Brendan Wallace, co-founder and CEO of the fifth wall.
Courtesy of the fifth wall
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Like much of the real estate industry, real estate technology, commonly defined as the use of technology and software to make real estate and property management more efficient, has become a huge hit in recent years.
With higher interest rates, capital market withdrawals and pushes by almost all venture capital, the push to artificial intelligence has collectively attacked real estate technology. Of course, there are some AI in real estate technology, but it was not enough to really promote interest in sectors that have historically been very slow to modernize.
“We’re looking forward to seeing you in the future,” said Brendan Wallace, co-founder and CEO of Fifthwall. “You’ve seen many businesses, new businesses and venture funds die. We lived through events of extinction.”
The fifth wall is a venture capital fund that manages more than $3 billion in capital, the largest investment company focusing on technology in a built environment.
Wallace cited last year’s IPO and said winter ended due to real estate technology ServiceTitancloud-based field service management software for transactions such as HVAC, plumbing, electricity, landscaping, and more. The company raised about $625 million in its first public offering, and its shares rose 42% on the NASDAQ debut.
Wallace also pointed out new unicorns such as Juniper Square and Built. Bilt, a platform that provides housing loyalty compensation, raised $250 million in July at a $10.755 billion valuation in a funding round led by General Catalyst and GID.
“The amount of corporate value disruption that occurred at Prop Tech was unprecedented from 2022 to 2024, but the amount of corporate value creation that just happened in the last 15 months has also been unprecedented,” Wallace said.
But that’s not the case with climate-related real estate technologies. Not to mention climate science as a whole, the space is increasingly challenging due to the American political winds that have shifted dramatically from sustainability and climate resilience. As a result, the entire real estate climate technology ecosystem is suffering.
Again, real estate has always been slow to modernize and particularly decarbonisation. But there was a huge boost from President Joe Biden’s administration and billions of dollars of public funding, many of which have allegedly decarbonised real estate. After that, Wallace said the world had changed under its feet.
“Many climate funds struggle to raise. Many property owners are degraded sustainability, decarbonisation, ESG (environment, social and governance), and there are obvious and negative emotional changes set in climate-related prop technology,” Wallace explained. “So what that means is that we’re still supporting the company. We’re actually still seeing a lot of good progress, but the feelings are negative.”
Despite the shift, he said he was optimistic about the sector for one strong reason. National policy may be anti-climate, but local governments do not. Cities are running out of money and carbon taxes are a very attractive way to raise capital. New York City is a prime example. It not only remained even more in politics, but was consistently more environmentally progressive.
One of the biggest investors in this sector, the fifth wall is playing long-term and is attractive in valuations, which means that negative climate “halo” continues to invest.
“In my view, the real estate industry is still responsible for 40% of its carbon emissions. It’s the industry that has been responsible for years and it’s going to cost a lot to decarbonize.
