Editor’s note: Survival of the retro-fittest

It’s a golden age for golden ages.

We are sitting at home during the so-called golden age of TV, with enough quality streaming to last us several pandemics. And there will probably be a golden age of partying and travel after we’ve got this virus kicked.

We are entering a golden age of big government, comparable to FDR’s presidency and the New Deal days. That’s going to include a golden age for climate change initiatives, which will force real estate to adapt.

And, as our cover story this month points out, it’s also a golden age for tech disruption of real estate.

Proptech is not new, but it seems to be only picking up steam.

A decade after the Silicon Valley legend Marc Andreessen proclaimed that “software is eating the world,” software is now eating the home, as E.B. Solomont reports in a series of pieces.

“It’s almost like a tipping point that’s been 10 or 15 years in the making,” said Max Simkoff, CEO of Doma, which is trying to disrupt the title insurance industry. Long dominated by four incumbents, it’s a $16 billion sector that hasn’t changed much since the 1800s.

Overall, investors poured $3.9 billion into 89 proptech deals during the first quarter of 2021, more than double the value of the preceding quarter.

And in the past eight months, four proptech startups focused on the residential industry have hit valuations of $1 billion or more. Three others — Airbnb, Compass and Lemonade — have gone public.

In the broader world of startups, in 2013 there were just 39 companies valued at $1 billion or more, a number that has surged to more than 600 today. That’s a sign of a lot of innovation, an indicator of overheated valuations, or both.

Zillow’s venture into iBuying could be one of the biggest proptech bets of them all. If CEO Rich Barton is successful in buying homes directly from sellers through Zillow Offers, some see Zillow becoming one of the next FAANG companies (Facebook, Amazon, Apple, Netflix and Google).

We also take a look at Compass’ IPO last month. The residential brokerage’s public offering raised $450 million — less than half the firm’s original target. But that it even got that far — and created a windfall for its founders, top executives and many rank-and-file agents — is a testament to its initial vision.

Elsewhere in the issue, we look at climate change and the big role for real estate innovation in addressing the problem. As Hiten Samtani points out, “real estate is the quiet sinner in the climate crisis.” Some estimates say it accounts for up to 40 percent of global carbon emissions.

Brendan Wallace, a co-founder of Fifth Wall, the country’s largest real estate–focused venture capital firm, is starting a fund that seeks to invest in technologies that help real estate combat climate change.

Landlords, Wallace says, are going to be forced to evolve in order to reach the goal of zero carbon emissions.

“Regulators are coming after you, and they are going to tax you. Tenants are not going to lease from you. Capital markets are not going to lend to you or insure you. And you might be underwater, because you can’t move your buildings,” Wallace said. “Capital markets Darwinism does work.”

Finally, back to present-day brick and mortar: Read our annual ranking of top investment sales firms. Surprisingly, while the sales volume of trophy office properties was down significantly last year in New York City, pricing didn’t drop that much. And check out our story on Manhattan’s condo market, which is now showing some strong signs of life after a tough year.

Enjoy the issue.