A(I) brave new world

The latest in real estate technology

February 14th, 2025

♡ Happy Valentine's Day ♡

Rebuilding LA: Continuing the Conversation

Recently, Brendan Wallace, Fifth Wall’s CEO & Chief Investment Officer, sat down with Nikki Pechet, the Co-Founder and CEO of Homebound, a Fifth Wall portfolio company.

After Northern California’s devastating Tubbs Fires in October 2017, which, at the time, were part of the state’s most destructive wildfire season on record, Nikki began building Homebound to reenvision and revolutionize home rebuilding and to streamline the complex and time-consuming endeavors involved in development and construction. Today, Homebound’s business focuses on serving low-supply housing markets and making new homebuilding more accessible.

In light of the fires that ravaged Southern California and Los Angeles earlier this year, Brendan and Nikki had no shortage of threads to pull on in their conversation. Tune in here.

A(I) Brave New World: Who Benefits?

This week, Brendan served up a take on LinkedIn that struck quite a chord and sparked discussion. Of course, any time you throw AI in the mix, you're likely to catch some algo tailwinds. Really, though, there's a lot in what Brendan's post catalyzed that's germane for real estate, PropTech, and the built world.

Quick recap: Brendan's post built on themes from a post from Paul Graham, a legendary Silicon Valley investor, computer scientist, and entrepreneur. Paul’s post reiterates an established and historically informed perspective, namely that people often underestimate the impact of new technologies when they emerge.

The concept isn't rocket science. Take, for instance, a transition that was afoot roughly a century ago when early automobiles began to share roads with horses and horse-drawn buggies. There were, understandably, many people who didn’t quite grasp the magnitude of the Model T. Who could blame them? Trying to evaluate new technologies is inherently challenging because so much of our worldview is colored by the frame of the paradigms we operate in day-to-day.

Fast forward a century. Are many of us likely just as incapable of fully wrapping our heads around how AI will shape the future? Certainly.

That said, Paul’s post also reinforced a second component of similar historical observations about what happens when transformative technologies reshape society. Often, it’s new entrants that take much of the new economic pie, not legacy incumbents. Electric vehicles (EVs) offer an appreciable 21st-century example. Tesla went from scuffling startup to one of the world’s most valuable companies in two decades or so, while legacy automakers have struggled to develop profitable EV business segments. Last year, Ford lost $5 billion on EVs.

Here’s where Brendan’s opinions and Paul’s differ. Paul sees AI as another technological revolution where the plurality of ‘winners’ will be new incumbents. Conversely, Brendan wrote:

“...With AI, I believe the opposite will actually be true. This means you may NOT want to invest in the ‘disrupter to [analog business]’ but actually into that [analog business] itself. In simple terms, the value of commercial incumbency is massively undervalued today…”

Brendan may be on to something. Tech giants like Meta, Amazon, and Microsoft are investing heavily in AI, and their market valuations are benefitting accordingly. Similarly, real estate titans like CBRE are building partnerships with the hottest AI companies in the world, like NVIDIA. NVIDIA may be the gold standard in GPU manufacturing, but it also recognizes that it’ll need guidance on what a massive AI scale-up will require in the built world.

Time will tell who's "right." For now, we wanted to take the opportunity to invite other members across Fifth Wall’s ecosystem to weigh in on the intricacies of this rabbit hole we’re now halfway down. Here’s what they had to say:

1. Josh Melnyk, Associate on Fifth Wall’s Investment Team

Q: Do you agree more with Paul or Brendan?

...While incumbents may need to invest upfront to clean and structure their data for AI models, the long-term benefits are significant. Once structured and trained, these businesses can generate highly accurate insights from private data that emerging, earlier-staged companies simply can’t access. A great example is Klarna, which leverages data from billions of real-time transactions to enhance its AI models. This exclusive data gives incumbents a distinct advantage, allowing them to operate at scale far more efficiently...

Q: Where is this conversation most relevant with respect to the intersection of AI and PropTech or AI and real estate in general?

...To the earlier point, incumbent real estate firms can leverage AI to transform their vast, proprietary datasets into tailored internal solutions, modernizing their operations. Meanwhile, emerging AI-driven PropTech solutions, like pricing optimization engines, gain greater impact by integrating data from multiple sources to address broader industry challenges.

Q: What's most interesting to you amidst this conversation?

What's most interesting about this conversation is how incumbent real estate organizations will reimagine their P&L. Traditionally, these companies have placed far less emphasis on R&D than industries like technology and healthcare. However, as AI and operational optimization take center stage, we may see a significant shift in spending as AI and technology are now becoming table stakes for incumbents to be competitive.

2. Josh Levy, Co-Founder & CEO, Document Crunch

Note: Document Crunch is a Fifth Wall portfolio company.

Q: Where is this conversation most relevant with respect to the intersection of AI and PropTech or AI and real estate in general?

The construction industry perfectly illustrates this dynamic. Document Crunch's success hasn't come from displacing construction companies or lawyers, but rather from enhancing their existing capabilities, workflows, and standard operating procedures. Technology alone isn't the answer. It must be bent and harnessed, and in our case, that means it’s combined with the industry expertise, knowledge, data, established processes, and leadership of incumbent players that make AI truly valuable and a force multiplier.

With companies that are nimble, we’ve seen contract compliance with construction project teams jump from 10% to 80%...

3. Marc Rutzen, Co-Founder & CEO, HelloData

Note: HelloData is a Fifth Wall portfolio company.

Q: Do you agree more with Paul or Brendan?

I lean more toward Paul Graham’s view: AI isn’t just another tool in the toolbox... it represents a deeper paradigm shift that will fundamentally alter how businesses operate. I do see Brendan’s point though... unlike past technology waves where digital-first companies overtook incumbents, AI is uniquely positioned to augment entrenched players with data moats and operational scale. In PropTech, property management firms, brokerages, and real estate investors are already leveraging AI for underwriting, leasing automation, and predictive analytics. Incumbents aren't getting replaced; they're getting amplified.

...I think the real paradigm shift will be when AI moves beyond automation into something closer to general intelligence. At that point, incumbents who merely "bolt-on" AI risk becoming reliant on external innovation, while new entrants can rethink traditional business models entirely.

The most interesting question to me isn’t just who wins, incumbents or disruptors, but how AI redefines the nature of competitive advantage in real estate. If AI can deeply understand demand, tenant behavior, and asset performance in ways humans can’t, what does that mean for traditional real estate economics?...

One implication we’re clear on? As much as talk about AI calls to mind visions of a more digital future, that future will still be grounded (both literally and figuratively) in physical infrastructure, land, and business for built environment companies. This includes data center developers, construction firms, PropTech companies, and other stakeholders with a vested interest in, well, the 'physical' world. Many thanks to Josh Melnyk, Josh Levy, and Marc Rutzen for their input.

STORIES WE READ THIS WEEK

TO TARIFF OR NOT TO TARIFF

Trump sets 25% steel, aluminum tariffs, widening trade war

MORE FROM THE FIRE FALLOUT

FAIR Plan to assess insurers $1 billion for L.A. fires; consumers may be on the hook for nearly half

RTO IN FULL FORCE

Office attendance hits postpandemic high thanks to RTO

CONCRETELY CREATIVE

Future cities could be 3D printed – using concrete made with recycled glass

HOW TO BUILD A HOUSE IN 4 DAYS

This state is building ‘lego block’ homes in 96 hours to help with housing gap

WORTH THE READ

Steel companies quick to decarbonize their operations may be better placed to capture new opportunities in the long term.

Steel tariffs are the talk of the town; get up to speed on decarbonization challenges and opportunities in the sector with McKinsey here.

FUN FINDS

Valentine's Day rush: Historical trends on dating app usage pre-V day.
Losing a pretty penny: The U.S. may stop minting pennies. Hoard em' while you can!
The Leaning Tower of… NYC: 1 of 319 skyscrapers in NYC leans 3 inches to the north.
Punxsutawney Phil was right! Another polar vortex Arctic blast is coming for the eastern U.S. next week.
The more you don't know: The Earth's innermost core is changing; scientists are at a loss so far as to why or what it means.
There's a new bitcoin whale in town: The Wyoming Highway Patrol Association became the first law enforcement agency (to our knowledge) to invest in the cryptocurrency.

Comments or questions? Reach us at newsletter@fifthwall.com

Fifth Wall
66 Hudson Blvd E Suite 5340 / 53rd Floor
New York, New York 10001

Email forwarded to you? Subscribe here. • Unsubscribe

This post is presented for informational purposes only, is not intended to recommend any investment, and is not an offer to sell or the solicitation of an offer to purchase an interest in any current or future investment vehicle managed or sponsored by Fifth Wall Ventures Management, LLC or its affiliates (collectively, “Fifth Wall”; any such investment vehicle, a “Fund”). Any such solicitation of an offer to purchase an interest will be made by a definitive private placement memorandum or other offering document.

Forward-looking statements and opinions as to carbon reduction initiatives and real estate markets or any other matters, as expressed in this presentation, are those of the individual presenters, but are not necessarily the views of Fifth Wall as a firm, and cannot constitute a guarantee of future success or profitable results. As a result, investors should not rely on such forward-looking statements and/or opinions, or on anything else contained in this post, in making their investment decisions. Moreover, certain information contained herein may have been obtained from published and non-published sources prepared by other parties and may not have been updated through the date hereof. While such information is believed to be reliable for the purposes for which it is used herein, Fifth Wall does not assume any responsibility for the accuracy or completeness of such information, and such information has not been independently verified by Fifth Wall. This post speaks as of its publication date, and Fifth Wall undertakes no obligation to update any of the information herein.

This communication is intended only for persons resident in jurisdictions where the distribution or availability of this communication would not be contrary to applicable laws or regulations.

No assurances can be given that any of the carbon reduction initiatives or other initiatives described in this post will be implemented or, if implemented, will be successful in effecting carbon reductions or any other initiatives. Investors should consult their own financial, tax, legal and other advisors in connection with any potential investment.

This email was sent to griffin.wuckert795@newsfeed.email
why did I get this? unsubscribe from this list update subscription preferences
Fifth Wall · 66 Hudson Blvd E · Suite 5340 / 53rd Floor · New York, NY 10001 · USA