Brendan Wallace, Fifth Wall Ventures’ co-founder, is dealing with a lot these days. Fifth Wall Ventures, a nine-year-old property technology venture firm, manages $3.2 billion in assets. On top of managing a successful firm, Wallace is also grappling with the impacts of wildfires on his home city, Los Angeles. Despite the destruction faced by many of his friends, Wallace’s own home remains unscathed.

Wallace has been adapting to circumstances out of his control, including the pandemic, which has significantly impacted many of Fifth Wall’s limited partners, including well-known real estate players such as CBRE, Cushman & Wakefield, and Lennar. Office vacancy rates are still around 20% nationwide, a figure that’s not anticipated to decrease as more companies abandon the idea of returning fully to the office.

Property technology has faced its own set of challenges, with companies like WeWork undergoing significant restructuring after a failed IPO. However, Wallace is optimistic about the industry’s future. He sees a significant potential in asset resilience – using technology to help real estate assets withstand damage and disruption. He also sees a promising opportunity to assist Fifth Wall’s limited partners in capitalizing on the tech industry’s growing demand for data centers and the energy they consume.

Recently, we had a chat with Wallace about these trends, life in LA, and the ongoing wildfires. Below are excerpts from our conversation:

When asked about his situation in LA, Wallace described it as “tragic”, mentioning the evacuation of their Santa Monica office. He believes this is a pivotal moment for Los Angeles, with several political and economic issues coming to the fore.

When asked about the aftermath and reconstruction, Wallace remains optimistic about LA’s future. He believes that despite the crisis, people will continue to want to live in LA, and Fifth Wall is excited to be part of the city’s rebuilding process.

Addressing the issue of insurance providers leaving the state, Wallace mentioned Fifth Wall’s investment in Hippo, a home insurance company that was very active in California. He raised concerns about regulations that instead of benefiting consumers, have created market asymmetries and exacerbated the problem of homes being uninsured.

Addressing the impact of wildfires on real estate valuation, Wallace predicts an increase in prices due to new construction in Southern California. He anticipates that the rise in insurance premiums will lead to decreased home affordability, but despite these challenges, he expects the demand for homes in these beautiful areas to remain high.

Discussing Fifth Wall’s investment in ICON, a 3D printer of modular homes, Wallace highlighted the company’s ability to build homes faster, cheaper, and with fewer materials. He emphasized the potential for scaling up this technology to reduce the waste associated with home construction.

When asked about the proptech sector, Wallace admitted that interest in the industry has cooled. However, he believes that the companies that survived this challenging period are emerging stronger and more viable in the long term.

Finally, addressing the issue of data centers and energy production, Wallace highlighted the need for real estate companies to become energy development companies. He revealed that Fifth Wall is investing in solutions to accelerate the development of solar energy, illustrating the interconnectedness of the real estate and energy industries.