PropTech is a term which is increasingly heard within real estate circles. However, there is still substantial scepticism about the application of new technologies; and how significant their impact on the industry may be. There is certainly a hefty amount of venture capital funding entrepreneurs who seek to alter the ways in which real estate is traded, used and operated. Many of these ventures will fail. However, the sheer volume of participants means that on balance some will succeed; and for those which do, the impact on the industry may be radical.
Real estate is the world’s largest asset class – so why have we not seen more change? The reality is that PropTech has already made a significant impact. You don’t have to look far to see successful examples such as Rightmove or CoStar all over the world. Additionally, WeWork and Airbnb have PropTech in their DNA – both seek to use technology to better utilise real estate assets.
I believe we are on the cusp of a new wave of PropTech companies which will fundamentally alter an industry traditionally resistant to change. The more important questions are perhaps what are the impediments to this change? What does change look like? And what might be the benefits? And to whom?
For existing participants there is little incentive to drive this change, given the likely impact on their existing revenue streams. Additionally, many recognise that they simply do not possess the infrastructure, people, or know-how to drive change. I believe the biggest drive will come from participants outside of the mainstream, or collaborations between tech and real estate professionals.
Secondly, there is a fundamental disconnect between the language and ideologies of those with tech know-how and existing participants. These two groups have found it challenging to find a common ground in the pursuit of workable ideas and applications. Technology companies rely on creating scale, distributing and analysing vast amounts of data and developing networks which, as they expand, increase value to users – further innovation is at the heart of their DNA. Whereas, property companies look to tightly hold data and leverage this information for their clients – local knowledge, client relationships and “know how” are at the heart of their offering.
PropTech has yet to be clearly defined. Just about any company who in some way leverages technology and participates in the property market could claim to be a PropTech. The reality is that no matter how PropTech is defined, the sheer weight of talent and capital will ultimately create momentum. The size and scale are yet to be truly understood. Few would have foreseen the impact of Deliveroo on the takeaway (and restaurant) industries or Uber on the Taxi market. There is no doubt that the potential for innovation is vast.
Speed of take up will be driven by better collaboration between those in the technology space and those in the real estate industry willing to take a risk. I believe PropTech will ultimately be designated within two core categories:
Smart Real Estate Technology – PropTech
Where companies provide services and information to create lower cost better outcome applications for existing market participants; to streamline their operations and improve efficiencies, and:
Market Based – PropTech:
Where companies seek to disrupt existing markets, by offering lower cost better outcomes for users of real estate. Groups which leverage block chain and seek to ‘tokenise’ real estate have received quite a lot of interest in this space.
Who will benefit from PropTech?
Whatever the development of PropTech looks like, it may well have positive impacts far beyond what is currently envisaged. For example. Diversity and inclusion – not a term typically associated with “chartered surveying” firms. However, the tech element may well bring a much-needed fresh approach where previously there has not been.
Finally, for the residential market specifically, through transparency and greater access to new capital, a wave of new developers may appear. This could relieve pressure on creaking housing markets around the world which would be a laudable outcome indeed.