Contxto – The state of real estate across the world is in flux. The pandemic caused by Covid-19 depressed demand while it has us all locked inside. But behind those shuttered doors and through technology, proptech is seeking to overturn the established market in both foreseeable and less expected ways.
Housing and houses in Mexico
At first glance, the revolution may well seem fleeting, but do not be fooled.
Take the home rental market for instance. In each of Mexico’s three main cities, the pattern seems to be a consistent decrease in prices, even when subdivided into diverse districts. This is exactly what Mexican proptech, Homie, has done in this bar chart:
The graph may be rather rich in info but the basic tendency is clear: across the board all rental prices have notably lowered—with the exception of Monterrey’s swanky San Pedro Garza district.
However, Homie, has sat down, crunched the numbers, and come up with what is perhaps a counterintuitive conclusion:
The fact that demand is down today is the principal cause for diminishing prices. However, once we’re out of confinement, housing demand will go back to normal and might even increase.
I thought this was pretty surprising news at first, so I pushed further, enquiring if they didn’t think that the incoming recession didn’t mean there would be a collapse in the housing market.
Carlos Arias of Homie kindly answered me, pointing to the fact that this was the rentals market they were talking about:
Let’s not forget that housing is a basic human necessity, and given the uncertain economic situation we’re living through, people will opt for rental instead of buying or taking out drawn-out loans.
Hurray! Everything will be going back to normal! Or will it? (Spoiler: It won’t).
Real estate technologies
Arias nods at a deeper issue in those final words quoted above: People will find it harder to buy housing, moving them to stick to rentals, rely more heavily on credit, or move back to family homes.
This points at a crucial link between real estate and the further opening of loan access in a credit poor region like Latam. This is fintech’s turf, but it’s very much worth pointing out that developments in this sector can directly impact the housing market.
Then there’s the question of the timeframe set by Homie for this return to relative normality post-COVID. Their calculations account for trends in the short- to medium-term.
However, the structural changes to the economies and societies across the world will be felt from the medium to long-term and will affect real estate directly.
As dull as it may sound, one of the most important developments we’ll need to have sorted before the structural shift occurs is a revolution in measurements. Outdated tools could end up giving us outdated data, blinding us to the fact that the world is changing.
Changes from who’s moving, to where they’re moving, to how cities actually behave will have to be taken into account.
Multi-polar cities and multi-nodal companies
Take the predictions made by TheVentureCity Fund’s General Partner, Guillermo Cortina, in a recent piece for Contxto. He remarked on the fact that social isolation has changed people’s and companies’ outlooks on work and commuting.
Cortina predicts the rise of the multipolar city. It will not only have different centers of agglomeration for different sectors (the finance district, the tech hub, etc), but rather it will see the distribution of companies themselves through the mixed use of co-working spaces, home office setups, and semi-autonomous nodes.
This shift will mean that real estate companies will have to evolve too and they often won’t even look like traditional building brokers. Innovations in fintech, Artificial Intelligence (AI), alongside the evolving market will make realtors look more like tech companies.
Here’s where proptech startups have a leg up. Carlos Arias touted Homie’s machine learning skills when I asked how they were going about making their predictions:
We are able to understand the real estate market because, apart from working from our own data, we have the AI-based technological tools to give us real time and manipulable information to give us the stats we need.
Office space revolution
All this talk of home officing could make you think actual offices are a thing of the past. But, as Cortina well points out, people are getting sick of sitting in their homes. There is value to an office for in-person meetings or just to get out of your pajamas for a while.
What the future will see is a new middle ground, balancing home and office in innovative ways.
Talking to a Los Angeles-based angel investor, I was surprised to hear that massive corporations were already shifting their behavior in this way. One of the big perks being offered by Amazon to incoming employees nowadays is an offer to retrofit their apartments or houses as home offices. Get weekly exclusive insights, data, and analysis on the Latin American tech ecosystem straight to your inbox!
A dodgy move if you ask me; providing the tools of 24/7 work to employees under the “Perks” heading. Think about it, do you really want your full office in your living room? Then again, it is a clever move; I suspect many people will be too shy to look a gift Trojan horse in the mouth.
More palatable local solutions are in the making, of course. Conceptions of office space that create and build on what now seem like old coworking paradigms.
An office everywhere
Meet The Everywhere Office, imagine it as a sort of Airbnb but for offices.
I interviewed its co-Founder, Gerardo Vallarta, who told me about the hybrid model his proptech is bringing to the table. Intriguingly, he seems to be bringing to life Cortina’s prediction of a multi-nodal working world.
What The Everywhere Office does is allow companies with surplus office space to let it out to other companies. This allows smaller and even big companies the flexibility to alter their preferences, geographic distribution, and general working layout in what is traditionally a very inflexible market.
You could technically always have gone this way with your company but the administrative nightmare involved in running a variety of different locations is what Vallarta’s is seeking to solve.
That’s why he claims that The Everywhere Office is “first and foremost a technology platform”, an all in one place where the busywork of getting ahold of and kitting out multiple offices is done by them, so companies can just turn up, plug and play.
It’s not all smooth sailing for The Everywhere Office though. The startup is fighting to differentiate.
Vallarta, however, is confident, noting that the honeymoon is over for all levels of workspace: People hate permanent offices with their commutes and impersonal, repetitive spaces. The likes of WeWork really helped to take the luster off the coworking craze. And, the love affair with home office has been handily murdered by coronavirus.
The future is hybrid… but it’ll take a while to evolve into its full form.
The Everywhere Office knows this, and so its team has really segmented their short and medium-term strategies which they’ve divided into pandemic themed phases:
When people slowly filter back into public working spaces. Here is where Vallarta will be looking to reap the benefits of the pandemic flurry of resizing companies. He will shift space for companies who suddenly have too much space but also a long term office lease on their hands to companies who have had to scale up their operations.
Where the real battle for office space supremacy will take place. This is when people will be fully out and about, marking the moment that will determine whether we go back to normal or whether proptechs can really revolutionize what they’re selling.
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