The International Talent Taskforce tackles crowdfunding in real estate

In the November 2, 2022 meeting of the International Talent Taskforce, participants discussed the topic of crowdfunding and its potential to impact the real estate industry. Professionals from the UK, Spain, France, South Africa and Belgium weighed in on what the future of crowdfunding might look like and how crowdfunding could impact investment, design and the role of the architect.

The current state of crowdfunding

Crowdfunding is becoming increasingly diversified and present across industries. This is reflective of the broader trend towards greater democratization of forms of private as well as intellectual property. Examples of this trend include well-known websites such as Wikipedia or modern lifestyle setups like co-working and co-living spaces.

In the realm of real estate, soaring housing prices, inflation and low offers have stagnated the industry, discouraging young people in particular from diving into the market. According to Paula Gonzalez (JLL Spain), “real estate crowdfunding can be seen as a disruptive way to jump onto the property ladder and influence the construction process.” Crowdfunding provides a degree of security both to investors and companies as it offers a means of securing funds for projects that, as Gonzalez explained, “provide some guarantees of success.”

What does crowdfunding look like in the world of real estate?

One of the concerns participants mentioned regarding crowdfunding in real estate is potential changes to the relationship between the architect and those investing in a given project.

In order to engage in crowdfunding successfully and safely, risk management is key. Francesco Chechile, Associate Director of our Real Estate programs at IE School of Architecture and Design, also an entrepreneur who worked in crowdfunding for some years, distinguishes between lending crowdfunding and equity crowdfunding: “In the latter, you would be investing in part of the company. In the former, you would be investing in debt from a company.”

When deciding how to invest, one can choose to funnel their cash through a lending crowdfunding platform, which functions as “an intermediary between the funds and the project” where “platform managers select viable projects to be funded.” Alternatively, there are equity crowdfunding companies, “where investors select a real estate project in which the role of the architect could be more strategic as a receptor of the investor’s goals in terms of quality, sustainability and other standards.” In either case, Francesco recommends managing risk by diversifying your portfolio with different types of assets.

Architects, AI and design decisions

According to architect Hamish Crockett (RSHP Paris), crowdfunding represents a way of “adding voices to the table” in decision-making. The architect must then ask the right questions in order to design for a wide variety of voices so that the public’s wants and needs can be met in the best possible way.

Yet there is also the question of artificial intelligence (AI) and its role in the decision-making process. While the participants agreed that AI is unlikely to replace architects, there were various viewpoints regarding the ways in which AI will participate in real estate. Jose Garcia Alamar (Foster & Partners, London) noted that “AI can create more efficient processes . . . [but] at this point in time AI alone cannot create a working building.”

There are some forms of design that AI could contribute to, however, as indicated by generative design companies like Autodesk. Crockett also mentioned that there is a “range of things that AI can or should be doing and would be a huge help to architects, like designing carpark grids.” He further pointed out that AI “could identify sites and financial models” for developers, citing Land Insight as a company that “provides tools to decide and shortlist sites and identify lease expiry.”

In addition, Belinda Duncan (Construct Education, Cape Town) cited the value of AI rendering processes like performance monitoring more agile, which could be beneficial for meeting sustainability objectives. Nonetheless, the participants maintained that AI simply isn’t ready to integrate the various specifications of investors—particularly as crowdfunding becomes more widespread in the industry—as well as the need for high customizability and consideration of cultural contexts.