Proptech’s Scariest Trends

There are scary thoughts that keep you up at night and fears that haunt your every working day.

Then there’s proptech, which comes with its own set of boogeymen and other unknowns that hide in the murky future. But that’s business, right?

As Halloween approaches with its own ghosts and goblins, not to mention a sugar rush, some proptech entrepreneurs and investors offered their own version of business fears that go bump in the night — and in broad daylight.

“We have been owner-operators in the multifamily space since 2007 and we have seen a lot through the ups and downs,” Erik Nordstrom, president at Bellevue, Wash.-based Ironridge Capital, which provides financial diligence for property owners and investors, said in a statement. “We have never done a cash call and have provided our investors a weighted average return of 28 percent a year for the last 18 years.

“But the biggest pain points come from the marketing platforms and the lack of return on investment. The other upcoming challenge in our industry is when and how best to use AI.”

Anyone who has dealt with apartment renting in New York City knows what horrors can lurk behind every door of the process, said Or Goldschmidt, founder and CEO of Roomrs, a Manhattan-based co-living apartment platform.

“There’s many things beside proptech [that scare me], but proptech-related, I think there is still a very big gap between the renter expectations and the adaptation by landlords of new products and services,” said Goldschmidt about what keeps him up at night. “When you think about Gen Z and the millennials — their demand for flexibility and trust — these are different services. And I don’t think that landlords always adopt fast enough. Over time, it can create an affordability and accessibility crisis, but I think it’s also an opportunity because the landlords who embraced the proptech revolution can be ahead of the curve, and whoever doesn’t will fall behind.”

Roomrs attempts to bridge that gap by simplifying the rental process, offering fully furnished, move-in-ready apartments with flexible terms and no broker fees, said Goldschmidt. The company partners with landlords through lease payments or revenue-sharing agreements and has close to 300 units in Manhattan and Brooklyn, and expects to expand soon to Queens. 

Another Dracula-like proptech trend that needs to have a stake put through its heart is promising more than the technology can deliver, he said.

“Generally speaking, I see a lot of companies overselling their tech and under-delivering on their proptech,” Goldschmidt said. “Like ignoring real estate’s slow speed. It takes time to introduce new products and services. The WeWork example, right? They grow at all costs. They move very fast. There are unstable operating costs, they burn a lot of cash, and, honestly, hurt the sector.

“If I’m looking at co-living as a whole, there were a bunch of companies that raised a lot of VC money, and they eventually failed. When we pitch a landlord, we sometimes hear, ‘Oh, how are you guys different from them?’ Or, ‘They failed, why wouldn’t you fail?’ It creates reputation issues. Real estate as a whole is a very slow and regulated industry, and the companies that fail usually ignore that.”

Goldschmidt also noted the nature of current funding in the industry.

“I think funding continues, but it’s just more cautious and selective,” he said. “Investors want sustainability and not just hype. They’re looking for companies that have a proven model with strong unit economics, where it saves money on ops.

“Luckily for us, we’re profitable, so we do not have any need to raise any funds. We’re not in the market for capital raising, but with [Zohran] Mamdani’s policies, like a rent freeze, everyone is at risk, so we have to stay on top of everything. But right now, there aren’t any major concerns to my company specifically. A lot of his policies are obviously not going to be the greatest for some real estate operators. Some additional policies that he’s speaking about, I’m curious to see how he will be able to execute on some of them when he’s elected. He will have to change certain things, and it’s not always that easy. So, it’s too soon to tell, but if some of his policies are implemented, it could be an issue for the entire industry, not just for us.”

Ori Tamuz, co-founder and CEO at Miami-based property management software company DoorLoop, was blunt about his proptech fears.

“The scariest trend in proptech is that companies are clinging to VC cash without a clear product-market fit,” Tamuz said in an email. “They’re slowing the whole category down. The truth is proptech adoption isn’t inevitable. It’s earned. Too many property managers are getting burned by companies that overpromise and vanish the second onboarding gets hard. Property managers don’t have time to wait six months to onboard. Many have tried ‘top-rated’ tools, only to be ghosted after they paid. Now they’re skeptical, and rightly so.”

Tamuz said DoorLoop is experiencing such bad acts by others firsthand, causing his customers to become tech skeptics. “They’re real operators who need real software that works today and gets better every month. That’s why what scares us isn’t a funding slowdown, it’s that funding kept too many me-too companies on life support for too long. A correction is necessary.”

In addition, owner-operators are also being misled, Tamuz said. “The trend of choosing legacy tools just because they’re robust is flawed. These tools are often outdated, overbuilt and more complex than they need to be. Modern operators want intuitive software, not a second job managing their software.”

Answering what keeps him up at night, Tamuz said, “We worry that the loudest voices often belong to companies with the least impact. But I’m optimistic. The next wave of proptech won’t be about buzzwords, it’ll be about execution. The winners will be the ones who stay close to operators, iterate fast, and focus relentlessly on outcomes.”

Among those interviewed, Janine Steiner Jovanovic, CEO at Dallas-based LeaseLock, an insurance technology company that leverages AI to eliminate security deposits, “screamed” the loudest with an exhaustive list of scary things haunting the proptech world.

“Proptech is in a critical phase,” Jovanovic said in an email. “It’s moving from a period of explosive growth and experimentation to one of maturity, consolidation, and a stronger focus on demonstrating real, measurable value. The next few years will determine which solutions truly stick and drive long-term transformation for our industry.”

However, she added that proptech was whistling past the graveyard on issues like the economy, where a prolonged recession would further depress transaction volume, stall new construction starts, and tighten capital, forcing companies to cut back on technology investments that don’t reduce costs.

“This is the biggest immediate threat,” wrote Jovanovic. “Proptech funding has already seen a significant decline. VCs are prioritizing profitability and sustainable business models over pure growth, demanding clearer paths to monetization and more efficient use of capital. While volume may remain lower, strategic investment will continue. Proptech solutions that offer a clear product market fit and enhance existing ecosystems will prevail. The market is simply more discerning.”

Bad funding decisions have led to “zombie proptech companies,” she said. “The venture capital boom of the last decade led to a proliferation of startups. Many who raised significant capital on promising ideas or early traction have failed to achieve sustainable business models, profitability and sufficient market penetration. Some have already failed, unable to justify prior valuations or raise capital. The market correction in tech funding, combined with economic headwinds, will lead to consolidation, acquisitions at lower valuations, and outright failures among these zombie companies.”

The difficulty that often accompanies integrating new solutions also spooks Jovanovic. It can be a complex, costly, time-consuming process. And, when solutions aren’t truly as interoperable as advertised, payoff can be delayed or worse, Jovanovic said.

Data security and privacy issues also pose threats, along with a “talent gap where many real estate companies lack the human resources to effectively implement, manage and maximize proptech,” Jovanovic said.

Evolving regulations and litigation around data privacy and transparency that require real estate companies to invest in defensive measures — rather than in innovation — as well as fragmented markets and vendor overload, also popped up among her proptech nightmare scenarios.

On the owner-operator side, Jovanovic said that while the top ones are doing a masterful job at leveraging proptech through deliberate, selective, and well-planned strategies, they represent only a portion of the industry. The rest are haunted by failing to maximize proptech due to a lack of strategy, implementing it in a piecemeal fashion without an overarching roadmap. Other frightening specters include bad data management practices, failing to invest in tech talent, and an over-reliance on proptech vendors who don’t have enough industry understanding or resources to implement and optimize their programs without active client participation.

Boo!

Philip Russo can be reached at prusso@commercialobserver.com.