IQ recently spoke to Thomas Schneider, Founder and Head of Platforms at BrickVest, the digital marketplace for real estate developers, lenders and investors, about how the Proptech revolution is opening up real estate to a wider range of investors.
Apart from its market platform activities, Brickvest has launched seven vehicles under its Harvest Investment Fund series and joined INREV late in 2018.
‘When we started the business five years ago we were inspired by the crowd-funding model of financing real estate,’ he explains. ‘There was, and indeed still is, great potential to widen access to commercial real estate for a broader range of investors, particularly those at the smaller end of the capital spectrum, such as family offices and high net worth individuals. We saw this as an area where a digital platform with a pan-European reach could make an impact.’
There is a lot of talk about disruptive innovation in the proptech field, but Schneider likes to emphasise that digital platforms can play an enabling role within the real estate investment industry as well. ‘Real estate continues to be a very tech-lite business, which means that there is considerable potential for optimisation by eliminating some of the less efficient aspects. For example, investors can find the process of selecting investment opportunities very time consuming if they have to contact each sponsor for the information they need to make a choice, and then put that information together in a comparable format. This is an area where digital innovation can help.’
Regulators are now prepared to take the time and effort needed to accredit online marketplaces, where five or ten years ago they definitely weren’t
Schneider says that he had been thinking about developing a platform for more than a decade before founding the company, but that the time was only right around 2014, when a number of the necessary preconditions fell into place. ‘The first piece of the jigsaw was technology. In recent years, the growth of computing power and the development of capabilities within the fintech sector, notably with blockchain, has made it much easier and cheaper to build online trading platforms and information exchanges.’
‘Perhaps even more important is the fact that such platforms are now open to regulation,’ he continues. ‘Regulators including the FCA in the UK are now prepared to take the time and effort needed to accredit online marketplaces, where five or ten years ago they definitely weren’t. This gives market participants the confidence that deals will be transacted securely, which is critical in a digital environment.’
‘Another key development in recent years has been the changing perception of technology among potential users in the real estate investment arena,’ says Schneider. ‘Not so long ago, visitors to real estate shop-window events like MIPIM and Expo Real weren’t that interested in talking about digital platforms for investment, at least not in the sense of using them in the real world. These days it’s completely different – people know that these kinds of innovation are coming and are keen to embrace them.’
It’s often argued that real estate is a relationship business, but tech has a role in helping different parts of the industry interact more effectively
‘For many, real estate is still quite a cumbersome asset class to deal with, particularly those looking to execute a complex international strategy with relatively limited dedicated resources.’ he explains, ‘So being able to compare a range of potential deals on-screen can open up a wider array of opportunities and the chance to make better informed decisions.’
‘Ultimately this should also make the real estate market more efficient and pricing more sensitive. Technology has huge potential to improve the functioning of the market, and that’s one of the reasons why we joined INREV – we share a commitment to fostering transparency and making the industry work better for investors. It’s often argued that real estate is a relationship business where technology can never replace people, but tech clearly has a role in helping different parts of the industry interact more effectively.’
As for the future, Schneider believes that AI could be the next big game changer for real estate, for instance in the area of brokerage – although that is still probably 10 or 15 years away.
How does BrickVest ensure that it keeps innovating? ‘It’s all about having the right kind of people with that entrepreneurial spirit,’ says Schneider. ‘It means being prepared to go into uncharted territory and take the risk of making mistakes. We encourage our staff to be creative and to challenge the conventional wisdom of how things are done in real estate. At BrickVest, we are more like Christopher Columbus – everyone has limited guidance and lives off their wits – but we know the gains could ultimately be enormous.’