Washington, D.C. is well-known for politics, but not so much when it comes to property technology (proptech), despite its potential to be a major industry hub, Commercial Observer reports.
“I think anything that’s not politics in the D.C. area is underrated in a lot of ways,” Lee Odess, CEO of Bethesda, Maryland-based Access Control Executive Brief, told Commercial Observer. “If you look at the technology impacts that we’ve had with data centers and the likes of AOL and companies like SmartThings from the IoT smart home industry, all those things get overshadowed because of the government side here.”
The large sums of government money paid to defense contractors largely overshadows proptech in Washington, D.C. Even large global real estate companies such as Hilton (headquartered in McLean, Virginia) and Marriott (Bethesda, Maryland) don’t garner much attention.
“If you think about the impact that those companies have on the proptech community itself, there’s a lot that comes from what happens in hospitality, especially now, where you could argue that real estate is in the hospitality marketplace more than ever,” Odess said.
Proptech has grown in the D.C. area despite the federal government’s funding and attention going toward other industries, Commercial Observer reports. Proptech startup access control companies such as Datawatch, Kastle Systems, Latch and Brivo, as well as CRE tech companies like CoStar and Loopnet, were all founded or are based in the area.
“We launched in D.C. because I love the city and believe there are so many cultures, people and attractions that lead to a high quality of life,” Adam Segal, co-founder and CEO of Cove, a Washington D.C.-based company that tracks tenant and operations data for office and multifamily properties, told Commercial Observer.
Why proptech has yet to break through in D.C.
The federal government hasn’t been quick to offer contracts to proptech companies. However, these businesses also have not been aggressively pursuing them, Commercial Observer reports. One reason is large federal contractors often have in-house groups that are developing specific products for the federal government. Additionally, proptech is still seen as too small of a portion of CRE to match the industry’s large federal lobbying presence.
“This requires a common set of interests and a certain scale,” Segal said of proptech’s absence of lobbying power. “With time, there will be an increased focus on what proptech laws and regulations can help the sector thrive, but, at this point, it feels fragmented without the same common themes as other industries or sectors.”
Meanwhile, a large part of Washington D.C.’s talent pool is more drawn to the legal field than tech. The metro DC region has the highest density of lawyers per capita in the U.S., Segal said. The more workers that go into the legal profession, the less there are to enter the tech and startup arena. A lot of the area’s talent pool comprises risk averse people who are unlikely to leave their job to start a new company, which is much more common in tech hubs.
Room for proptech to grow in DC area
There is funding available for those who are willing to take a chance and start a D.C.-based proptech company, Commercial Observer reports. Camber Creek is just one of the proptech venture capital firms that exists in the D.C. metro area.
“I think it’s a strong and growing community,” Isabelle Granahan-Field, an investor at Camber Creek, told Commercial Observer. “Camber Creek has been around since 2011, before proptech was really a known term. So, we’ve seen the importance of proptech investing across the country, and in D.C. as well. It makes a lot of sense that there’s a large proptech presence here based on the broader commercial real estate concentration here and the growing venture community.”
Granahan-Field added that the broader venture ecosystem is strong in Washington, D.C. and that proptech blends in with a number of other industries such as construction, insurance technology and financial technology (fintech). Common interests and bonds with generalist funds and tangentially focused funds do exist.
Meanwhile, what the D.C. area lacks in standard proptech hub qualities, it makes up for with major CRE companies like Bozzuto and JBG Smith, which provide “fertile ground for technology,” according to James Moore, COO and co-founder of RCKRBX, an Alexandria, VA-based SaaS platform that provides demand-side data to the multifamily development space.
“You have large standalone firms like JBG (Smith) that tend to focus on the region,” Moore said. “They’re a client of ours and have been a strong supporter. We see a lot of appetite for a lot of different types of proptech. We’re just one slice of it with demand-side data.
“But, as the world moves to more clean and sustainable futures, you see a lot of proptech going into that area as well, and the Inflation Reduction Act will probably be a catalyst for some of this.”
Additionally, Amazon’s HQ2 in Arlington, AV has helped the northern Virginia area become the largest data center hub in the U.S., and create more proptech startup companies in the area, according to Odess.
“That’s a vibrant community that doesn’t get as much attention because we think only of high-rises,” he said.