As I mentioned in a previous blog, I think 2017 will be the year of M&A in the CRE Tech sector. There are many reasons for this, including the challenges many sites are facing to raise money and scale as well as the consolidation of power in the hands of those with traction and resources. But I think another important trend will be the emergence of the largest industry players as major investors and acquirers in the RE tech scene. As they begin to take notice of what's happening in the startup world, they will undoubtedly recognize that there are huge opportunities to add to their services arsenal by acquiring sites that can differentiate them in the marketplace.
Look no further than the announcement last week of CBRE acquiring Floored. Makes total sense. To quote CBRE’s top digital executive, Chandra Dhandapani, who has stated previously that the company plans to be aggressive in the real estate tech space, and commented in The Real Deal about this deal...“Space visualization is something all of us can relate to and it makes it easier for our brokers to work with our clients.”
Did you get that? “…work with our clients.”
That’s the key. They see this acquisition as a way to give them a competitive edge against their competition in the battle to out-service their clients. Brilliant.
In that regard, does it really matter what a global powerhouse like CBRE paid for Floored? It matters more that they have a new tool in their global arsenal to win business. And they see technology as key in that strategy.Therefore, it's only a matter of time until we read about JLL, Cushman/DTZ, Avison Young, NKF, Transwestern, Colliers etc. jumping in and also getting involved in the M&A tech space! In my opinion, that’s going to be a big trend in the coming years.
It used to be that the large brokerage firms invested in talent, paying crazy sums of money to lure brokers from competing shops. Maybe this still happens. But my bet would be that the new investment strategy they will deploy will be in tech. Some may say they are late in the game as every other industry (financial services, pharma, marketing, retail, etc.) has been doing this for years. But I actually think the timing is perfect. Now is really the most strategic time for them to be buying since it’s pretty clear who the initial winners are and also who has a great technology (but perhaps little in the way of marketing and traction). In fact, if you asked most of the tech sites what their biggest challenge is, it would be growing their customer base. With one smart move by one of these global firms, the marketing challenge gets solved.
Maybe that’s what the CBRE and Floored deal is actually all about?
It’s going to be an interesting year in the CRE tech sector for sure!