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Last year featured a significant amount of uncertainty across the commercial real estate landscape. As market sentiment shifted, investment professionals, in particular, took a more conservative approach, with many sitting on the sidelines waiting for brighter days ahead. While changes were less stark within the management side of the business, no part of the real estate industry was fully sheltered from interest rate hikes and the other macro factors that hit the sector.

Amid these challenges, some of which will persist well into 2024, technology is positioned to help innovative real estate companies gain an edge. A wide range of startups have emerged in recent years to help improve the industry, and these companies will be asked to prove their mettle as owners and operators seek to navigate today’s new reality.

As we enter 2024, here are some of the biggest trends we expect to shape real estate tech in the new year.

Emerging Opportunities in the Generative AI ‘Gold Rush’

A year after the widespread adoption of ChatGPT, artificial intelligence (AI) is no longer just a buzzword within real estate technology. Over the past year, conversations centered on generative AI and its many applications for commercial real estate dominated the industry, and we can expect to see and hear more of this as we enter 2024.

However, as tech entrepreneurs and investors alike scramble to throw their hat in the generative AI ring, it is important to remember that AI’s outputs are only as smart as its inputs. While a handful of AI companies like Travtus—which launched its AI-powered “digital employee” technology for multifamily operations half a decade ago—are already becoming entrenched in the sector, newly emergent firms focused on AI for real estate will have trouble getting access to key datasets. Instead, real estate tech firms that have already built strong customer relationships and have extensive proprietary data to learn from are equipped to build the generative AI tools that will have the most success at market penetration.

For example, companies like data analytics firm Markerr began last year to use machine learning to help real estate investment teams drive informed decision making. For Markerr, developing a generative AI component to its existing dashboards was a natural evolution; by leveraging data collected directly from its user base, startups like Markerr can create generative AI tools with the sophistication and knowledge base to address the inefficiencies that professionals are experiencing daily—ultimately helping drive adoption as these products go to market.

A Growing Emphasis on Construction Technologies

An illiquid capital market, soaring construction costs, and general industry uncertainty caused construction starts to plummet in 2023. That said, with the construction process slowing down, there are a great deal of active projects stuck in the development process.

Properties under construction will benefit greatly from technologies that bring much-needed efficiencies to construction in a challenging environment where delays and overruns are more costly than ever. (Longer projects require longer construction loans, and construction financing costs are sky high.)

Technologies that can leverage institutional and historical project data to flag potential risks before they arise and help create actionable solutions to common development pitfalls will be crucial for developers trying to push their projects across the finish line in 2024.

Investors Will Place Greater Weight on Startup Business Models

The current funding environment is extremely challenging for startups and early-stage companies, and this broader investment pullback is likely to continue into at least the first half of this year. Amid economic challenges like rising interest rates and inflation, technology investors are becoming more discerning when differentiating between the types of “proptech” they are willing to bet their money on.

The coming year is poised to widen a split between proptech companies that address clear industry problems yielding strong return on investment with purpose-built solutions and those with more capital-intensive and interest-rate-sensitive business models. Historically, a significant amount of real estate tech venture capital was invested in technologies that sought to reimagine concepts like single-family home sales and financing and office leasing. While some of these technologies have value in the long run, they are much easier investments to make in a bull market. As investors pursue technologies poised for near- and medium-term growth, capital-efficient software startups with a clear path to profitability will have an easier time securing funding in the year ahead.