Rise of Proptech Start-ups with latest tech innovations take the Real-Estate industry by storm.
Real Estate is a massive industry that contributes £94bn to the UK economy and accounts for 5.4% of GDP, according to the British Property Federation. In a world where digitalisation has disrupted conventional processes of several industries, Real Estate is next in line to undergo digital transformation and innovate its traditional ways.
The market value of Real Estate in the UK is £1,662bn, representing 21% of total net wealth. An industry this big presents tremendous opportunities for entrepreneurs as several parts of Real Estate are slow to adopt technology such as pricing, mortgages and building management. There is an immediate need for software and tech upgrades to make business more efficient in this digital era.
Today, customers in real estate face several problems. In the buying and selling sector, agencies and professional advisers dominate transaction processes and levy heavy brokerage fees. Most importantly, brokers, lawyers and chartered surveyors in the industry base their income on laws around conventional methods lacking technology.
Simple tasks such as booking property viewings or commercial site visits still occur over emails and telephone conversations instead of software applications that can automate the process.
As customers get more acquainted with technology and carry out day-to-day processes digitally on software/mobile applications, real estate firms are forced to innovate and stay relevant to their customers.
What is PropTech?
PropTech is an acronym composed of the words “Property” and “Technology”. It refers to the emergence of technology as a solution to overcome challenges in the real estate industry. PropTech aims to create services and innovate existing ones that will disrupt traditional methods of real estate sectors.
‘‘It’s a trend that began with Rightmove (launched in 2000) and Zoopla (2008), which list properties online in partnership with established estate agents.’’ -The Guardian
PropTech first made an impact by opening doors to the world of online residential market.
Back then, customers had to make multiple visits to different estate agents and gather bundles of paper with information on properties.
Websites such as Rightmove and Zoopla in the UK and Trulia and Zillow in the US collated public information (sale price/rent) onto websites that was then easily accessible by customers and agencies. This led to disruption of intermediate providers of property information.
Currently, there has been a rise in startups aiming to provide technological innovation in the commercial sector (co-working spaces, retail spaces), building management sector, financing (mortgages, insurance) and appraisals.
According to the PropTech 3.0 Report by Professor Andrew Baum, PropTech startups are gaining support by seed funding and investment from diverse sources such as real estate technology Venture Capital (VC) funds.
“Last year, real estate tech start-ups raised $3.4 billion in funding, a fivefold increase from 2013, according to start-up data provider CB Insights.” -CNBC
So, PropTech impacts the real estate sector in two ways:
1) Technology and innovative applications cause a culture shift, as people with new skills enter the industry.
2) Entry of Venture Capital and Startup Accelerators that invest in tech startups who aim to disrupt real estate and housing industry.
PropTech Startup Accelerators
Startup Accelerators in Real Estate are also called “seed accelerators”. These are programs that offer education, mentoring and investment to startups developing digital approaches to traditional methods.
Examples include the following, listed by Professor Andrew Baum, in his report PropTech 3.0:
1. Property Innovation Labs (PI Labs): London-based accelerator focused solely on PropTech. Not only does it run accelerator programmes, but it also invest directly into tech companies aiming to launch products for the property industry.
2. MetaProp: New York based real estate technology accelerator provides advisory and growth consulting services for companies in the real estate industry. It also provides investment for technological products.
So, its not just entrepreneurs being encouraged to revolutionise the industry. RealTech firms like Fifth Wall have emerged to become Accenture and McKinsey of the Real Estate industry as they help already established firms, to digitally innovate their services. These firms conduct competitive analysis, market research and provide strategic advisory to large organisations.
According to Savills, The volume of investment directed towards PropTech companies suggests that the investment community strongly believes that PropTech will have a transformative effect on the real estate industry.
Geographically, the U.S attracted a majority of PropTech investment accounting for more than 50 percent of total funds, followed by Asia (25%) and UK (10%) in the year 2017. However, the Asia Pacific region has attracted the most investment between 2013–2017 with a total of 60% of overall investment across all regions (Source: JLL).
Top 5 Areas of Real Estate undergoing Digital Transformation:
Initially, Property Search and Property Listing online created waves in the industry. Recently, technologies based on Artificial Intelligence, Augmented Reality/Virtual Reality, Internet of Things and Robotics are set to disrupt all areas of property sector. Some areas undergoing tech futureproofing include:
1. Property Management
Startups in the property management sector use cloud computing and Internet of Things to provide tools and software for property managers. JLL reports that the use of technology in this sector will automate tasks, save time and increase efficiency for day-to-day operations.
Real Estate industry to date relies on estate agents to manage paperwork related to properties, record payments and forward communication between two parties (buyer and seller/landlord and tenants).
So, technology in this sector will digitalise tenant management, electronic payments and provide an online platform for buyers and sellers or landlord and tenants to communicate.
For example, HappyCo Inc. has developed a mobile app for property inspections. Property managers in the real estate industry can now maintain digital records and and manage inspections over the internet.
Alternatively, Digital Gorkha is a visitor management system for commercial and residential properties that digitalises the identification, registration and monitoring of visitors. SpaceConnect is another software that lets estate agents book visits and meetings at commercial properties.
On the other hand, platforms such as Kaodim and Housejoy.in help property managers connect to reputable handymen for property maintenance.
2. Construction Management
According to the PwC report published last year, Artificial Intelligence, Construction Robotics, Drones and Information Management Systems have the potential to impact conventional construction process.
For construction teams, visualisation tools for blueprints and project management software for tasks will enhance the construction process. For example, QwikSpec is a platform that enables daily monitoring of work on site based on real-time data. It is also used to conduct and monitor site inspections.
Aconex by Oracle, uses cloud technology to connect engineering and construction teams. It allows users to access and maintain all digital records of the project, gain insights and keep track of processes.
Drones provide means for conducting building/site inspections and collecting pictures and videos for marketing use.
For the construction process, autonomous excavators were launched by Built Robotics in the US. These are fitted with latest sensors from self-driving cars and autonomous software that is designed specifically for the purpose of construction. So, it assists in geofencing of the area and units excavated can be moved from home site to home site.
Built Robotics has solved the problem of chronic labour shortage in the construction sector. Other startups in this sector aim to speed building processes and cut costs.
3. Virtual viewing
A Virtual Reality based platform such as Vieweet in UK, allows real estate customers to take virtual tours of the property they are interested in. On the other hand, Realync in the US allows property agents to conduct live video tours with potential buyers online. This helps them answer any questions on the go.
Therefore, the traditional method of scheduling a property visit on a physical location is disrupted. Now, buyers can be reached globally which will also led to an increase in foreign investments (Source: Forbes).
Moreover, Augmented Reality and 3D mapping techniques help companies create indoor plans of properties that can be interacted with. The Commercial Real Estate App in Australia lets users scan properties in their area and access listing info on office spaces, amenities and lettings agencies within a building.
“the ability for users to access property data in their current location is a powerful proposition, while the possibility of modifying a property’s visual appearance to understand development or renovation potential is a game changer.” -Maty Paule, Head of Product at Commercial Real Estate.
Urbanbase launched a 3D editor tool based on augmented reality. It allows users to place 3D furniture, replace wallpapers and change flooring on 3D space to understand the look and fit in real time. Likewise, Cupix is a cloud-based software company that allows users to capture indoor scenes and create a 3D virtual tour for promoting real estate listings or to document construction sites.
4. Financing & Lending Mortgages
Startups in this sector act as channels between estate agencies, owners and buyers. In particular, the residential sector has lots of investors and buyers looking for investment and financing platforms that will offer them flexibility and options to choose from.
Currently, Fintech startups such as WeLend operate in the personal loans market and provide personal loans for mortgage and rent payments. Other startups focus on solving payment problems for buyers in the market through platforms that enable buyers to carry out payments in monthly instalments.
LendInvest in the UK, is a property lending and investing platform. It is a Fintech lender that provides fast finance to individuals and SMEs across the UK. On the other hand Spruce in the US, is an online title company that offers mobile notaries, closes deals and schedules the process online for both buyers and lenders.
For insurance, Matic Insurance is a company that integrates with other lending platforms. It helps buyers choose from instant quotes on insurance deals, sign-up for policies and share it with loan officers before closing process.
So, financing is no longer a cumbersome process. Lenders with an online presence gain a competitive edge over other home loan providers as they become more discoverable. Also, buyers get instant and affordable policies to choose from on the web that eases mortgaging and insurance.
5. Smart Buildings
Smart Buildings combine spaces with technology, allowing efficient operation and management of real estate assets. These assets include single property units and cities that optimise their system designs using automation to run efficiently.
In particular, smart building technology is based on the Internet of Things (IoT): a network of devices, appliances and software that automate processes as they connect and exchange data. This helps to achieve intelligent leases, efficient supply of energy and its monitoring.
Previously, commercial real estate companies used manual methods for collection of data to manage building layout and maintenance. Today, PropTech is changing the smart building industry by offering high-tech, affordable and environment friendly solutions.
The Capital Tower in Singapore is the oldest “smart building” in the world, built in 2000. It is equipped with an Intelligent Building Management System (IBMS) that controls and monitors the building’s ventilation, lighting, security systems, power systems and fire systems. Thus, leading to conservation of energy and sustainability of environment.
The Edge in Amsterdam is the greenest building in the world. Its exterior provides home for bats and beehives and its interior is equipped with an intelligent light system by Philips. The Edge also has a security robot that travels through the entire building after office hours.
Smart buildings also impact the overall well-being of people as they are found to be healthier, happier and more productive at such settings. CBRE received the Realcomm’s “Digie” Award for its Smart Building Client Experience Center. Its LEED Triple Platinum building in the U.S. has an IoT design and secure network that tracks occupants from their arrival on site to departure. Their sensors track temperature needs and auto adjust it based on occupancy, time of day and other factors.
Occupier movements and counts also help offices alter existing building layouts. Commercial real estate companies can help their tenants by adjusting office layouts based on data gathered by sensors.
Overall, Proptech in this area cuts building operation costs, improves building maintenance and energy management in addition to efficient utilisation of space.
Conclusion
The real estate industry is on the path to change digitally. Although slow, the movement has begun and cannot be underestimated to stay resistant to techonological innovation for long.
“I firmly believe the next five years are pivotal for the real estate industry. We must embrace change or be left behind.” — Anthony Couse (CEO of JLL Asia Pacific).
Proptech is creating building blocks for an efficient property market that is focused on its user requirements and experiences. Proptech businesses thrive in real estate based on their ability to provide unique solutions to problems in the industry.
In terms of investment, Proptech seems to capture 15% of all Venture Capital funding. There has been a significant increase in investment in real estate technology from $4.2 billion in 2016 up to $12.6 billion in 2017 from venture capital and investment community.
Big deals that contributed to this increase came up from a massive $4.4 Billion Investment From SoftBank into coworking space WeWork and $450 million in US-based start-up Compass (Source: JLL).
In Europe, Proptech investment witnessed a consistent growth with UK accounting to 60% of the total investment. For instance, the London based property financing platform LendInvest managed to raise £100 million capital for its funding in 2017 rounds of equity funding.
Therefore, PropTech is gaining momentum with increase in the number of start-ups and innovations scaling the industry. From funding and transactions to building to management of property and tenant operations, there are few areas left for disruption. Now, companies in the real estate industry not only have to update themselves with current trends but collaborate with PropTech start-ups to bring new solutions to the market and increase their client reach.
