Proptech Check: Q&A With Goodwin’s Minta Kay
As proptech advances and evolves the way real estate is managed and handled, it has also been transforming the firms and companies within the industry.
Goodwin law firm launched its proptech practice a year-and-a-half ago this month, which brought together the firm’s real estate and tech experts to take advantage of the expanding sector.
The firm represents companies and proptech users across all tech and asset classes. They work with firms like Coyote Software, which enhances property acquisition and management by providing real-time deal tracking, tenancy and reporting data. They also represent companies like Join Digital, which provides cloud-based solutions and cybersecurity offerings.
Minta Kay is a partner and chair of Goodwin’s real estate industry group and the co-leader of its proptech initiative. She reflected on how the practice has evolved over the past 18 months and filled Commercial Observer in on where the industry is going.
Commercial Observer: How did the proptech practice come together leading up to the 2018 launch? What opportunities did you see at the time?
Minta Kay: We were watching the market throughout 2017 and early 2018 and recognized that we had the unique opportunity, amongst all global law firms, to deploy our very deep existing tech and real estate teams to add value to clients who were looking at the proptech space with uncertainty about what it meant. Quickly, we saw the opportunity to help our real estate-focused clients understand new technologies and their potential impact, and to help our tech-focused clients understand how real estate worked, and how real estate industry participants approached their investments.
Now, 18 months later, how has it worked out? How has the practice evolved or grown, and what have you learned since 2018?
Our launch into the proptech space has been hugely successful. There is not a week that goes by that we don’t help a real estate industry participant understand how different tech solutions can impact their business and how technology, in general, is going to force change in the way they must construct their hardscape or manage their portfolios.
At the same time, tech company founders routinely expressed gratitude for being able to talk with one firm that understands all aspects of their business — tech, fundraising, product development, venture capital, and real estate. Our practice has grown to include more than 60 lawyers globally, including lawyers from our intellectual property, licensing, privacy and cybersecurity group who are critical to being able to service the needs of clients active in this space comprehensively.
What has the flow of investment over the past few years told you? Is the level of interest from venture investors still growing, or has it plateaued?
The level of funds flowing into proptech remains very strong. Investment rounds continue at a healthy pace and show no evidence of slowing. The number of products that continue to be developed, and the size of the real estate investment and ownership communities, together indicate that we can expect vibrant activity in the years to come.
We continue to work with increasing numbers of startups who are entering the space and growth companies who are maturing successfully. I foresee exciting developments in the way we think about and create our environments across the board, both driven by real estate-focused tech and by the pace of technological change in general.
What are the biggest challenges involved in the real estate industry as it continues to converge with technology?
Challenges in this regard derive from an industry that has historically been quite traditional and focused on bricks and mortar, meaning the provision of traditional space in which traditional users run their businesses in a traditional way. The real estate industry has been slow to pursue innovation, but that is changing rapidly now. Participants from the real estate side are adjusting their views on technology and are hiring people who can bring greater familiarity and expertise to the table. They are also increasing testing technologies to determine if various technologies can increase their return on investment.
How is tech driving mergers & acquisitions?
M&A activity within the proptech sector has accelerated over the last several years and activity is continuing to increase pace in 2020. Technology companies are buying platforms that provide the technology they don’t have and can’t develop economically on their own. Other companies that offer relatively similar solutions are combining, understanding that all cannot succeed in similar spaces. These combinations have generally demonstrated enhanced synergies resulting in increased revenue and other key financial metric output.
M&A strategy on the technology side has also rendered many proptech companies more attractive to real estate partners because of the increase in scale and capabilities into a single tech-stack results in more streamlined adoption. There still remains what people in the industry call “noise” in the space, and industry participants are watching that clear through increasing numbers of corporate combinations. As real estate continues to adopt technology in the future, we expect that acquisition strategy will evolve as part of the core playbook.
Can you talk about the emergence of construction tech? How is it evolving for your clients? You mentioned that places like London are ahead of this compared to the U.S.?
Technology to facilitate more efficient construction, construction monitoring and development mapping is evolving quickly and achieving widespread adoption. Examples of ‘con-tech’ include Building Information Modeling (BIM) technology, which promotes collaboration and sharing of information to drive cost efficiency.
A number of governments, such as [the U.K.’s], now require the use of BIM technology on all public construction projects. Sensors are being widely used to monitor various aspects of projects and predict potential safety issues. Drones are being paired with software to inspect, digitize and map sites helping to aid better decision making and increase efficiency, productivity and safety. Additionally, as has been widely reported, several firms are experimenting with 3D and modular construction techniques, including providing housing.
About what percentage of your clientele is focused on data center real estate? Are you seeing more interest in the investment of data centers?
Data centers remain an interesting growth opportunity for clients who have access to sites in which centers can be developed and operated. Data centers require significant infrastructure. At the same time, given growth in the use of the cloud, the asset class remains a favored class for those who understand the unique aspects of the facilities and the unique needs of facility users. Experts believe the demand for data centers will continue to grow and outpace supply, creating a valuable investment opportunity.