Now that the Biden Administration has lifted its mandate to wear masks in federal buildings and national parks (and recommended states do the same) for vaccinated individuals, we are starting to see a bit of light at the end of the tunnel for the collective Coronavirus nightmare that has affected the entire world for more than a year now. Things are now finally going to return to normal.
Of course, by “normal” I don’t mean 2019. For better or for worse, we are about to enter a “new normal.”
Entire books have and will be written about how Covid-19 and our reaction to it have changed the world. In this piece, however, I will focus exclusively on the changes that will come to the real estate industry.
What to Expect in a “Post-Covid-19” Real Estate Industry
Of course, Covid-19 will linger on and probably continue to infect people for many years to come (especially its mutations). But the crisis is abating and will soon be gone. During the crisis, we saw a massive increase in industry consolidation. A year ago, close to half of small businesses had fallen to a position where they couldn’t survive even one month without new money and by October of 2020, some 400,000 small businesses had already closed.
On the other hand, Amazon’s market cap doubled. Many big businesses saw a similar boon.
This trend is likely to continue as there does not seem to be any political will to undo this consolidation with taxes on major corporations and the PPP funds allocated to small businesses have dried up while there is no substantive talk of additional support. Furthermore, inflation is beginning to increase and this will likely put the brakes on any new, major spending initiatives.
But the main thing that will drive further consolidation is technology.
Technology and Real Estate
The real estate industry was a bit of a late comer to being “disrupted” by technology, but it finally happened. This was a process that started before Covid-19, but the lockdowns really sent the move to new technologies in the real estate space into overdrive.
It used to be all but impossible to manage more than a few dozen houses from one office. Nowadays, many firms (including ours) manage well over 100. Indeed, technology has made it much easier for large hedge funds to buy single family houses instead of focusing exclusively on apartments and commercial buildings when buying real estate. Hedge funds are continuing to buy houses now and are one of the reasons home prices are increasing so rapidly across the country.
For that reason, we should expect to see home ownership rates across the country continue to dip (although not crater).
Technologies ranging from simple to complex have made real estate easier to do. Property management software makes it much easier to manage tenant accounts, apps such as PayNearMe make it easier for tenants to pay their rent, ShowMojo or Rently boxes make it easier to show properties, Nest makes it easier to set thermostats and save on energy costs and companies like Simplifyy are trying to take property management almost entirely into the cloud by doing everything offsite other than the maintenance.
And, of course, other things that are applicable to all sorts of businesses like Zoom for conference calls or mail scanning devices such as Sasquatch have helped real estate professionals as much as any other group.
To remain competitive going forward, real estate investors, agents and developers will need to utilize these technologies more and more.
As we come out of the Covid-19 pandemic, technology will continue to disrupt the real estate industry while the industry continues to consolidate. And there will likely be another major pandemic in our lifetimes too. Given this reality, those that survive (and thrive) the consolidation will be the ones that best utilize the new technologies that are currently available and yet to come. Make sure to be one of them!