real Estate Data (MRED), and Stellar MLS. Companies such as Zillow aggregate the listings from major MLS players and even have started offering their own financing.
However, it isn’t all rainbows and sunshine. This increase in the utilization of technology has led to concerns from many real estate professionals. According to an NAR report, 48% of real estate firms (both residential and commercial) said that keeping up with technology was one of the biggest industry challenges they faced.
The Power of Mobile Location Data
Among the various data resources in the modern real estate industry, mobile location data stands out as a game-changer. It offers unparalleled insights into consumer behavior, providing millions of data points per person per day. This level of granularity allows for hyperlocal market understanding and precise targeting of consumer segments. One such prominent player is Placer.Ai who has raised ~$200M in VC funding to date and has been deemed as a “Unicorn”. They have used this data to better understand foot traffic for usage in a variety of different real estate verticals including Retail, Brokerage, and Hospitality. With a ~65% increase in the average amount of internet-connected devices utilized by the average North American over the last 5 years, the continuing drop in computing cost, and the mass adoption of cost-effective cloud infrastructures, the industry has seen significant strides in understanding how to capitalize on this increasing amount of consumer data.
While mobile location data has huge potential it has faced criticism regarding possible privacy concerns. To mitigate this risk location intelligence companies, such as Hamilton’s portfolio company Occuspace, have taken steps to ensure anonymity. A sampling of these steps include:
Not tracking door-to-door movements
Not collecting device data
Anonymizing their data sets
Going forward it will be interesting to see how privacy legislation adapts to these new technologies - in particular, how the coming data tidal wave of Human-AI and AI-AI interactions will be addressed.
Accurate & Targeted Market Insights
In the past, real estate investors often had limited insights into markets, relying on broad classifications and outdated census data. However, the proliferation of real-time data has facilitated hyperlocal market understanding. Instead of simply estimating which street is optimal for a new venture, businesses can now pinpoint the exact corner and side of the road for maximum impact, revenue, visibility, etc. Data in the past was primarily utilized to understand what had happened in the past. For example:
What % of tenants paid on time?
What was the average price per square foot charged?
The industry has quickly moved towards leveraging the more robust market data available today as a key predictive tool when making decisions:
Given historic data and resident demographics, how likely is Resident X to pay (Propertyware)?
What type of asset maximizes rental income for a certain location/lot (Citybldr)?
As UF Warrington Professor Charles Boisseau discusses the evolution of data in real estate he reflects on what the common practices of real estate investing were in the past “It was not that long ago that commercial real estate professionals would draw circles on road maps to help pinpoint the best place to locate a business. These concentric rings might show the one- to five-mile radius from a given piece of property — and served as a starting place to help clients select a site for a retail store or to decide whether to invest in a local shopping center.”
That said, while data is becoming an essential driver in real estate deal making, relationships are still essential in the real estate industry and Boisseau adds that data is no “Silver Bullet.”
Predicting Market Trends
One of the most significant shifts is the use of data for predictive analytics. Instead of merely understanding historical data, the industry now employs data-driven methodologies to forecast future market trends. This proactive approach allows investors to identify emerging hot markets and make informed decisions ahead of the curve. Another overarching trend is the collection and utilization of real-time data.
For example, a retail chain could utilize historic foot traffic data and integrate this into a model considering weather patterns to determine how staffing/inventory needs may change in real time. A great example of a company using AI to stay ahead of the curve is Floodmapp, a startup that utilizes predictive analytics to determine the extent of damage to real estate assets before, during, and after natural flood disasters.
Investing In Real Estate Data
The integration of widespread, accurate data has propelled the real estate industry into a new era of transparency, agility, and responsiveness. As technology continues to advance, leveraging data will remain essential for thriving in increasingly dynamic real estate markets.
As part of our thesis development for investing in real estate data startups, Hamilton Ventures is constantly analyzing and researching this space. We will be releasing additional blog posts in this series outlining more specifics of how data is being utilized in different parts of the real estate industry.
Connect With Hamilton Ventures
If you are a proptech entrepreneur looking for guidance or capital please connect via our website, or contact TJ Fleming: tfleming@hamiltonventures.io
If you are interested in investing in our portfolio opportunities, reach out to Prashant Kothari: pkothari@hamiltonventures.io