Unlocking Proptech Opportunities in Large Specialized Real Estate Markets

10 min read

Venture capitalists only began paying attention to the real estate technology space about a decade ago and, today, solutions aimed at addressing challenges for office space and multifamily have received the most funding and investment. But that’s far from the only sector within real estate in need of technology solutions. There’s much more opportunity.


All told, real estate is a massive, $3.7 trillion market. Delegating software to such a vast piece of the economy is difficult, and just like there is need for vertical SaaS to tackle specifics of each industry, there is need for specialized solutions that address the variances between the many different real estate asset types and their many different stakeholders, such as property managers, tenants, owners and investors. Just like construction depends on the part of the building process you are part of, RE tech depends on the type of assets you are working with.


More specialized sectors of real estate haven’t gotten as much attention, likely because they are thought of as small. And while it’s true that office and multifamily real estate dwarfs each of these specialized sectors, they are still sizable. Another objection some investors may raise is that some of these specialized markets are highly fragmented. Again, that’s accurate, but a strong technology whose implementation costs are small would likely do well — these markets have been grossly underserved when it comes to software solutions that address their challenges.


In this article, we’ll address five sectors of interest: Self-storage, senior housing, student housing, affordable housing and data center facilities. Let’s begin by looking at the size of each market.


  • Self storage: A $61.2 billion market in 2023, these properties continue to retain their valuation, averaging $165 / square foot in H1 2023, which is 2.5% above the H1 2022 average. Occupancy is about 90%, which has been stable since Q4 2022.
  • Senior Housing: This is a $92.6 billion market in 2023, and average rent growth has hit a historic high of 5.4% this year, per research from AEW. The sector is positioned for growth, with average home sales paying for seven years of average rent in senior housing in 2023 vs four years in 2011. Additionally, demand growth is about 5% while new construction is less than 2% of inventory — the value of existing properties is set to rise.
  • Student Housing: There are 15 million off-campus beds in the U.S. across over 2,198 properties, and student housing set an all-time high in transaction volume for 2022 with an annualized total of $18.9 billion, significantly surpassing the previous year-end high of $11.5 billion in 2021 (an estimated 5% of total real estate value transacts per year). Preleasing at schools exceeded 90% in summer 2023, and rents reached a new record high for mid-summer at $849 per bedroom.
  • Affordable housing: The global affordable housing market was worth $52.2 billion in 2021. Plus, in the United States, the Inflation Reduction Act of 2022 provided $4 billion in additional funding for the Housing Choice Voucher (HCV) program. The latest available research shows that the shortage of affordable housing grew by half a million units from 2019 to 2021. So, demand is high, but costs are also high – HUD LIHTC mortgages fell 16.2% in 2022 over 2021.
  • Data center: The sector was worth $215.7 billion in 2022, and vacancy for primary markets at a record low at 3.3%. Pre-leasing is also strong, with 73.1% of 2.287 MW data centers under construction already pre-leased. 


In many of these sectors, companies are managing their business using Excel or, in some cases, without any technology assistance at all, in part because real estate management systems largely don’t account for these specialized asset unique needs.


What’s more, useful data is not available to make good decisions about many of these markets, often because the industries are so fragmented. Self-storage, for example, is very much a mom and pop industry. These small companies typically don’t have robust technology systems or data.


Challenges and opportunities

Each sub-sector has specific, unique challenges and opportunities, which are covered in greater detail below. But, overall, there’s a big opportunity to automate management tasks that are, today, largely manual. Additionally, predictive analytics and AI could enable property managers in these sectors to mitigate risk and assist with marketing and leasing. These solutions, however, must be tailored to meet the very specific needs and challenges of the sector they address.


Self–storage – $61.2 billion market

In self-storage, leases are typically month-to-month with payments via credit card. Pricing can be very fluid, sometimes changing daily. Many operations are owned by smaller local landlords who would greatly benefit from property management technology, were it easy to deploy and priced appropriately. Digital infrastructure could significantly increase efficiency, enable faster and more accurate decision making and increase customer satisfaction.


Specifically, self-storage businesses need property and business management systems that can:

  • Handle and even predict fluid pricing
  • Predict future leasing trends and vacancy rates
  • Manage leasing and marketing
  • Accept credit card payments


There’s also an opportunity to collect and provide good data on this highly fragmented market, so managers can make informed decisions on important factors like leasing, acquisitions or development opportunities.


Senior housing – $92.6 billion market

This sector has some similarities to multi-family, as much of the business operates on an apartment lease model, so in some cases, traditional property management software could  improve efficiencies.


But there are also profound differences, because senior living also provides services similar to those of a hotel — providing room and meal service  — and a medical facility with healthcare providers on staff and the associated requirements to comply with regulations such as HIPAA. Mainstream multifamily software solutions don’t address these unique aspects of their business. As a result, they must rely on cobbled together point solutions that integrate poorly or, more commonly, resort to spreadsheets or paper processes. Specialized solutions could increase efficiency and enable more rapid growth.


There are potential applications for technologies that can be derived from hospitality, multifamily and even medical offices to improve the operations and experience for senior housing. Specifically, these property management solutions should assist with:

  • Regulatory compliance
  • Managing hospitality services such as room service and housekeeping
  • Managing medical staff
  • Managing relationships with tenants’ children, who may have power of attorney, for example
  • Changes in stage of life
  • Tenants who need to downsize
  • Specialty care


All in all, white senior housing may resemble multi-family, there are enough nuances and expectations of this asset class to warrant solutions specifically dedicated to this market.


Student housing – Annualized transaction volume of $18.9 billion in 2022

Student housing may look like multifamily on the surface as well, but scratch that surface, and you’ll find a completely different animal. For starters, leases are almost entirely 12-month contracts with very high turnover all within the same, short time frame. What’s more, these leases can include parents or guardians as co-signers, along with multiple students who share the property.


With so many students living on their own for the first time, the number of work orders can be crushing, because so many are for simple things that residents in an ordinary multifamily situation would take care of themselves — such as a clogged toilet or a flipped breaker. Finally, student housing also often requires managing a relationship with the local institution of higher learning.


Similar to self-storage, a lot of these properties are owned by local landlords who could benefit from property management software capabilities, so long as they are tailored to their specific needs. Automation would significantly reduce the crushing load of lease turnovers that occur during a very short period of time and also streamline management of the excessive number of work orders. Increased efficiency and automation could enable small organizations to expand and scale much faster.


Specifically, they need solutions that can manage and automate:


  • A highly concentrated period of high turnover and leasing
  • A massive amount of relatively trivial work orders
  • Leases that almost always have co-signers
  • Ability to charge individuals within a property separately or all of the lessors jointly depending on the circumstance


Affordable housing – $52.2 billion market

This is another sector that’s similar to multifamily, but it includes specialized tax and government subsidy consideration. Tax credits can be used for the development of affordable housing properties, while renters may apply for and receive government assistance with rent, which requires oversight. Finally, there’s a requirement for affordable housing companies to follow federal regulations that govern affordable housing.


The affordable housing sector needs software that enables property management similar to multifamily, but includes capabilities to manage the areas where it differs. Increased efficiency and automation would enable affordable housing companies to expand in a market that is severely underserved. Specifically, the sector needs solutions that address:

  • Tax credit analysis and transfer
  • Compliance with government regulations and reporting
  • Applying and tracking vouchers for leases


The affordable housing asset class is distinct in its resiliency even during downturns. It is also poised to grow as the pressure to solve the US housing crisis mounts, and expand to include workforce and attainable housing. As such, specialized management solutions will emerge to help owners and property managers deal with the nuances of these assets.


Data center – $215.7 billion market

The data center space is essentially industrial real estate, but with unique features that make it significantly different from the rest of that space, such as highly specialized electrical, physical security and cooling requirements.  These facilities are so dependent on electricity that their capacity is not measured in square footage but in KW or MW of power. Proptech solutions need to address:


  • Energy management and usage
  • HVAC management
  • Physical security


These assets have specialized building, management, and security implications, which combined with global growth in this asset class, should see an uptick in interest.


The opportunity for technology investors

For starters, it should be clear that these “niche” sectors are not niche in the sense of being small. To the contrary, these are large multi-billion dollar markets with the potential to provide technology investors with significant returns. What’s more, there has not been much investment activity to develop software solutions for these sectors, which means there’s not much competition.


Of course, there’s a reason there hasn’t been much investment. Most of these sectors are highly fragmented. But to succeed, these solutions must be tailored specifically to the sector’s needs and – this is critical – be easy to implement and maintain. In fact, enabling these spaces with digital infrastructure could make them more accessible to owners and operators who may not have direct institutional knowledge of these segments, enabling them to expand their portfolios without fear of mismanagement.


In the real estate sector, there are tech opportunities outside of traditional office space and multifamily.  These sub-sectors are sizable, and, while they have begun to experiment with more purpose-built technology solutions, most are still largely using Excel, which presents an almost greenfield opportunity for entrepreneurs and investors who are willing to learn the spaces and understand their unique challenges. These overlooked sectors deserve attention from technology entrepreneurs.

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