Welcome to PropTalk, a new series on our blog where we interview the most influential and prolific thought leaders in the commercial real estate tech industry today. Know someone we should feature? Email me at katie(at)hqo.co. Otherwise, sign up for our once-a-week newsletter so you never miss a PropTalk again.
First things first, why am I interviewing Steve Weikal?
If you aren’t familiar with Steve Weikal, well... sit back, grab a cup of coffee, and get ready. (PS - huge mistake on your part if you’re remotely involved in CRE tech and you don't know Steve, but I digress.)
Steve is the Head of Industry Relations at the MIT Center for Real Estate. He is the guy responsible for managing relationships between the Center and its global network of partners and 1,100 alumni of the MIT Master’s in Real Estate Development (MSRED) program. He is a lecturer and researcher, focused on technology’s impact on developing, transacting and managing real estate. Steve also founded MIT Real Disruption, a series of real estate tech conferences that recently folded into the national CREtech conference platform run by Michael Beckerman. You’ve definitely seen him at a conference or two, or 20, or read insights from him in places like the Boston Globe, GlobeSt. the Real Reporter, and more.
So, let's jump in...
Katie: Steve, I've read your bio, but can you share a little more color on your background? How'd you get to where you are today?
Steve: I started looking into CRE tech about 5 years ago, way before anyone was calling it CRE tech. I was as an alumni of MIT; before I came back and started to teach, other alums were very interested in what was going on in the industry.
The Center for Real Estate Alumni Association’s spring conference was in London that year, so we wanted to do something for US-based alums. The topic that a lot alums were interested in at the time was real estate crowdfunding. We discovered a few early CRE tech companies in the space, real innovators at the time like CompStak, VTS, The Square Foot, Honest Buildings, LiquidSpace. We wanted to learn more, so I invited Michael Mandel of CompStak, Nick Romito of VTS, and Jon Wasserstrum of SquareFoot to come up and hold an informational breakfast at MIT for alums, and that’s how it all started. Really glad to see all these early companies are still thriving; they came on the scene way before the phrase CRE tech was even coined.
Katie: You’ve been on the forefront of this whole CRE tech movement so I'm very interested in your predictions for the proptech space in the next 10 years. What can we expect now, in the near term, and ten years from now?
Steve: It’s always hard to predict the future but our researchers are seeing some bigger trends.
The first big trend I’m watching for CRE tech is convergence. We’re going to see a big convergence of the many, many point solutions into a broader all-in-one platform for real estate. The space really began with point solutions, but we’re seeing APIs open up between startups of course, but also legacy systems. We’ve seen blending before - VTS and Hightower, VTS and ComStak, Truss, Matterport and SpaceList, CBRE360 and Floored – but there will be a lot more plugins and sharing, which will change the landscape. I talk a lot about the UI and UX of property, and I think we will definitely see a single platform emerge for the building. Maybe it will be HqO – it’s very possible!
We’ll also see convergence of all of the different industry “techs” – CRE tech, construction tech, design tech, fintech. When you look at a venn diagram of all of those technologies, real estate is the common thread so I think we’ll see convergence of real estate solutions and then all of the other businesses that help real estate run and operate.
The next trend I’m watching is real estate intelligence. “Innovation” and “commercial real estate” were phrases that were never used in the same sentence. For being a third of the global GDP and the largest asset class in the world, real estate is still running on a 40 year old technology: the spreadsheet. Now this isn’t to bash the spreadsheet because it was created by some very smart MIT people back in the day (laughs). But the industry really, really, really needs a change. And so I do think we’re going to see real estate get much smarter in a small amount of time. There’s AI, big data, wide data, machine learning, neurolearning and so much more impacting other industries and we’re going to see it actually impact the real estate business too.
Lastly, my colleague Dennis Frenchman and I talk about the concept of real estate fracking quite a bit. Real estate use is getting broken up into smaller bits and reconfigured in higher valuations. Coworking is doing this of course, but so are firms like LiquidSpace and Breather – there’s a whole swath of variations where companies are taking under or unutilized real estate and monetizing it on three different axis and in four to five different dimensions – monetizing the use of assets in ways we never thought were possible – all because of tech. We couldn’t do it without technology.
I do feel thankful that MIT is leading the charge on all of this too. The convergence of MIT’s DNA of tech plus entrepreneurship, married with the fact that the real estate program doesn’t sit in the business school – it sits between architecture and planning and the media lab – we are truly the creators in real estate. It’s not just the four walls in a building, it’s about context and the city and the people and all of the other elements that are important to real estate. There is no other academic institution that sits at the center of that universe.
Katie: In your opinion, what’s the top proptech segment to watch?
Steve: From an academic perspective, I’m very excited by the new and different ways startups are gathering data. Every real estate tech startup is a data company, they just don’t realize it yet, and we’re on the cusp of accessing data that wasn’t able to be gathered in the past. As a result, academic institutions will be able to conduct more R&D, the industry will get more efficient, and more and more data will be gathered – it’s a virtuous cycle. For landlords, the good news is that this data is available. They never thought about these data points before because there was no way to get it. The bad news is that now they have more data than they know what to do with and as an industry we have to figure out how to sort it out in a way that’s valuable to the owner of the data.
Katie: Let’s say we experience an economic downturn, what do you predict happens to the WeWorks, Knotels, and Industrious’ of the world?
Steve: One important caveat here in my opinion is that this business model is not solely lease arbitrage. I think that is vastly over simplifying the model. They are monetizing many aspects of the office experience. But to answer your question, it’s hard to predict the outcome. One perspective I’ve heard questions what happens when there are fewer startups because of a downturn. These players will have to keep filling up desks and when the per-desk base price is higher than the market, those players could be in trouble. Any market in trade works that way.
Alternatively, I heard a perspective that questions whether coworking would become more popular if the economy slows down because it forces companies to reconsider the efficiency of their office needs. Coworking options could become a great real estate solution if tenants need their gross office expenses to be lower. Sure, the cost per square foot is higher but you only pay for what you need, so arguably the cost for companies should go down overall.
Coworking isn’t going anywhere anytime soon. Three years ago I would ask a room of corporate occupiers who was using coworking space and no one would raise their hand. 18 months ago, only five or six people would would raise their hands. Now, I see half the room raise their hands and I only think that would go up in a down economy.
For those running coworking spaces, I’ve heard from more than a few of them that they like the risk profile of 40 tenants than a single tenant that goes through a downsizing, breaks their lease and leaves the building.
Katie: Ok, in our last question, we ask you to think like a landlord or broker. Choose whether you would Invest, Buy, or Build in the following proptech companies: (1)Convene, (2)Starry, and (3)WiredScore.
Steve: I’m obviously not a landlord but I’ve spoken to a number of owners about this. Some are incubating in-house, some are partnering, and some are just becoming customers. In all three of these company examples, if I was a property owner, why would I deploy capital in an area where I don't have expertise? I would let these companies do what they do best and as a result that affords me more time and energy to do what I do best.
For Convene, they are masters of the hospitality and meeting experience. For landlords, if they want those big ticket services, it’s a big commitment and it requires critical mass – you need density in the building and the neighborhood to make Convene work. Now, not everyone needs a Convene so some landlords are opting to build their own services business because they haven’t been able to find smaller alternatives. An interesting opportunity here for a Convene Light from a services perspective, or a more tech-forward amenity option like HqO. You could also see where a platform like yours could facilitate more pop-up amenities, experiences, and coworking – it still fits into the narrative of players unlocking value in spaces not being used, but it’s temporary. I could also tie this back into the convergence of platforms… all these trends are coming back full circle.
Starry is an easy one… why would I ever try to build my own connectivity in my building? Let them be the experts.
WiredScore has the advantage of a pre-built global brand that Arie has built. The whole idea is that this third party brand provides the validation and as an owner, you can’t replicate that. LEED certification went through challenges because owners found it to be too expensive and turned to “LEED certifiable levels” instead. WiredScore is different. Owners have much to gain from being a WiredScore building and at a relatively reasonable cost.
Katie: Steve, this was an incredible amount of information on all things proptech. Thank you for your time and knowledge!
To learn more about MIT Center for Real Estate, head over to https://mitcre.mit.edu/.