As investors and venture capitalists pour billions into the next wave of property tech, it is spurring greater competition in an already congested market.

New tech concepts are popping up left and right, with VC funds having poured $1.37B into real estate tech startups in seed capital and Series A funding as of June 30 — and each is fighting for market share.

“Ultimately there’s too much noise, that’s the problem,” said Elliot Vermes, CEO of valuation and deal management platform redIQ.

As a result, players in the sphere are getting creative to market their solutions to customers and make sense of the CRE landscape.

San Francisco-based Dealpath, a deal management platform for property investment and development teams, created an infographic to help customers navigate and make sense of the wealth of tech offerings on the market.

Within Dealpath’s graphic, all CRE tech firms fall into one of three categories — discovery services, transaction services and property management services.

“We started working on this to better understand the needs of our customers and found that they were seeking the same type of clarity [we were]. Our goal is to better recognize industry pain points and understand what solutions are available to customers in order to make informed decisions,” Dealpath CEO Mike Sroka said. “We found this framework to be really exciting and believe it can help the industry progress forward.”

How It Works

Dealpath believes the CRE software landscape consists of the three categories mentioned above, which align with the three phases of commercial property ownership.

First are the discovery service firms, which include big names like CoStar, Xceligent and Compstak. These companies provide a myriad of services from market research to listing services and auction and investment options, according to Dealpath.

Next are the transaction-oriented platforms, which include valuation and appraisal firms and mortgage lending companies. Though there is some spillover from the other two categories into this middle section (as is the case for online marketplace and transaction company Ten-X), these firms deal with the evaluation and execution of transactions. Firms that fall into this space include Altus Group, The Debt Exchange and redIQ.

Dealpath Director of Marketing Lou Hong said the industry will begin to see more companies in both the first and last categories spilling over into the transaction category.

"There are really great companies in the transaction space. [But] there is a lot of opportunity for growth," Hong said. "We're going to start to see discovery and prop management moving into the transaction space."

Lastly, property management solutions, which include companies like Yardi, VTS and RentMetrics, help property owners and tenant rep brokers operate their properties efficiently.

Referring to these three categories when discussing CRE tech will cut down on the abundance of industry buzzwords and jargon causing customers confusion, Sroka said.

“As an industry of owners, investors and providers, we have a collective opportunity to establish relevancy and build compounding value into the future with more effective communication,” Sroka said.

Another Lens

Dealpath’s illustration is but one example of solutions being created to help customers understand the CRE tech landscape. Many other firms view the landscape through different lenses.

Vermes said he looks at the property tech world through a 2 by 2 matrix. First, you have two types of software — solutions for property transactions and for property owners. From there, Vermes said you have tech that caters to lease-driven properties and tech for operation-driven properties.

“Lease-driven properties are the ones that have complex leases, where the value of the properties is determined in large part by the tenant's creditworthiness and the terms of the lease," Vermes said. “The other category is operation-driven properties. This is where the leases are fairly straightforward, like for multifamily or self-storage properties, and value is driven by operations rather than the lease terms.”

Vermes said one way companies can alleviate some of the confusion in the tech market is to hone in on the industry’s dominant players. When breaking down the CRE tech landscape for customers to digest, referring to the larger, more well-known solutions like CoStar, RealPage and Altus when describing their platform is another way to add clarity.

Another solution will be industry consolidation, Vermes said. As larger companies aim to steal market share and force out smaller players to become the dominant solution in their space, they will look to acquire and merge with their competitors — creating less noise in the market.

“I think the challenge is there are a lot of new firms entering, and now people are trying to make their mark. But I think it is going to consolidate,” he said. “There are large companies that are inquisitive, they’re going to become hubs … those guys are going to basically continue to acquire companies and try to become the go-to.”

Next week, look back on some of the largest and most memorable CRE tech mergers and acquisitions to date in Bisnow’s “The Beginner’s Guide To CRE Tech” series.