Are Tech Startups Shaping Real Estate Markets?

Every day new advances in technology create necessary changes. Changes in processes and approaches. As technologies advance, markets change.

How does the real estate industry respond to these changes? Do we pick up the ball and run with it? Or do we hesitate until we’ve fallen behind? (Like Xerox did when they failed to think forward, allowing Canon to jump in and develop the lucrative small- and home-copier market.)

We live in a day when growth is driven by innovation. Disruption is the norm. By keeping our finger on the tech pulse of the twenty-first century there are opportunities to get ahead of the game.

Harvard Business School’s Kim B. Clark Professor of Business Administration and best-selling author, Clayton Christensen, coined the phrase “disruptive innovations.” Christensen explains that, in business, disruptive innovations allow an entirely new group of consumers “access to a product or service that was historically only accessible to consumers with a lot of money or a lot of skill.”

In terms of real estate, the tech industry -- especially new tech startups -- is the disruptor. And there’s a new group of home buyers poised to take advantage of the changing real estate landscape. Let’s look at why all this disruptive talk even matters. But first...

Who Benefits from the Disruption?

If you stay up-to-date on market trends, employment trends, and home-buying trends, there’s one word you can't get away from. Millennials. In a very real sense, Millennials are a market trend of their own. The wise Realtor pays attention to what they're up to.

What are their latest buying habits? Do they realize (or care) that they’re known for their social media addictions? And why do they love avocado toast so much? These topics are highlighted and broken down in just about every other sales and marketing blog post you read. And for good reason.

This group of 22- to 37-year-olds (those born between 1981 and 1996) are projected to overtake Baby Boomers as the largest adult generation living in the United States by the year 2019. Oh, and . . . they’re starting to buy homes.

Now that we know the Who, let's look at the Why and Where this specific disruptor affects real estate.

Why the Disruption Has Momentum

Read any business journal, Forbes blog post or comments from Venture Capitalists and tech startups are the “IT“ thing. Considering we live in a technology-driven society it's not really a new concept. But have you noticed how technology-centric companies are infiltrating every aspect of daily life? They’re becoming . . . you guessed it . . . disruptive.

From virtual doctor visits and complicated financial transactions to 3D printed hip replacement joints and algorithms that help us find our soulmate tech companies develop innovations faster than you can swipe right. To maintain the current pace of innovation tech companies have to be attractive to new recruits.

It seems as if they’re doing a good job.

• According to the Bureau of Labor Statistics (BLS) technology careers -- analyzing, designing, administering, programming -- are expected to increase by almost 15% in the next decade. This makes tech jobs the fastest growing sector of employment than any other occupation. Different opportunities are created every day with advancements in technology. Millennials are the ones filling those positions.
• One of the silver linings of cloud computing is the ability to telecommute. Offering work-from-home options is something many tech startups can do. (We’ll see later how the growth of the remote workforce presents new opportunities for real estate sales.)
• Over the past 10 years, occupations requiring a modicum of digital skills have seen an increase in wages. In 2016, tech-savvy workers received much higher compensation than those with jobs that entail low-level digital skills. This according to in-depth research conducted by The Brookings Institute, a nonprofit organization and think-tank based in Washington DC.

Mini Silicon Valley's pop up in more suburban settings, drawing employees to not-so-metropolitan areas. As real estate agents, the question is: are the latest tech company hotspots something to keep an eye on? I say, yes.

Where the Disruption Has an Impact

Millennials who are on the older side of the age range are settling down, starting families, and purchasing homes. And guess what? Location, location, location doesn’t matter as much anymore.

Disruption has changed where tech employees choose to buy a new home and where tech companies decide to house their headquarters.

Location doesn't play as heavy a role for consumers when it comes to deciding where to live. Considering commute time isn't a concern for anyone who is a remote workforce employee. This opens a whole new market for realtors.

This is also true for tech startups. A prime location is no longer the biggest draw. There's no need to set up shop smack-dab in the middle of the largest metro area. Thanks to the growing wave of remote work, many tech companies can locate their brick-and-mortar hub in secondary markets. Where property is much less expensive.

The tech revolution has opened an entirely new set of location possibilities.

Utah is the perfect example of this disruption in action. Recently there's been an explosion of tech companies setting up shop in the state. So much so that Amazon named the Beehive State the top entrepreneurial state in the US.

You might expect to see populations booming in and around Salt Lake City. But the Wasatch Front isn't pulling in as many new residents as you’d think. The south is claiming its fair share of the influx of home buyers.

Population data from the Census Bureau shows that it's St. George, UT experiencing the most growth. The city topped the list of the fastest-growing Metro areas with a 4% population increase from 2016-2017.

Of course, there are multiple factors contributing to this growth. But don't you think, as a realtor, it would be worth keeping abreast of real estate trends in St. George?

On the flip side of this, remote work has made it possible for people to purchase homes outside of the major metro areas. (I discuss this concept in further detail in this post.)

Avoid becoming the Xerox of your real estate niche. Make sure you know how the tech industry is shaping up in your state. Sites with databases of startups like Startups List and AngelList are great resources.

Who knows? Maybe instead of watching, you’ll create some disruption of your own.