The Great Shake-Up: In Pandemic, Some Real Estate Founders Saw Right Time For A Bold Bet
Hemant Chavan was working as a development executive in New York City when the pandemic set in, and before long, he sensed opportunity.
Like many commercial real estate professionals in the last two years, Chavan, a development director at luxury residential developer Gemdale, was dealing with Zoom fatigue, saw a hunger for pandemic-era shoppers to get out and travel and experience real life after years of limited interactions. The Indian American businessman also saw the pandemic accelerating so much technology around him — virtual building tours, rental leasing, construction management software.
“Anything that makes your job easier or takes away redundancy, technology will take over that space,” he said. “Software is going to eat everything.”
Those market hunches, and a feeling that it was time to break off and start something on his own, led him to found Brik + Clik, an experiential retail store that curates a selection of direct-to-consumer brands. After successfully launching in 2020 with locations in San Francisco, New York City’s Oculus and Los Angeles, he now has eight employees and plans to open three to five new stores this year, with a funding round set to close in the coming months.
“This was the right time,” he said of starting a retail business during a pandemic that brought store traffic to a standstill. “You can take some risk and bootstrap knowing physical spaces do come back.”
Call it the Great Resignation meets an industry in flux. Throughout the pandemic, wild swings within the commercial real estate market created significant uncertainty that still lingers for key sectors like urban office and retail, calling traditional market wisdom and certainty into question.
Emerging asset classes have developed into lucrative new niches within sectors, especially the life sciences and industrial real estate. Rapid adoption of technology has hit the sector, traditionally a laggard, supercharging new tech ventures and corporate spinoffs. Proptech startups brought in a record $32B of venture capital funds last year.
It’s arguably a challenging time to start a new firm, due to broad uncertainty, but the feeling of society being shaken up has led many commercial real estate professionals to the conclusion that now is the best time for a new idea to break through.
Chavan and other entrepreneurs Bisnow spoke with were clear about the difficulty of raising capital and gaining traction during the dark days of the ongoing coronavirus crisis. Many felt like they were starting from scratch, despite decades of collective experience. But most spoke of older business models and traditional ways of business becoming obsolete all the more quickly during this ongoing transition. A Great Shake-Up has shown them that real estate is ready to move toward new ways of doing business.
Noah Miller founded Richboro Capital, a Boca Raton, Florida-based real estate investment firm focused on smaller investments. Miller’s trigger was seeing a market niche that was traditionally underserved, deals needing investments ranging from $100K to $5M. In June 2020, he left his position as a vice president at Pensam Capital, which specialized in national multifamily investments.
“It was easier to find someone to invest $20M than $1M, and that doesn’t make any sense,” he said. “When Covid hit, I said, 'Why not now?' I was looking to get out of the institutional world.”
Miller admits that while the idea had been in the back of his head for years, Covid gave him a vivid, emotional jolt, a reminder that life isn’t predictable, and he should just take that jump. And, Covid made it clear the industry was changing, and plenty of smaller investors needed capital.
“I don’t know if it’s just real estate, but Covid turned a lot of people into entrepreneurs,” he said.
He found that the idea did work — he’s done 15 deals since starting — but found himself starting over in a sense, building a new proverbial Rolodex and educating the market about the opportunity. It was slow to build, but as the market started to pick up in 2021, he found Richboro picking up momentum.
“I like being a trendsetter,” he said. “There’s nobody else doing this, and hopefully more people will come out for the small-balance real estate world. We’ll be in a league of our own for a bit, which I’m OK with.”
Stephen Paek founded U-Rite the year before the pandemic, developing a new underwriting software seeking to unseat industry-standard Argus. He said the early days of the pandemic were particularly challenging.
He started the firm the same month he got married, leaving his role at Hines after deciding that the only way he could follow through on his vision of improving underwriting software was to go all-in and commit full time to developing new software. That meant hiring software developers collaborating on a mock-up and working prototype to show potential clients.
“The pandemic didn’t have anything to do with me starting the firm,” he said.
“There was just so much activity in the real estate industry, so much flowing into it, and lots of opportunities.“
By March 2020, Paek had a model to show and began getting good feedback and finding new, paying clients. Despite the slow pace of pickup and growth, he believes timing, and the pandemic, has actually been in his favor, with technological advancement finally coming to the industry and more people reconsidering their old-school mentalities.
”There’s a recognition that systems and processes are outdated,” he said. “When Covid hit, it really resonated with people that they needed to re-evaluate. The pitch of disrupting current processes, our messaging, was kind of done for us by Covid.”