Fifth Wall, focused on real estate tech and $3.2 billion under management, looks set to dominate its market even more • TechCrunch

Brendan Wallace’s ambitions seem almost limitless. The LA-based venture that Wallace and co-founder Brad Greiwe founded less than seven years ago has $3.2 billion in assets under management. But that company, fifth wall, argues that there are huge financial returns to the intersection of real estate and technology, without worrying about digesting that capital. It’s the heavyweights – CBRE, Starwood and Arbor Realty Trust among them – that don’t seem to care either.

Never mind that just last month, Fifth Wall closed its largest ever venture fund focused on real estate tech startups with 866 million USD in capital, or it has closed a fund 500 million USD sooner than 2022, aiming to decarbonize the real estate industry. Never mind that beyond these two efforts, the Fifth Wall also expanded to Europe last February with an office in London and a €140 million fund. (It’s also a large office in New York, an office in Singapore and a presence in Madrid.) As for the fact that office buildings in particular have been shocked by the combination of layoffs, employees, work-from-home policies and higher interest rates, Wallace says he sees it as an opportunity.

Furthermore, Wallace saw more opportunities he wanted to pursue, including in Asia, as well as around infrastructure, including buying and building “solar farms and utility-scale wind and microgrids” that the Fifth Wall plans to invest in and which it will finance.

There’s a lot of work to be done, especially for a consortium of 80 people, whose biggest exits today include relocation company OpenDoor, property insurer Hippo Insurance and SmartRent, which The company sells smart home technology to apartment building owners and developers. No one is forgiven by public market shareholders; However, in conversation with Wallace and the picture he paints of the world, it’s easy to see why investors keep throwing money at his team.

We spoke to him earlier today in an edited chat.

TC: How come so many of your real estate investment partners have invested so much capital with you when it’s a challenging time for real estate, especially office buildings?

BW: It’s the same argument that we’ve made, which is that you have the two biggest industries in the United States, which is real estate, which accounts for 13% of US GDP, and technology, and they are circling. and it represents a huge explosion in economic value [as] we’ve seen in this kind of super-cycle of proptech companies that have grown up. Now, this extra layer has been unearthed around climate technology. The biggest opportunity in climate technology is actually the man-made environment. Real estate accounts for 40% of CO2 emissions, but the climate tech venture capital ecosystem has only put about 6% of climate VC dollars into technology for the real estate industry.

How do you specify which vehicle – your flagship proptech fund or your climate fund – funds a particular startup?

The way we define proptech is technology that can be used in the real estate or hotel construction industry, so it needs to be technology they can use right away — it can be a variety of things. . It could be rentals, property management software, fintech, mortgages, operating systems, keyless entry — but it doesn’t necessarily have a decarbonizing effect in the real estate industry. It may be a derivative interest, but it is not the core focus. The core focus is simply that you have this industry that has been so slow and late to adopt the technology that is now starting to do so and as it does so it is creating all the value. this. We’ve got six portfolio companies going public and we’re a six year old company.

[As just one example], do you know how many home units today have a smart device inside them? One percent of all home units in the United States have a single smart device – any smart device: light switch, shade, access control. There is a massive transformation going on right now, in which everything inside a building will become smart. And we are at the dawn of that right now.

However, I believe the opportunity in climate technology is a multiple of that opportunity simply because the costs required to decarbonize the real estate industry are so great. The cost to decarbonize the US commercial real estate industry is estimated at $18 trillion. That’s just the US commercial real estate industry. In a word, the GDP of the United States is about $22 trillion to $23 trillion and we have to decarbonize the real estate industry over the next 20 years, so one way to think about it is that we we have to spend about one year US GDP in the next 20 years just decarbonizing our physical assets.

What are the main areas of spending that you are focusing on?

I’ll give you a very concrete example, literally concrete. If concrete were a country, it would be the third largest CO2 emitter on planet Earth after the US and China. All 7.5% of global CO2 emissions come from concrete production. It is the most used material on planet Earth after water. So you have this raw material as the input to all of our infrastructure — all our cities, all the houses we live in, all the buildings where we live. business — and that is generating 7.5% of global CO2 emissions. And so the race is on right now to determine the chances of creating a carbon neutral or carbon negative cement. We actually invested in a company called Brimstone along with Bill Gates and Jeff Bezos because they also see an opportunity that this is one of the key spending categories where the $18 trillion needed to decarbonize real estate will be spent. Then you can go deeper down [list]from glass, steel, laminated wood – just all the materials used to construct buildings.

More immediate, and this is a question of space reuse, but what do you think will happen to underutilized office space in this country over the next 18 to 24 months? I realize that’s especially extreme in San Francisco, given the population of tech workers that hasn’t returned to the office yet.

I won’t draw too many conclusions from San Francisco alone. I think San Francisco is probably the hardest hit city. I don’t think San Francisco is the canary in the coal mine for the rest of the US office industry. But with that said, I think we’re at a point where the pendulum has clearly swung very far in the direction of combined work and companies shrink their physical footprints, but you’re already starting to see that these things are cyclical and cyclical and that some employees really want to go back to the office, while CEOs are saying, ‘It’s hard to mentor and build culture and drive the kind of performance that we used to have in an office in a completely remote environment.’ So my feeling is that it’s probably going to take us two to three years before another pendulum swings back towards companies withdrawing themselves into a physical office. I think our sentiment and need for ministry is artificially low.