As property technology becomes more popular after the pandemic, Atlanta could see the rise of a new sector — if real estate investors get onboard.
"Proptech” involves any startup that is adding technology solutions to the real estate market, from portfolio management software to building design. The sector has grown 300% each year for more than a decade, according to an August 2021 report from real estate services company Jones Lang LaSalle Inc.
“Atlanta has the appetite to merge two industries, an example being financial technology,” JLL Atlanta tech advisor Todd Edstrom said. “It’s the personality of the city to marry traditional business and new business.”
The city is often referred to as a “developer’s town” because of constant new projects and availability of space. Atlanta is one of the few major metropolitan areas not bound by a coast, lake or river, and its infamous sprawl demonstrates that geographical freedom. That real estate activity could transfer into the technology sector, Edstrom said.
But Shadow Ventures CEO KP Reddy expected the local proptech sector to grow much more than it has over the past five years.
Shadow Ventures, an early-stage firm focused on proptech, usually finds investments outside of the city, even though Atlanta has the foundation to have a bustling proptech sector.
The Georgia Institute of Technology has top-ranked civil engineer and architecture programs, continually graduating new talent who could go on to launch startups. It also has diverse infrastructure that could pilot proptech innovations, such as the Hartsfield-Jackson International Airport, the MARTA transit system and an array of commercial and residential developments.
While serial entrepreneur and Atlanta Tech Village founder David Cummings has seen a steady increase in local proptech startups, he says they tend to be difficult to scale because of their reliance on physical infrastructure. For example, local startups MooveGuru and Zeto help homeowners with moving and maintenance, meaning they must connect their platform with local vendors.
Reddy points to Atlanta’s risk-averse culture as the reason for the sector’s stunted growth.
“The risk capital doesn’t exist for a lot of startup founders to get going,” Reddy said. “To do innovative things, you need capital.”
Nationally, commercial real estate startups have grown from 2,000 to 8,000 in the past decade, according to the JLL report. Those 8,000 companies have raised more than $97 billion in funding during that time frame.
New York City is the current hub for proptech, Reddy said, in part because of real estate investors’ willingness to “throw a couple million bucks” at startup founders “and see what happens.”
The risky perception of proptech could be changing because of advances in consumer technology and the forced office changes that the pandemic caused, Reddy said.
Consumers are accustomed to innovative e-commerce platforms and software that makes their everyday lives more efficient, Reddy said. Real estate professionals may be more inclined to digitize their business processes now that they’re used to tech.
The shift to remote work and a changing office environment also makes innovation a necessity rather than a luxury. Some companies started virtual apartment tours or electronic document signing during the pandemic, Edstrom said. Those innovations may continue in the post-pandemic landscape.
Developers are also reimagining office layouts and structures. Technology tools that aid sustainable building design or accommodating hybrid schedules are becoming more popular, according to the JLL report.
For example, Atlanta startup Cove.tool shows builders the cheapest products they can use to make a structure more energy efficient. It also designed a COVID-19 assessment tool to analyze office floor plans for social distancing. Cove.tool raised $5.7 million last year and planned to grow to 50 employees by the end of this year.
Having an existing base of real estate professionals who care about the industry should help proptech grow, Cummings said.
Jamestown, the developer behind Ponce City Market, Westside Provisions and Buckhead Village, and CIM Group, which is redeveloping The Gulch in downtown Atlanta, both have technology investment arms. Other national real estate firms with local presences, such as JLL, see value in proptech, Reddy said.
Now, it’s a matter of getting more local real estate companies engaged in the tech sector, Reddy said.
